China Archives | Page 38 of 154 | Smartkarma

• The total revenue growth rate accelerated significantly to 28% YoY in 2Q23.
• The high-margin businesses grew more rapidly than the low margin business.
• Gross Merchandise Value and Active user base still increased strongly.

• There is considerable worsening in net profit, including from key divisions
• Despite rising assets for Health and Life, profit in this core division is down a lot
• Banking exposure is significant, with a poor outlook, and making Ping An less pure

• On the 28th May, PRC department store play Golden Eagle Retail (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
• The Offeror is the Wang family, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable. 
• The Scheme Doc was despatched this morning (23 August). The Scheme Meeting is September 15th with expected payment on (or before) the 17th of October. The Offer price is final.

• Despite Headwinds Revenue Remains Relatively Stable at HK $1,968 million 
• For 1HFY2023–Total Buyback of 0.77 million shares (HK$2.3 million) at average price of $2.99 
• Stock at 0.25x tangible P/B and at 1.96x P/E on our FY2024 earnings estimate 

• When we discovered that JD Health’s growth could face a downturn crisis, we hope to find a suitable substitute. ClouDr has such potential due to its good performance/reasonable business model.
• The current anti-corruption campaign could bring new opportunities to ClouDr, who can rely on “hospital first” strategy to take the upper hand, but it should be based on some prerequisites.
• ClouDr’s business is expected to keep strong growth momentum in 2023. The Company is expected to achieve breakeven in 2024. Investors could see good stock price performance at that time.

• IQiyi failed to give its share price a lift with  stronger-than-expected 2Q results except for slight miss in paying subscribers .
• We believe that investors are expecting the end of its remarkable turnaround story and embracing a stable and moderate growth stage.
• While iQiyi trades at ~10x our FY23 earnings, the cheap valuation by itself doesn’t stand out among China internet peers as a group. We would wait for better entry points.

WCC’s H1/23 results were softer than expected, as the company reported lower sales volumes and larger-than-expected ASP declines across its plants in Mainland China. In particular, sales volumes and ASP in the company’s stronghold of Shaanxi fell 4% and 16% y-o-y, respectively. Positively, WCC’s expansion in Africa has been progressing well, with overseas operations now accounting for 27% of revenue. The company’s plants in Africa enjoy substantially higher margins than those in China.

In our view, the key risk for WCC is uncertainty regarding the extent of its African expansion, with the company reportedly developing another USD 100 mn cement plant in Rwanda. We believe further expansion into Africa will fundamentally change WCC’s risk profile.

 We move our recommendation on the WESCHI 4.95 26 to “Buy” from “Hold”.

• Activation Group (9919 HK) unveiled its first-half financial results for 2023 on August 10th, 2023.
• In this article, we will provide an overview of Activation’s performance during this period and share thoughts on its future prospects.
• The Experiential Marketing segment recorded a full recovery, reaching RMB 280 million, surpassing the 2021 H1 level of RMB 276 million.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
• There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
• A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

• 1Q23 shows strong Value Of New Business (VONB), not sure of profit flow through
• Comparative to 1H22 is easy vs loss of USD556m in the period, but risk to downside
• Despite, stock buybacks, increased dividends market cap down 34% since peak this year

• Based on the close of 21 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in September.
• NARI Technology Co Ltd A (600406 CH) and CSC Financial (601066 CH) should replace Tongwei Co Ltd A (600438 CH) and Shaanxi Coal Industry (601225 CH) in the ETFs.
• There are couple of stocks with over 1x ADV to trade from the ETFs. Plus there are cash and carry positions that will need to be rebalanced, adding to flow.

Longfor’s H1/23 results were weaker than expected, with y-o-y declines of 35% in overall revenue to CNY 65 bn and 40% in revenue from property development to CNY 50 bn. That said, recurring income rose 10.4% to CNY 12.2 bn, which is becoming a meaningful annuity-like cash flow. This will be helpful in underpinning Longfor’s financial risk profile should there be a prolonged downturn in the property sector.

The company appears to have healthy access to bank funding, and should have sufficient liquidity to meet near-term debt maturities. That said, we highlight the risk of a potential reduction in the liquidity buffer, due to weak contracted sales and higher ST debt. Longfor recorded contracted sales of only CNY 7.6 bn in July 2023, compared to an average of CNY 11 bn per month in H1. ST debt surged 75% to c. CNY 39 bn, from c. CNY 22 bn at FYE 2022.

We maintain our “Hold” recommendation on the LNGFOR curve. The various notes appear to offer good value at current yields of 15-21%. That said, market technicals are very poor for private developers, with even the bonds of solid names such as Longfor experiencing volatility.

• Taobao and Tmall have implemented two major reforms: 1) The launch of the Wanxiangtai Platform Unlimited Edition; 2) Changing the rules for displaying merchant sales volume from monthly to annual.
• Although the new Wanxiangtai differs from PDD’s “Fangxintui” and “Quanzhantui” , the idea is to simplify and automate merchant promotion. We anticipate that this change will boost the take rate.
• We increased our core e-commerce take rate estimate for BABA in FY24/FY25 to 3.85%/4.0%, respectively, and raised our TP to US$ 127.

• China MeiDong Auto (1268 HK) announced a profit warning this morning, expecting a 90% decline in net profit for 1H23. 
• Luxury auto dealer in China is facing major uncertainties in its business model, with no visibility in the near term. 
• However, Zhongsheng Group (881 HK) currently employs the best long-term strategy amidst industry transformation.  Suggest to keep a close eye on the name.

• Chinese express parcel volume growth was 11.7% in July, far slower than in Feb-May
• July ASP for all segments fell to 8.84 Yuan per piece, the lowest in at least ten years
• Industry leader SF Holding partly insulated from margin pressure by air, international 

• Hengrui’s performance recovery in 23H1 (especially 23Q2) was due to the low base last year caused by pandemic/lockdown. Increasing innovative drugs revenue proportion also reduced the negative impact of VBP.
• People think the turning point of Hengrui’s performance has arrived, but we hold different opinions.Some big varieties haven’t entered VBP. It would take some time to achieve breakthrough in internationalization.
• The negative impact of 23H2 anti-corruption hasn’t been reflected in interim report.Even if Hengrui’s performance growth could be back to 20-25% YoY in 2025/2026, over 60 PE/TTM is already expensive. 

• Sichuan Baicha Baidao Industrial (SCBCBDID CH) is looking to raise up to US$300m in its upcoming HK IPO. The deal will be run by CICC.
• Sichuan Baicha Baidao Industrial (SBBI) sells new-style tea drinks through its ChaPanda stores, most of which are franchised.
• As of the Latest Practicable Date (8th Aug 2023), ChaPanda’s store network comprised 7,117 stores, spanning across 31 provinces and municipalities in mainland China. 

• Sinopharm Group Co Ltd H (1099 HK) will be added to the Hang Seng Index (HSI INDEX) on 1 September while Country Garden Holdings Co (2007 HK) will be deleted.
• Both changes are a surprise, but the impact on Sinopharm Group Co Ltd H (1099 HK) will be much larger. Given the recent increase in shorts, there could be covering.
• Estimated one-way turnover is 1.9% leading to a one-way trade of HK$3.65bn. Capping will result in selling on Alibaba Group Holding (9988 HK), Tencent (700 HK) and HSBC (5 HK). 

• As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
• Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
• Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

• This is the Brand Spanking New and Improved and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see H/A relationships easily. 
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations. 
• We hope this new version serves readers even better. Improvements this week due to popular demand, and updated format. Further feedback is welcome/appreciated. 

• Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
• The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk. 
• The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote. 

• The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
• East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE. 
• AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

• On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
• Sinopharm Group Co Ltd H (1099 HK) is ADDED, Country Garden Holdings Co (2007 HK) – in no surprise, is deleted. 
• I see HK$4bn a side to trade, and the only “compelling” trade by ADV here is Sinopharm, but correlations with a Peer Basket are low.

• Evergrande’s filing in itself does not signify a deterioration in its financials; it was already insolvent as of end 2021.
• The bankruptcy filing provides the benefits of automatic stay and is a necessary step to validate the Group’s offshore restructuring plan. 
• Evergrande’s long term viability still depends on recovery of the China property market. 

• The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK). 
• Neither of these two are a surprise. Neither are hugely impactful. 
• There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

• In 2Q23, total revenue grew by 31% YoY and revenue from external customers grew by 56% YoY.
• The operating margin can still breakeven during the rapid growth.
• We believe the stock has an upside of 70% for yearend 2024. Buy.

• Fu Shou Yuan (1448 HK) has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.
• Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.
• A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&As are added drivers to earnings prospects.

• There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
• We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
• Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

• For a considerable period of time, the industry has been speculating about when the large-scale VBP of TCM formula granules will officially begin. Now, here it comes. 
• Primary market and other financing except IPO in European and US biopharma industry shows a significant signal of recovery. However, IPOs remain stagnant. 
• We analyzed key points about China Resources Sanjiu. Sanjiu is expected to have better performance in 2023 than 2022, but we advise investors to allow a sufficient margin of safety.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• The IPO space saw a few pops this week, some were somewhat justifiable in SBFC Finance Limited and Concord Biotech while one was reminisent of the 2020-21 frenzy,  Vinfast. 
• In the placement space, the selldown for InterGlobe Aviation Ltd (INDIGO IN) materialised as expected but despite that the deal didn’t do much.

• As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
• BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
• Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

• BILI reported 2Q23 top-line in-line and non-GAAP net profit 7% better than consensus.  However, gaming revenue was weak, causing BILI to revise down its full-year revenue guidance.
• We believe e-commerce ads could become a new near-term driving force, but the rapid growth of game-related ads might fade post-Q3. 
• Also, the significant consolidation of ACG games could affect BILI’s future game performance. We maintain our US$ 12.3 TP and SELL rating.

• Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
• The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
• For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US). 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Sino-Ocean Group
2. Adani Ports & Special Economic Zone
3. Road King Infrastructure
4. China Jinmao Holdings
5. Geely Auto

and more…

• MaxLinear’s acquisition of Silicon Motion has been abandoned, with both sides threatening arbitration. 
• It is difficult to understand why the acquisition would have resulted in the synergies projected by management.  The businesses are very different.
• Assuming the companies go different ways, expect for SiMo to perform as it has in the past.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events. 
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.

• WuXi XDC Cayman Inc (1877628D HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO.
• WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In this note, we will talk about the not-so-positive aspects of the deal.

• Chongqing Brewery Co A (600132 CH) announced a impressive earnings beat last night, with net profit up 24% yoy in 2Q23.  Stock is limit up (10%) today.
• The results confirm the premiumization thesis of the China beer sector is in tact.
• Buy China Resources Beer Holdings (291 HK); take advantage of the overall H-share market weakness and unfounded fear on deflation.   

• JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.
• Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.
• There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.

• JD reported 2Q results that were slightly better than the street expected.
• But the set of results did little to alleviate our concerns about the structural challenges JD need to combat.
• We still don’t think JD represents a viable investment case due to its lack of growth catalysts (vs. PDD) and attractive valuation (vs. Alibaba). We would stay on the sideline.

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
• I currently expect 14 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500. 

• State investors including China’s biggest government-backed chip investment fund agreed to pour 12.6 billion yuan ($1.7 billion) into a wafer production project in Shenzhen as the country strives to boost its domestic chipmaking capacity.

• Shanghai-listed China Resources Microelectronics Ltd. (CR Micro) said in an exchange filing Tuesday that its board has approved a plan for its Shenzhen subsidiary Runpeng Semiconductors to sell shares to several investors.

• The deal, still pending approval by shareholders, will expand Runpeng’s registered capital from 2.4 billion yuan to 15 billion yuan, with a capital injection from the National Integrated Circuit Industry Investment Fund Co. Ltd., known as the “Big Fund,” and four other government-backed investment funds.

• The growth rate of advertising revenue rose to 36% YoY in 2Q23 from 22% YoY in 1Q23.
• Bilibili continued to cut costs and expenses by dismissing employees in a game studio.
• The share price has fallen enough, and we believe it is time to Buy.

• Tencent reported 2Q23 revenue/non-IFRS net income (2.5%)/2.3% vs cons. Gaming was weaker than the street expected, while online advertising beat.
• We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q. 
• We maintain BUY but cut TP to HK$ 402 to reflect online gaming weakness.

• The main business line, home appliance began to grow by two digits.
• Logistics revenue continued to grow strongly by 51% YoY and can still break even.
• The operating profit rose to RMB7.3 bn in 2Q23 versus RMB3.8 bn in 2Q22.

• Alibaba Group Holding Ltd.’s workplace collaboration platform DingTalk will split from the company’s cloud division and pursue its own IPO, a source familiar with the matter told Caixin, as the tech giant ramps up efforts to unlock growth following its major restructuring.
• DingTalk’s separation is expected to be completed before the Alibaba cloud unit’s own IPO, the source close to the e-commerce firm said.
• Alibaba announced in May that it would spin off its Cloud Intelligence Group via a stock dividend distribution to its shareholders over the next year with an eventual listing.

• WuXi XDC Cayman Inc (1877628D HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO.
• WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In this note, we will talk about the positive aspects of the deal.

• In 2Q23, online advertising and FinTech revenues continued to grow rapidly.
• Game revenue was slow, but two existing games were still at the top of the game market.
• The operating margin improve significantly, benefiting from the layoff last year.

• Tencent (700 HK) reported 2Q2023 results today. Revenue grew 11.3% YoY to RMB149.2bn (vs consensus RMB151.1bn) while reported OP increased 34% YoY to RMB40.3bn (vs consensus RMB44.6bn).
• Rapid growth in ad business, video account monetisation and cost controls have contributed to Tencent’s 2Q2023 earnings despite domestic gaming business has slowed down.
• Though Tencent’s 2Q2023 results show a recovery in earnings, we would interpret the company’s earnings with caution given the slowdown in domestic gaming and social networks businesses.

• SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange. 
• Earlier this month, I discussed the historical price and volume performance of SSE 50 and SSE 180 Rebalance events in Quiddity Primer for SSE 50/180/380 Index Rebalance Events. 
• In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the December 2023 Rebalance event.

• Lianlian DigiTech (2104619D CH) is looking to raise up to US$500m in its upcoming HK IPO.
• LianLian DigiTech is a digital technology company that provides a range of digital payment services and value-added services to customers in China and around the world.
• Lianlian’s digital payments segment has historically been its largest revenue contributor. However, profitability has been declining on the back of lower gross margins and mounting losses from its Liantong JV.

• While management of SITC International (1308 HK) thinks that the worst is over, we are less positive given the lacklustre demand and the disappointing Jul-Aug market freight rates.
• Its gross margin is still significantly ahead of the pre-COVID levels, and financially, its net cash balance has been coming down. The dividend payout ratio has also lowered slightly.
• The FY23 consensus earnings forecast is too optimistic given 1H23 net profit is only 33.5% of the full-year estimate. The downside risk will cap near-term share price performance. 

• TME reported in-line results with continued divergence in its two major businesses: Online music increased by 48% YoY, while social entertainment declined by 25% YoY.
• We expect these trends to continue, with online music benefiting from price increases and social entertainment facing ongoing challenges from competition, regulations, and macro influences.
• Recently, Douyin has been advancing the integration of its large entertainment division. We anticipate that this will pose pressure on TME. Remain SELL and cut TP to US$ 5.7.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Greentown China

• As a PRC aviation/defense play, AviChina Industry & Technology H (2357 HK)‘s fundamentals are undemanding. 
• Preceding my comments on AviChina are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Hang Lung (10 HK) and Hang Lung Properties (101 HK).

We view Yankuang as “Low Risk” on the LARA scale. This reflects: [1] the company’s huge scale (producing over 100 mn tons a year) and status as the second-largest producer in the Chinese coal sector; and [2] that it is majority owned by, and has strategic importance to, the Shandong government. These translate to strong access to onshore capital. Our assessment also takes into account Yankuang’s: [1] earnings being dependent on coal price fluctuations; [2] improving financial profile; [3] exposure to adverse movements of the USD against the CNY; and [4] track record of operation.

Our fundamental Credit Bias on Yankuang is “Positive”, due to: [1] the company’s enhanced SOE status following the completion of the Yanzhou Coal/Shandong Energy merger; and [2] supportive coal prices.

Controversies are “Immaterial”, but the ESG Impact on Credit is “Moderately Negative”. The coal mining industry in China is exposed to regulatory and geopolitical risks, such as forced closures of inefficient mines. The industry also faces extreme scrutiny from environmental agencies, given its negative impact on the environment.

• Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
• Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
• The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

• ImmuneOnco’s execution/R&D efficiency is far from satisfactory. After about seven years since the establishment in 2015, there are no candidates entering phase III trials or close to market launch.
• The biggest concerns are druggability and safety profile of CD47-targeted candidates. There could be potential R&D failure risks. The pipeline layout around CD47 also makes it hard to diversify risks.
• It’s challenging for ImmuneOnco Biopharmaceuticals (Shanghai) (IOB HK) to hit high-quality license-out deals with reputable big pharma, leading to uncertainties on internationalization. We’re conservative about the outlook. 

We view Lenovo as “Low Risk” on the LARA scale, mainly due to the business’ large size, track record and strong balance sheet. Lenovo is the world’s largest PC maker, with the PC segment being the company’s key profit centre. The Mobile segment has been scaled back to certain markets, and has turned profitable. The Data Centre/Server business is promising and has grown impressively, albeit still suffering losses.

Negatively, all three of the company’s market segments are becoming commoditised. The PC markets, having previously experienced a structural decline due to changes in user behaviour as well as substitutes (smartphones and tablets), has enjoyed strong demand as more people have been working from home amid the pandemic.

Our Credit Bias on Lenovo remains “Stable”, as the growth outlook is subdued due to weak post-COVID-19 PC demand. We do not expect the credit to improve further. That said, the strong balance sheet, sound liquidity and solid working-capital management would cushion Lenovo from the PC segment’s inventory adjustment period.

Controversies are “Immaterial” and the ESG Impact on Credit is “Moderately Positive”. ESG-compliant funds may find Lenovo attractive due to its strong ESG. The company has done very well in terms of environmental factors, with a strong management team as well as a long and positive track record. Lenovo is mainly exposed to geopolitical risk, albeit it has managed this very well amid the US-China trade war.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• AAC Technologies Holdings
• Sino-Ocean Service

• SMIC reported C2Q23 top-line, EBIT, and non-IFRS net profit in-line, (10%), and (20%) vs. our est., and in-line, (35%), and (8%) vs. cons., respectively.
• SMIC guided 3Q revenues up 3-5% QoQ, but gross profit flattish QoQ. This suggests SMIC is shipping 8” wafers with low, or negative profit per wafer.
• We maintain BUY on Huawei exposure but cut our TP to HK$ 24 to reflect the low profitability of 8” wafer orders that could persist given weak demand.

• This is the Brand Spanking New and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see the relationships easily. We used to do it. 
• We decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations. 
• We hope this new version serves readers even better. Feedback is actively solicited to see if we can improve it from here. 

• In response to media speculation, L’Occitane (973 HK) has clarified that Reinold Geiger, the Chairman and the largest shareholder, is contemplating a possible transaction through a voluntary general offer.
• However, the rumoured offer of HK$35 per share is false. Mr Geiger has confirmed that the potential offer price would be no less than HK$26.00 per share.
• The floor price of HK$26 is light and needs a bump (towards HK$30), particularly if Mr Geiger wants 95% of voting rights to exercise the right of compulsory acquisition (squeeze-out).

• Alibaba delivered a strong June quarter that beat consensus by a wide margin and across the board, showcasing an acceleration of recovery.
• The strong results were however clouded by China’s weak macro signals and investors’ lingering concern about China consumption of which Alibaba is commonly seen as a proxy.
• Alibaba trades at 9x our revised-up FY24 earnings. The most certain thing about Alibaba amidst all the uncertainties is it is getting cheaper and it is not a value trap.

• BABA reported CY2Q23 top-line and non-GAAP net profit 10% and in-line vs. our estimate, and 12% and 20% vs. consensus, respectively. Taobao/T-mall 3P, international retail, and DME beat our estimate.
• We suspect WeChat cooperation has been a main driver for increasing DAU of a cohort of previously untapped users. This also drove merchants to return to the platform.
• We maintain BUY and raise TP to US$ 120 to reflect (1) higher growth of Taobao/Tmall, and (2) improved profitability of most business groups.

• Within Alibaba (ADR) (BABA US)‘s June quarter results, the numbers from logistics arm Cainiao Smart Logistics (1437124D HK) stood out: revenue up 34% Y/Y, & EBITA turned to +ive
• In this insight we attempt to place Cainiao’s stellar results into context: it grew far faster than parent Alibaba’s revenue, but also faster than Chinese e-comm and Chinese express
• As Cainiao preps for its IPO, its June results should boost investors’ confidence. The numbers also hint at what is driving Cainiao’s recent performance, and which indicators to watch

• Back on the 7 June, Chindata Group (CD US) announced Bain Capital’s NBIO to buy all shares of the Chinese data center provider it does not already own for $8/ADS.
• On the 13 July, Chindata announced that China Merchants Capital has made an NBIO at $9.20/ADS.
• Now Chindata has entered into a definitive agreement with Chindata at US$8.60/ADS. Bain holds more than 2/3s of Chindata to vote this through. And there is no PRC regulator approval.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adani Ports & Special Economic Zone
• China Jinmao Holdings
• Road King Infrastructure