China Archives | Page 46 of 153 | Smartkarma

• Tencent is nearing our 302 support target with undershoot risk to sub 300, support at 290. HSI continues to trade heavy but reaching oversold levels.
• The break below 331 acted as the most recent sell trigger and will turn into resistance on the way back up. We turned bearish Tencent back in February. 
• Need to see lower price with weakening sell volumes for better buy conviction. Lower wedge support the buy zone, sync with an HSI low.

• At long last, Yashili International Holdings (1230 HK) has dispatched the Scheme Document. 
• The Court Meeting and EGM will be held on the 23 June. The IFA says the Offer is fair. At a ~160% premium to undisturbed, it certainly is. 
• Assuming the transaction gets up, payment will occur on or before the 13 July. 

• The Yashili International Holdings (1230 HK) scheme document is out with the court meeting scheduled for 23 June. The IFA considers the HK$1.20 per share offer to be fair and reasonable. 
• Key conditions include approval by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). The shareholder with a blocking stake should be supportive.
• This is a done deal. At the last close and for the 13 July payment, the gross and annualised spread is 1.7% and 15.3%, respectively.

• Asia-Based leading personal finance aggregation and comparison platform MoneyHero has filed to go public in the US by merging with Bridgetown Holdings and raise proceeds of up to US$154m.
• This would give MoneyHero a pre-money enterprise value of US$200m and an equity value of US$198m with post-money EV of US$342m assuming no redemption by Bridgetown’s public shareholders.
• MoneyHero Global (1534965D HK)  plans to use proceeds from the deal to further accelerate growth and capture market opportunity in the region.

• Broker Mason Financial Holdings (273 HK) is suspended pursuant to the Hong Kong Code on Takeovers and Mergers. 
• Shares are down 95% from its June 2015 peak, and 54% since the onset of Covid. The company last turned a profit in 2018.
• The largest shareholder is the chairman of Shimao Group (813 HK).

• The potential spin-off listing of Alibaba Group (9988 HK) Cloud faces significant challenges from various factors, making the timing particularly challenging for the spin-off.
• The Cloud Business is experiencing intensifying price competition, while simultaneously facing substantial regulatory risks, particularly with the Chinese Government’s plans to nationalize the cloud computing market.
• Due to the ongoing price war and the potential risk of nationalization, we believe that Alibaba (ADR) (BABA US) Cloud’s fair value is substantially below $10bn.

• We tend to shy away from the restaurant industry but decided to make an exception for Tam Jai;
• The brand has become a household name in Hong Kong and delivers attractive business economics for owners from its home market;
• However, we see multiple red/yellow flags when it comes to the management’s capital allocation, particularly relating to overseas expansion.

• On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous notes, we highlighted which divisions could list and looked at some of the divisions in more detail. In this note, we will talk about the local operations.

• Perfect Medical Health’s (1830 HK) share price correction seems overdone. News that COVID cases are expected to rise to over 65 million a week by June in China: the culprit.
• The stock presents an excellent opportunity to invest with a 8.9%/11.8% FY23e/24e dividend yield and 20% of the market capitalization in cash. Such excessive pessimism in this name is unwarranted.
• Catalysts for the stock would be the FY23 March-end results to be declared on June 28th, 2023. 

• Water Oasis (1161 HK) H1 FY23 results were encouraging and a step in the positive direction as revenue/PAT improved by 27%/116% YoY ( although below our estimates by 10%/30%).
• The company paid a semi-annual dividend of 7 cents (9% annualized yield) for an 82% payout ratio. Net cash of 243 mn HKD represents 25% of market capitalization.
• The company has made several investments in new locations and spent heavily on advertising ( costs up 76% YoY); A positive inflection of trends will bear fruit in H2 2023.

• Investment levels in BYD Company Limited H Shares have reached record highs among active Emerging Market funds.
• On a fund level, between 10/31/2022 and 04/30/2023, 22 funds opened new positions in BYD, led by Vontobel MTX Sustainable (+2.4%) and Putnam Emerging Markets (+1.95%).
• BYD has risen up the ranks to become the most widely held and largest weight in the autos sector, surpassing Kia Corp and Mahindra & Mahindra over the last 2-years.

• 1Q massive beat was driven by TEMU, higher-than expected take rates and other income, in order of importance. 
• We remain confident PDD’s China online marketplace business will face increasing growth headwinds, but also acknowledge that TEMU has been growing on track with lower-than-expected losses.
• Earnings growth from PDD’s domestic business will be largely offset by losses incurred by TEMU for 2023. Strong 1Q has not fundamentally changed deceleration trend of full-year bottom-line growth trajectory. 

• On 28th Mar 2023, Alibaba Group (9988 HK) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous notes, we highlighted which divisions could list and looked at some of the divisions in more detail. In this note, we will talk about the international operations.

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.

• Fosun International
• Vedanta Resources

• The China Conch Venture Holdings (586 HK) / Anhui Conch Cement (600585 CH) ratio is at an all-time low. The implied stub is re-testing its all-time low.
• Preceding my comments on China Conch/Anhui 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%.

• There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 9 June.
• The inclusions will also be added to other indices over the next couple of weeks and there will be inflows from multiple index trackers.
• The adds have outperformed and with 9 trading days to implementation of the changes and the inclusions also being added to other indices, there could be further outperformance near-term.

• In 1Q23, total revenue grew by 58% YoY and the operating margin improved to 18% versus 9% in the same period last year.
• We believe the company benefited from its low-price products and the low comparison base last year.
• We conclude the stock has an upside of 40% and a price target of US$100.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• Meituan (3690 HK) has been trapped in a symmetrical triangle since bottoming in March 2022. Today the base of the triangle was impulsively broken at 122.55.
• The base of the triangle also forms part of a much larger LT uptrend that began in 2019. A month end close below 122.55 will target material multi-month downside.

• There will be 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 June.
• One-Way turnover for the Chinext Price Index is estimated at 3.17% while the one-way turnover for the ChiNext50 Index is 6.61%. The one-way trade across both indices is CNY 2.72bn.
• The adds have outperformed the deletes by a huge margin over the last 3 months and there could be profit taking into implementation.

• JD Industrials (2231713D CH)/JDI, a leading industrial supply chain technology and service provider in China, has filed for a US$1bn IPO. JD.com Inc (ADR) (JD US) owns a 77.95% stake.
• In JD Industrials IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on slowing SME growth, declining key accounts take rate and gross margin, unnecessary factoring and transfer of most cash for treasury management.

• PDD Holdings Inc (PDD US) shares rose 19% on last Friday following 1Q23 revenue of RMB 37.6bn (consensus: RMB 31.9bn) and OP of RMB 6.9bn (consensus: RMB 5.0bn).
• The declining margin trend is a significant concern as Pinduoduo won’t appear cheap if margins fall short of expectations.
• Meanwhile, the existence of Temu could be at risk if the US government takes measures to address the De minimis loophole.

• Changjiu Digital Technology (CDT CH) is looking to raise about US$150m in its upcoming HK IPO. The deal will be run by Citic Securities and ICBC.
• Changjiu Digital Technology (CDT) provides comprehensive automobile digital risk management services and automobile dealership operation management services in China. 
• According to CIC, it was the largest digital risk management service provider in China’s automobile sales and distribution industry in terms of revenue as of FY21 (31st Dec 2021).

• Growatt Technology (1833969D CH) has downsized it HKEx IPO to about US$400m and in this insight, we have compared the company’s financials against other listed PV inverter players.
• Our peer analysis reveals that Growatt’s top line has grown at much higher rates compared to No. 1 player Sungrow whose margins were well below the company.
• By looking at valuation multiples of listed peers, it seems that the company could easily command a valuation of more than US$5bn if it is valued in line with peers.

• Besides COLI, we also like CRL, being another SOE play (no bankruptcy risk), with dual growth engine from residential development business and shopping mall business
• Major share price drivers includes its contract sales trend, retail sales, rental performance as well as property policy from government
• CRL is trading HKD30, there is no placement risk until it trades at HKD HKD39 (P/B =1x).  We recommend buying if stock trades <HKD35 as a technical indicator

• Golden Eagle Retail (3308 HK) disclosed a scheme privatisation offer from the controlling family at HK$6.88 per share, a 40.4% premium to the undisturbed price (HK$4.90 on 22 May).
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable. 
• The offer price is final. The offer is reasonable particularly as the sentiment on the department store sector remains weak. This looks like a done deal. 

• There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
• All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
• The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.

• There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
• One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
• 8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), HKBN Ltd (1310 HK), Hailan Holdings (2278 HK), Origin Energy (ORG AU).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Silk Laser Australia (SLA AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Penguin International (PBS SP).

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• PRC department store play Golden Eagle (3308 HK) has announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close. The price is final.
• 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. 
• Apart from shareholder approval, there are no key regulatory approvals to be obtained. 

• The recent discrimination incident will likely affect traffic recovery pace of Cathay Pacific Airways (293 HK) negatively if it turns into a full-scale boycott by mainland passengers.
• The scenario of CX becoming majority-owned by Air China Ltd (H) (753 HK) is getting increasingly possible. This may not be totally positive to CX given CA’s weaker service ranking.
• Consensus forecasts now look somewhat bullish following the incident, and the stock’s 0.7x P/B does not stand out as attractive relative to history or ROE (7% in FY25F).

• In this insight, we explore the investment thesis and major share price drivers for 688 HK
• COLI saw share price weakness, and is trading at 0.46x P/B.  Potential risks are 1) fail to meet 20% growth target 2) slower than expected land acquisition
• We see value emerging from the stock, and recommend BUY as long as the stock trades below HKD20 (as a technical indicator)

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.

• Meituan
• Tata Motors ADR

• New Horizon Health (NHH) achieved high performance growth last year. However, we recommend investors take a calm and objective view of NHH’s current high growth rate if they see the real story.
• NHH’s dual attributes of medical+consumption means large growth potential/strong profitability. Thus, the real expectation for NHH is not just about achieving breakeven, but more about how to achieve high profitablity.
• If market education level falls short of expectations in the future, it’s difficult for NHH to achieve expected scale/profit margin. There would be greater valuation downward risk at that time.

• The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
• One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
• There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.

• There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
• We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
• The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.

• There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
• The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
• With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.

• There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
• While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
• The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.

• The 9th national VBP is drawing near. As all drugs under national/provincial VBP are scheduled to be executed before 2025/12/31, there should be new policies in 2026 and beyond.
• The capabilities of Chinese pharmaceutical companies in ADC field have at least stepped onto a platform to compete with international giants, which is clearly more progressive than during PD-1 era.
• We analyzed key points of Ovctek. Its investment logic has changed and centralized procurement will break investors’ expectations for Ovctek’s future performance growth. Valuation may continue to be under pressure.

• JD Industrials (2231713D CH)/JDI, a leading industrial supply chain technology and service provider in China, has filed for a US$1bn IPO. JD.com Inc (ADR) (JD US) owns a 77.95% stake.
• JDI is the largest industrial supply chain technology and service provider in China in terms of GMV, customer coverage and SKU offerings in 2022, according to CIC.
• The key elements of the bull case rest on large addressable markets, market share gains, robust product revenue growth underpinned by key accounts, improving underlying margin and strong cash generation.

• Meituan (3690 HK) ’s 1Q2023 earnings beat consensus estimates and the key highlight was the company turning into adjusted operating profits after two years.
• Revenue from Core local commerce continued to see strong growth in earnings though we expected growth rates to decline with pandemic conditions easing off.
• Meituan has launched its food delivery app “KeeTa” in Hong Kong which is dominated by Foodpanda and Deliveroo.

• Jiangxi Rimag Group (JIR HK), a China-based medical imaging center operator and provider of Rimag cloud services, filed for a Hong Kong IPO.
• Jiangxi Rimag Group (JIR HK) was backed by Goldman Sachs, leading VC firms in Asia, Baidu Inc., JD Health, and American healthcare investment firm OrbiMed. 
• China’s medical imaging industry is experiencing a remarkable transformation, driven by rapid technological advancements, evolving healthcare needs, and supportive government policies.

• NetEase reported in-line revenue for 1Q23, while non-GAAP net income exceeded our estimate by 22%. 
• <Justice Mobile> is set to launch by the end of June. We anticipate that investors may need to wait for some time after June for NetEase’s next potential hit title. 
• Maintain a BUY with TP unchanged, implying 18X PE in 2023.

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. Lenovo
2. Vedanta Resources
3. China Jinmao Holdings
4. Lifestyle International Holdings
5. Geely Auto

and more…

• Meituan reported 1Q23’s rev./non-IFRS net income 2.5%/126% vs. our est., the strong margin beat is due to efficiency improvements in all business lines;
• To compete with Douyin’s in-store business, Meituan will spend more in 2Q23, however FD and insta-shopping continue to have margin upside. 
• Our BUY thesis remains unchanged, as we believe investors overestimate Douyin’s impact, while underestimating Meituan’s ability to improve margins. 

• Weibo’s 1Q23 top line was in line with our est., and non-GAAP net income beat our est./cons. by 6.5%/ 7.6%, due to cost-saving measures. 
• While we dial down its 2Q23 revenue forecast, we remain optimistic about its growth in 2H23, as more brand advertisers gradually recover. 
• Maintain BUY and TP unchanged, which implies 12X PE in 2023.

• A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
• Preceding my comments on Japan Post 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%.

• Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$400 million HKEx IPO, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: The Investment Case, Growatt Technology IPO: Growing Watts, Growatt Technology IPO: The Bear Case, Growatt Technology IPO: The Bull Case. 
• In this note, we outline our updated forecasts and present our updated look at Growatt’s potential valuation range.

The Asia HY Trade Book for May 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
• Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.
• HSBC Holdings (5 HK) and  Citic Ltd (267 HK)  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

• In 1Q23, total revenues grew by 27% YoY with all business lines up by more than 10% YoY.
• The real operating profits turned positive after nine quarters’ losses.
• We believe the stock has an upside of 35% for yearend 2023. Buy.

• XPeng reported soft 1Q23 results, with topline of RMB 4.03bn, missing cons by (4.4%); GPM of 1.7% missing cons. and our est. by (4.5ppt)/(4.8ppt. 
• The 2Q23 guidance implies a QoQ recovery of 15.2%-20.7%, thanks to increasing order intake of the all-new P7i and recent channel transformation. 
• We maintain BUY. We cut TP to US$ 10 due to pressure amid intensified competition.

• VIPS reported C1Q23 top-line, GAAP operating profit, and non-GAAP net income 6.6%, 27%, and 31% vs. our est., and 5.6%, 20%, and 36% vs. cons.; 
• We expect VIPS profitability to remain steady given its relative immunity to competitor price competition, mainly due to its high apparel exposure, high member loyalty, and differentiated product sourcing strategy; 
• Given improving apparel demand and EPADS on share buy-backs, we maintain BUY and US$ 16.3 TP, implying 8.1x 2023 non-GAAP P/E.  

• Xiaomi reported C1Q23 top-line and non-IFRS net income (6.9%) and 20.7% vs. our est., and in-line and 39.9% vs. consensus; 
• We suggest that higher margins are transitory, as (1) key IC component prices may have bottomed, (2) EV spend is likely to ramp up further. 
• We maintain SELL and HK$ 8.2 TP, implying 26x FY23 PE.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Water Affairs’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• BZ reported 1Q23 cash billing 2.9% higher than our est.; revenue in-line with our estimate and consensus;  and non-GAAP NI 36.3%/35.3% higher than our est. and cons.
• As BZ approaching the proxy of China’s labour market, its primary hurdle is the slow recovery of labour demand and mismatch of supply and demand.
• We maintain SELL rating and TP at US$13.5., as we are still waiting for signal for the overturn of job seeking market in China.

• JD Industrials (JDI)  is looking to raise about US$1bn in its upcoming HK IPO. 
• JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
• In this note, we will undertake a peer comparison versus domestic and international peers.

• Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value). 
• The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value. 
• With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

• On May 22nd, Meituan launched its food delivery platform called KeeTa in Hong Kong SAR.
• KeeTa’s expansion stratgies include Collaboration with branded chain merchants,lower ASP, subsidy campaign, and launching “On-time Guarantee”.
• Sofar the initial results after launch seems to be in-line with expecation, while  there will still be a lot of challenges, like small market size and stabilized competition landscape.  

• Alibaba Health Information Technology (241 HK) ’s 2HFY03/2023 revenues beat consensus by 1.4% while adjusted operating losses of RMB1.74m (0.01% of revenue) is significantly lower compared to 2HFY03/2022 and consensus.
• Improvement in profitability was driven by improved GPM coupled with decrease in SG&A costs which helped offset increase in fulfilment costs as a result of the Covid-19 outbreak.
• Our quantamental analysis suggests that Ali Health’s margins have very little room for improvement unless the company cuts down SG&A significantly while improving revenue % from non-direct pharmaceutical businesses.

• Industry and company reports show ASP declines gained momentum in April
• April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
• Our thesis: pricing is getting weaker, and this trend will soon impact margins

• The odds are high for PDD to miss consensus for 1Q results this Friday due to high base and deflating domestic growth drivers, despite TEMU’s momentum.
• Among major China tech companies, PDD is likely to be the only one to register stagnant or even negative earnings growth for FY23, which has not been in the price.
• A down cycle for PDD’s earnings growth leads us to assign 12x P/E to an estimated non-GAAP net profit of RMB39 billion for FY23, implying 15% downside. 

• Despite solid outperformance, share price of Xinhua Winshare (811 HK) is more than 100% covered by net cash of Rmb7.6bn. DPS has also risen uninterruptedly in the last 3 years. 
• 1Q23 result demonstrated operating resilience as recurring profit soared 48.5%. Its franchise in textbook publication and distribution stayed well protected, securing profitability outlook.
• We like XW’s boring businesses in the current depressed market. It trades on 4.5x PER with secured 6.6% dividend yield. The HA discount has widened to 10pp deeper than average. 

• JD Industrials is looking to raise about US$1bn in its upcoming HK IPO. 
• JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
• We undertook a peer comparison in our previous note, in this note we talk about some additional useful information that we found interesting from peer filings.

• MicroPort Cardiac Rhythm Management (1813053D CH) is looking to raise about US$200m in its upcoming HK IPO. The deal will be run by Goldman Sachs and CICC.
• Microport Cardiac Rhythm Management (MCRM) is a R&D-driven, commercial-stage medical technology company specializing in active implantable medical devices for cardiac rhythm management (CRM). 
• Its operations are dedicated to the design, development and commercialization of products and solutions to treat and manage arrhythmias and heart failure. 

• Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO.
• HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
• In this note, we will talk about the trading dynamics and valuation.

• Alibaba Group Holding Ltd. outlined timetables for several key business units to complete spinoffs or pursue independent share sales, kicking off major moves in a sweeping reorganization to break up the gigantic conglomerate and unleash new growth momentum.
• Alibaba’s board of directors approved a full spinoff of its cloud services division while exploring initial public offerings for the logistics and grocery arms, the company said Thursday.
• The e-commerce giant plans to carve out the Cloud Intelligence Group within 12 months through a stock dividend distribution to shareholders, meaning it could relinquish control of China’s biggest cloud services platform.

• Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$400 million HKEx IPO, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: Growing Watts, Growatt Technology IPO: The Bull Case and Growatt Technology IPO: The Bear Case. 
• The updated PHIP which disclosed the 2022 results and latest developments suggests that Growatt continues to deliver profitable and cash-generative growth. 

• China just announced game approval for May batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game. We saw a pattern of approval rotation for the duo.

• Angelalign’s business model is easily challenged by lower priced similar competing products. Once Angelalign’s products lose price advantage, it would lead to a rapid decline in overall sales performance. 
• Performance growth could still be under pressure this year due to unsatisfactory demand.The potential price war, further price reduction and increasing selling/marketing expenses would put more pressure on profit margin.
• Angelalign hasn’t accumulated enough data size due to few overseas customers, which could lead to product quality issues and slow internationalization progress. There is downside risk due to overvaluation.

• Kuaishou reported 1Q23 top-line 4% vs. our est., and non-IFRS net profit of RMB 42mn vs. our est. of RMB (688mn); 
• We raise 2023 live-streaming/ads/ecommerce revenue growth from 12%/ 17%/26% YoY to 18%/20%/43% YoY, and non-IFRS net income from RMB 860mn to RMB 3.89bn due to a series of monetization methods; 
• We maintain SELL due to the competitive pressure of Douyin and WeChat Video Account, reflected by decelerated user growth and time spent.  

• Weaknesses of BABA stock and China tech sector in general post their strong earnings recovery for March quarter suggest market’s concerns centering around growth outlook.
• BABA fundamental has tracked well to our projection since last November. P/E multiple contraction – which priced in too much pessimism – prevented our bullish call from materializing, for now.
• We stick to our thesis that March quarter results set stage for BABA re-rating on sustained recovery, well-executed overhaul effectively unlocking value and investors’ renewed appetite for China assets.

• We spent the second half of last week meeting ECM focused clients in Hong Kong.
• Overall, the mood remains somewhat grim for Hong Kong/China and it will be up to a few upcoming deals to open up the market again.
• In this note, we talk about some of the feedback for the upcoming IPOs and placements.

• The revenue growth rates of all business lines accelerated in 1Q23.
• Operating losses shrank to RMB1.3 bn in 1Q23, less than RMB3 bn in two previous quarters.
• We believe the stock has an upside of 66% for the yearend 2023.

• Lithium battery maker, EVE Energy (300014 CH), is expected to invest US$2.3bn in expanding its battery manufacturing capabilities in two new plants. 
• Both plants are expected to come online within 18-24 months, depending on market conditions and various approvals. 
• Eve is down 57% from its December 2021 high, and trading around its lowest level since November 2020, excluding a brief dip in April 2022. 

• Kuaishou Technology (1024 HK) ’s 1Q2023 earnings were above consensus estimates with the company reporting positive adj. EBITDA and adj. net profit during the quarter.
• Operating profit margin of the domestic business further improved while the company managed to significantly reduce operating losses of the overseas business during the quarter.
• Kuaishou also announced a small share buyback worth of HK$4bn which further affirms the company’s improving fundamentals and should help attract investors.

• In the evening of May 20th, NetEase held an online conference where it announced release dates for games…
• …that It has Previously Announced, and Unveiled New Titles that Will Be Launched in the Future.
• Overall, June Will Be the Peak Month for Newly Launched Titles from NetEase, with One Big Game (Justice Mobile) And Two Smaller Games (Badlanders and Racing Mobile)

• Despite unfriendly external environment in 2022, Consun Pharmaceutical (1681 HK) still achieved stable performance growth. The Company has maintained a consistently high level of dividend payout, which is commendable.
• The rapid sales expansion of commercialized products has laid the foundation for the high-quality growth of Consun, and the continuously improving profitability further confirms its growth certainty.
• Based on the current market value, we think Consun is undervalued considering its RMB3 billion cash balance by 2022. It is expected to usher in valuation repair in the future.

• Reported 1Q EPS of $0.11 on revenue of $22.1 million, up from the prior quarter’s loss of $0.08 per share on $19.34 million in revenue.
• The performance topped the results of the past three quarters, showing the continued recovery of the transmission business in China, which had been affected by the severe COVID restrictions and shutdowns.
• This is particularly encouraging as 1Q is typically the seasonally weakest quarter due to the Chinese New Year holiday and manufacturing restocking.

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.

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