HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The HSI has already recovered to 2.2% above the pre-"reciprocal tariff" level, and the top 10 best-performing constituents have registered an average return of 15.6%.</li>
<li>Despite so, there are still 40 under-performing stocks, with 32 of them remain in the negative zone with an average of 4.8% loss. </li>
<li>Among them, <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman (2057 HK)</a>, <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing APAC (1876 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>, and <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> look well-positioned to catch up.</li>
</ul>


The HSI has already recovered to 2.2% above the pre-"reciprocal tariff" level, and the top 10 best-performing constituents have registered an average return of 15.6%.
Despite so, there are still 40 under-performing stocks, with 32 of them remain in the negative zone with an average of 4.8% loss. 
Among them, ZTO Express Cayman (2057 HK), Budweiser Brewing APAC (1876 HK), BYD Electronics (285 HK), and Meituan (3690 HK) look well-positioned to catch up.


HK Strategy: What Are Some of the HSI Laggards to Pick Up?

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>The HK$7.19/share IPO pricing is attractive. The valuation safety margin reserved for the IPO of Green Tea may be mainly due to the management's consideration of attracting long-term funds.</li>
<li>If the market sentiment is positive, combined with conservative IPO pricing, Green Tea would still perform well after listing. For example, valuation has the potential to recover to 15x P/E.</li>
<li>However, when scale expansion fails to bring efficiency improvement,“cracks” appear in the core logic of the capital story.So, taking profits when Green Tea's valuation exceeds Xiaocaiyuan is a good option.  </li>
</ul>


The HK$7.19/share IPO pricing is attractive. The valuation safety margin reserved for the IPO of Green Tea may be mainly due to the management's consideration of attracting long-term funds.
If the market sentiment is positive, combined with conservative IPO pricing, Green Tea would still perform well after listing. For example, valuation has the potential to recover to 15x P/E.
However, when scale expansion fails to bring efficiency improvement,“cracks” appear in the core logic of the capital story.So, taking profits when Green Tea's valuation exceeds Xiaocaiyuan is a good option.  


Pre-IPO Green Tea Group - Thoughts on IPO Pricing and Valuation Outlook

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the June rebalance of the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a> ended on 31 March, the results will be announced on 16 May and will be implemented on 6 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart International Group L (9992 HK)</a> could be added to the index while <a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> could be deleted from the index.</li>
<li>There are other stocks with big flows due to a change in the FreeFloat-Adjusted Factor (FAF) methodology for Secondary Listings that will be implemented from the rebalance in June.</li>
</ul>


The review period for the June rebalance of the HSCEI ended on 31 March, the results will be announced on 16 May and will be implemented on 6 June.

Pop Mart International Group L (9992 HK) could be added to the index while Sunny Optical Technology Group (2382 HK) could be deleted from the index.
There are other stocks with big flows due to a change in the FreeFloat-Adjusted Factor (FAF) methodology for Secondary Listings that will be implemented from the rebalance in June.


HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace Sunny Optical (2382 HK)

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shakey-s-pizza-asia-ventures" target="_blank" data-smartkarma-citation="entities:23706:1" rel="noopener">Shakey's Pizza (PIZZA PM)</a> delivered FY24 revenue/profit growth of 13%/11% YoY.  This was due to a turnaround of 9MFY24 revenue/profits from-10%/10% YoY, with Q4FY24 high season revenue/profits growing 19%/57% YoY.</li>
<li>The company is experiencing a sequential improvement in its SSSG, which is continuing into Q1 FY25. It has guided double-digit growth in revenues and profits in FY25.</li>
<li>Trading at 11.5x/10.2x PE for FY24/25e, with low expectations, we believe there could be a good rally post the results.</li>
</ul>



Shakey's Pizza (PIZZA PM) delivered FY24 revenue/profit growth of 13%/11% YoY.  This was due to a turnaround of 9MFY24 revenue/profits from-10%/10% YoY, with Q4FY24 high season revenue/profits growing 19%/57% YoY.
The company is experiencing a sequential improvement in its SSSG, which is continuing into Q1 FY25. It has guided double-digit growth in revenues and profits in FY25.
Trading at 11.5x/10.2x PE for FY24/25e, with low expectations, we believe there could be a good rally post the results.


Shakey's Pizza (PIZZA PM) FY24 and Concall Highlights: Solid Q4 Bottomline, Strong FY25 Guidance

LXJ International Holdings / Equity Capital Markets

<ul>
<li>LXJ’s revenue/net profit showed an upward trend from 2022 to 24Q1-Q3, but growth momentum was decreasing. The same store sales growth dropped significantly. Profit margin is also lower than peers. </li>
<li>There’re significant differences in dietary habits and tastes across China, making it difficult for LXJ to expand nationwide. So, the future growth potential may not be as good as expected.</li>
<li>In December 2021, valuation of LXJ had reached RMB18 billion. Since LXJ’s revenue growth/profit margin are inferior to Xiaocaiyuan, we think the valuation of LXJ should be lower than Xiaocaiyuan.</li>
</ul>


LXJ’s revenue/net profit showed an upward trend from 2022 to 24Q1-Q3, but growth momentum was decreasing. The same store sales growth dropped significantly. Profit margin is also lower than peers. 
There’re significant differences in dietary habits and tastes across China, making it difficult for LXJ to expand nationwide. So, the future growth potential may not be as good as expected.
In December 2021, valuation of LXJ had reached RMB18 billion. Since LXJ’s revenue growth/profit margin are inferior to Xiaocaiyuan, we think the valuation of LXJ should be lower than Xiaocaiyuan.


Pre-IPO LXJ International Holdings - The Pain Points and the Outlook

China

Haidilao International Holding Ltd. operates Chinese cuisine restaurant brand focusing on hot pot cuisine. The Company provides hot pots, soup bases, dipping sauces, drinks, prepared food, and other products. Haidilao International Holding opens restaurants in Taiwan, Hong Kong, Singapore, South Korea, Japan, and the United States.

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Haidilao International Holding (6862 HK)

HK Strategy: What Are Some of the HSI Laggards to Pick Up?

HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Osbert Tang, CFA

Pre-IPO Green Tea Group - Thoughts on IPO Pricing and Valuation Outlook

Green Tea's IPO pricing shows good valuation safety margin. When scale expansion fail to bring efficiency improvement,“cracks” appear in the core...

Xinyao (Criss) Wang

HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace Sunny Optical (2382 HK)

Pop Mart could replace Sunny Optical in the index. There will be inflows for NetEase, Trip.com and Baidu due to a FAF methodology change. Pop Mart...

Brian Freitas

Shakey's Pizza (PIZZA PM) FY24 and Concall Highlights: Solid Q4 Bottomline, Strong FY25 Guidance

We summarize the highlights from Shakey's Pizza (PIZZA PM) FY24 results and the conference call. With a massive swing in earnings in Q4, up 57%...

Sameer Taneja

Pre-IPO LXJ International Holdings - The Pain Points and the Outlook

LXJ's revenue and profit are on the rise but growth is slowing, facing challenges in expanding nationwide due to regional dietary differences....

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: What Are Some of the HSI Laggards to Pick Up?

​HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Osbert Tang, CFA

Pre-IPO Green Tea Group - Thoughts on IPO Pricing and Valuation Outlook

​Green Tea's IPO pricing shows good valuation safety margin. When scale expansion fail to bring efficiency improvement,“cracks” appear in the core...

Xinyao (Criss) Wang

HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace Sunny Optical (2382 HK)

Pop Mart could replace Sunny Optical in the index. There will be inflows for NetEase, Trip.com and Baidu due to a FAF methodology change. Pop Mart...

Brian Freitas

Shakey's Pizza (PIZZA PM) FY24 and Concall Highlights: Solid Q4 Bottomline, Strong FY25 Guidance

We summarize the highlights from Shakey's Pizza (PIZZA PM) FY24 results and the conference call. With a massive swing in earnings in Q4, up 57%...

Sameer Taneja

Pre-IPO LXJ International Holdings - The Pain Points and the Outlook

​LXJ's revenue and profit are on the rise but growth is slowing, facing challenges in expanding nationwide due to regional dietary differences....

Xinyao (Criss) Wang

HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Green Tea's IPO pricing shows good valuation safety margin. When scale expansion fail to bring efficiency improvement,“cracks” appear in the core...

LXJ's revenue and profit are on the rise but growth is slowing, facing challenges in expanding nationwide due to regional dietary differences....