Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of August 2nd.</li>
<li>We estimate the weekly inflows to be US$486.3 million, led by financials, health care, utilities sectors, and offset by consumer discretionary, materials, consumer staples.</li>
<li>We highlight flows for Wanhua Chemical, Moutai, CATL, Fuyao Glass Industry, Haier Smart Home.</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of August 2nd.
We estimate the weekly inflows to be US$486.3 million, led by financials, health care, utilities sectors, and offset by consumer discretionary, materials, consumer staples.
We highlight flows for Wanhua Chemical, Moutai, CATL, Fuyao Glass Industry, Haier Smart Home.


Northbound Flows (Aug 2nd): Wanhua Chemical, Moutai, CATL, Fuyao Glass Industry, Haier Smart Home

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>Dong-E-E-Jiao's performance is exciting. The first-ever equity incentive plan fully demonstrates the new management team's confidence in the future development of the Company. There's potential for another leap in valuation.</li>
<li>Our 2024 forecast is net profit to reach RMB1.4 billion, up 20% YoY. Reasonable valuation is 25-30x P/E.If market value falls below RMB35 billion, this is a great buying opportunity.</li>
<li>Dong-E-E-Jiao is worth long-term holding due to attractive dividend policy. China Resources may further improve dividend payout, which is in line with the major trend for SOE to increase dividends.</li>
</ul>


Dong-E-E-Jiao's performance is exciting. The first-ever equity incentive plan fully demonstrates the new management team's confidence in the future development of the Company. There's potential for another leap in valuation.
Our 2024 forecast is net profit to reach RMB1.4 billion, up 20% YoY. Reasonable valuation is 25-30x P/E.If market value falls below RMB35 billion, this is a great buying opportunity.
Dong-E-E-Jiao is worth long-term holding due to attractive dividend policy. China Resources may further improve dividend payout, which is in line with the major trend for SOE to increase dividends.


Dong E E Jiao (000423.CH) - Big Dividends and Potential Leap in Valuation Are Highly Anticipated

<ul>
<li>Some investors are disappointed with 23Q3 performance, but we think Dong-E-E-Jiao is getting back on track. The de-stocking has achieved great results and pressure on distribution channels has been alleviated.</li>
<li>Since Dong-E-E-Jiao’s contract liabilities hit a record high, we are optimistic about the performance in 23Q4 and 24Q1. China Resources could further improve Dong-E-E-Jiao’s dividend rate, making it more attractive.</li>
<li>Since Dong-E-E-Jiao’s performance is continuously improving, valuation still has room to grow. A significant increase in valuation in the short term depends on whether there would be M&amp;A deal emerges.</li>
</ul>


Some investors are disappointed with 23Q3 performance, but we think Dong-E-E-Jiao is getting back on track. The de-stocking has achieved great results and pressure on distribution channels has been alleviated.
Since Dong-E-E-Jiao’s contract liabilities hit a record high, we are optimistic about the performance in 23Q4 and 24Q1. China Resources could further improve Dong-E-E-Jiao’s dividend rate, making it more attractive.
Since Dong-E-E-Jiao’s performance is continuously improving, valuation still has room to grow. A significant increase in valuation in the short term depends on whether there would be M&amp;A deal emerges.


Dong E E Jiao Co Ltd (000423.CH) - The Situation Is Getting Better and Better

Equity Capital Markets

Xiamen Yan Palace Bioengineering / Equity Capital Markets

Xiamen Yan Palace Bioengineering (XIAMEN HK)

<ul>
<li>From 2020 to 2022, Yan Palace has spent RMB831 million on advertising and promotion, while total net profit of the Company during the same period was only about RMB500 million.</li>
<li>OneNest is the main product with the highest gross margin, which is driven by price increase strategy.However, raising price may not work. Revenue growth in 2023H2/2024 could further slow down.</li>
<li>The question is are investors really satisfied with such low-margin business for a company with strong consumption attributes? Valuation of Yan Palace should be lower than <a href="https://www.smartkarma.com/entities/dong-e-e-jiaoco-ltd-a" target="_blank" data-smartkarma-citation="entities:8470:1" rel="noopener">Dong E E Jiao</a>.</li>
</ul>


From 2020 to 2022, Yan Palace has spent RMB831 million on advertising and promotion, while total net profit of the Company during the same period was only about RMB500 million.
OneNest is the main product with the highest gross margin, which is driven by price increase strategy.However, raising price may not work. Revenue growth in 2023H2/2024 could further slow down.
The question is are investors really satisfied with such low-margin business for a company with strong consumption attributes? Valuation of Yan Palace should be lower than Dong E E Jiao.


Pre-IPO Xiamen Yan Palace Bioengineering (PHIP Updates) - Some Points Worth the Attention

<ul>
<li>Although Yan Palace prioritizes R&amp;D capabilities in prospectus, its revenue growth and business model are mainly relied on large investment in marketing/promotion.The root cause is the efficacy problem of EBN.</li>
<li>Whether Yan Palace's future performance growth can be sustained is a question mark if marketing/promotion cannot drive growth anymore. Net profit margin is low. EBN is not a profitable business.</li>
<li>Yan Palace's products do not have core competitiveness or high moat. Compliance risks are also worth being vigilant about. The valuation of Yan Palace should be lower than <a href="https://www.smartkarma.com/entities/giant-biogene-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:35950:1" rel="noopener">Giant Biogene</a>.</li>
</ul>


Although Yan Palace prioritizes R&amp;D capabilities in prospectus, its revenue growth and business model are mainly relied on large investment in marketing/promotion.The root cause is the efficacy problem of EBN.
Whether Yan Palace's future performance growth can be sustained is a question mark if marketing/promotion cannot drive growth anymore. Net profit margin is low. EBN is not a profitable business.
Yan Palace's products do not have core competitiveness or high moat. Compliance risks are also worth being vigilant about. The valuation of Yan Palace should be lower than Giant Biogene.


Pre-IPO Xiamen Yan Palace Bioengineering - Concerns About Profitability and Growth Sustainability

China

Dong-E-E-Jiao Co., Ltd. primarily manufactures and sells traditional Chinese medicine, health care products, health foods, and bio-medicine. The company also engages in gelatin products manufacturing.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
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Dong E E Jiaoco Ltd A (000423 CH)

Northbound Flows (Aug 2nd): Wanhua Chemical, Moutai, CATL, Fuyao Glass Industry, Haier Smart Home

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlighted flows for Wanhua Chemical, Moutai, CATL, Fuyao Glass...

Ke Yan, CFA, FRM

Dong E E Jiao (000423.CH) - Big Dividends and Potential Leap in Valuation Are Highly Anticipated

Exciting performance/confidence in future growth drive potential for valuation leap at Dong-E-E-Jiao. Forecasted net profit increase and...

Xinyao (Criss) Wang

Dong E E Jiao Co Ltd (000423.CH) - The Situation Is Getting Better and Better

Dong-E-E-Jiao’s successful de-stocking helps form a new supply-demand relationship.Strong support provided by China Resources/high dividends would...

Xinyao (Criss) Wang

Pre-IPO Xiamen Yan Palace Bioengineering (PHIP Updates) - Some Points Worth the Attention

As Yan palace's revenue growth further declines, effectiveness of marketing activities has already decrease. Huge selling expenses erode profit...

Xinyao (Criss) Wang

Pre-IPO Xiamen Yan Palace Bioengineering - Concerns About Profitability and Growth Sustainability

Since the efficacy/actual value of EBN is questionable, marketing/promotion alone cannot drive future performance growth.Yan Palace's profit model...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Northbound Flows (Aug 2nd): Wanhua Chemical, Moutai, CATL, Fuyao Glass Industry, Haier Smart Home

We analyzed northbound Shanghai/Shenzhen connect flows in the past week and highlighted flows for Wanhua Chemical, Moutai, CATL, Fuyao Glass...

Ke Yan, CFA, FRM

Dong E E Jiao (000423.CH) - Big Dividends and Potential Leap in Valuation Are Highly Anticipated

​Exciting performance/confidence in future growth drive potential for valuation leap at Dong-E-E-Jiao. Forecasted net profit increase and...

Xinyao (Criss) Wang

Dong E E Jiao Co Ltd (000423.CH) - The Situation Is Getting Better and Better

Dong-E-E-Jiao’s successful de-stocking helps form a new supply-demand relationship.Strong support provided by China Resources/high dividends would...

Xinyao (Criss) Wang

Pre-IPO Xiamen Yan Palace Bioengineering (PHIP Updates) - Some Points Worth the Attention

As Yan palace's revenue growth further declines, effectiveness of marketing activities has already decrease. Huge selling expenses erode profit...

Xinyao (Criss) Wang

Pre-IPO Xiamen Yan Palace Bioengineering - Concerns About Profitability and Growth Sustainability

Since the efficacy/actual value of EBN is questionable, marketing/promotion alone cannot drive future performance growth.Yan Palace's profit model...

Xinyao (Criss) Wang

Exciting performance/confidence in future growth drive potential for valuation leap at Dong-E-E-Jiao. Forecasted net profit increase and...