Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>BILIBILI shares have rallied more than 200% since early November on prospects of China exiting zero-COVID, short covering, and accelerated breakeven timeline.</li>
<li>Yet simply achieving breakeven doesn’t justify its US$10 billion valuation. It has to be accompanied by decent profitable growth - an unlikely scenario given the aggressive downsizing needed for breakeven.</li>
<li>BILI’s businesses also entail structurally low margin. Stock could easily de-rate by 30% or more when growth euphoria recedes and disappointed profitability checks in during 2023.</li>
</ul>


BILIBILI shares have rallied more than 200% since early November on prospects of China exiting zero-COVID, short covering, and accelerated breakeven timeline.
Yet simply achieving breakeven doesn’t justify its US$10 billion valuation. It has to be accompanied by decent profitable growth - an unlikely scenario given the aggressive downsizing needed for breakeven.
BILI’s businesses also entail structurally low margin. Stock could easily de-rate by 30% or more when growth euphoria recedes and disappointed profitability checks in during 2023.


BILIBILI (BILI US): Can Achieving Breakeven Justify US$10bn Market Cap?

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 December rebalance of the <a href="https://www.smartkarma.com/entities/kraneshares-csi-china-internet-etf" target="_blank" data-smartkarma-citation="entities:28208:1" rel="noopener">KraneShares CSI China Internet ETF (KWEB US)</a> will take place at the close of trading on 12 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/alibaba-pictures-group-ltd" target="_blank" data-smartkarma-citation="entities:20724:1" rel="noopener">Alibaba Pictures</a>, <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding</a>, <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology</a>, <a href="https://www.smartkarma.com/entities/xd-inc" target="_blank" data-smartkarma-citation="entities:28283:1" rel="noopener">XD Inc.</a> and <a href="https://www.smartkarma.com/entities/caocao-inc" target="_blank" data-smartkarma-citation="entities:42803:1" rel="noopener">CaoCao (2643 HK)</a> will be added, while <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a> will be deleted.</li>
<li>Short interest has increased in most adds recently and there could be some short covering following the announcement of the index inclusion.</li>
</ul>


The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 12 December.

Alibaba Pictures, East Buy Holding, Ping An Healthcare and Technology, XD Inc. and CaoCao (2643 HK) will be added, while iQIYI Inc (IQ US) will be deleted.
Short interest has increased in most adds recently and there could be some short covering following the announcement of the index inclusion.


Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>In 4Q24, Bilibili’s total revenue increased by 22% YoY and its largest business, value-added services, increased by 24% YoY.</li>
<li>SAIC president, Mr. Jia, removed 63 mid-level managers in the passenger car department.</li>
<li>Mengniu raised a profit warning that net profit will plunge by 95% - 99% in 2024.</li>
</ul>


In 4Q24, Bilibili’s total revenue increased by 22% YoY and its largest business, value-added services, increased by 24% YoY.
SAIC president, Mr. Jia, removed 63 mid-level managers in the passenger car department.
Mengniu raised a profit warning that net profit will plunge by 95% - 99% in 2024.


China Retail Weekly (24 Feb 2025): BILI, SAIC, NIO, Mengniu, JD, IQiyi

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

Cross Asset Strategy

<ul><li>Casinos / In Depth: Casino plan could put Thailand behind only Las Vegas and Macao</li><li>Consumption /In Depth: China’s policymakers target consumption to kick economy into gear</li><li>Energy Insider /: BYD crushes rivals in global EV sales, oil producing ship that captures its own emissions unveiled</li></ul>

Casinos / In Depth: Casino plan could put Thailand behind only Las Vegas and MacaoConsumption /In Depth: China’s policymakers target consumption to kick economy into gearEnergy Insider /: BYD crushes rivals in global EV sales, oil producing ship that captures its own emissions unveiled

CX Daily: Casino Plan Could Put Thailand Behind Only Las Vegas and Macao 

Analyst - Media&Entertainment Sector, Blue Lotus Research Institute

Stan Zhao

Analyst - Media&Entertainment Sector

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>Earnings results have differed in the recently concluded C3Q24. Performance ads in home electronics, 3C, auto, entertainment and travel have benefited from recovery in consumption; </li>
<li>Heading into C4Q24, we expect rebound in real estate to benefit property ads, and the continuing warm up in consumption to spread to e-commerce (apparel and cosmetics);</li>
<li>We expect trade-in subsidies for home electronics and electrical vehicles to renew in C1Q25 and further stimulus to encourage consumption in travel and catering to be announced. </li>
</ul>


Earnings results have differed in the recently concluded C3Q24. Performance ads in home electronics, 3C, auto, entertainment and travel have benefited from recovery in consumption; 
Heading into C4Q24, we expect rebound in real estate to benefit property ads, and the continuing warm up in consumption to spread to e-commerce (apparel and cosmetics);
We expect trade-in subsidies for home electronics and electrical vehicles to renew in C1Q25 and further stimulus to encourage consumption in travel and catering to be announced. 


Stimulus Policies Are Now the Biggest Determinant of Internet Ads Performances

China

iQIYI, Inc. offers video entertainment services. The Company provides movies, television dramas, variety shows, and other video contents. iQIYI offers services worldwide.

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iQIYI Inc (IQ US)

BILIBILI (BILI US): Can Achieving Breakeven Justify US$10bn Market Cap?

Simply achieving breakeven can't justify BILI's US$10bn market cap. Expect the company to be a leaner, profitable company yet without bright...

Eric Chen

KWEB Index Rebalance: 5 Adds & A Delete

There are 5 adds and 1 delete for the KWEB ETF in Dec. Most of the changes were forecast but short covering and positioning could take the stocks...

Brian Freitas

China Retail Weekly (24 Feb 2025): BILI, SAIC, NIO, Mengniu, JD, IQiyi

In 4Q24, Bilibili’s total revenue increased by 22% YoY. SAIC removed 63 managers in the passenger car department. Mengtniu raised a profit warning.

Ming Lu

CX Daily: Casino Plan Could Put Thailand Behind Only Las Vegas and Macao

TOP STORY Casinos / In Depth: Casino plan could put Thailand behind only Las Vegas and Macao The Thai government first proposed legalizing...

Caixin Global

Stimulus Policies Are Now the Biggest Determinant of Internet Ads Performances

C3Q24 earnings show ad performances are highly correlated with stimulus spending. We expect continuing stimulus to sustain the benefit and...

Blue Lotus Research Institute

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BILIBILI (BILI US): Can Achieving Breakeven Justify US$10bn Market Cap?

Simply achieving breakeven can't justify BILI's US$10bn market cap. Expect the company to be a leaner, profitable company yet without bright...

Eric Chen

KWEB Index Rebalance: 5 Adds & A Delete

There are 5 adds and 1 delete for the KWEB ETF in Dec. Most of the changes were forecast but short covering and positioning could take the stocks...

Brian Freitas

China Retail Weekly (24 Feb 2025): BILI, SAIC, NIO, Mengniu, JD, IQiyi

In 4Q24, Bilibili’s total revenue increased by 22% YoY. SAIC removed 63 managers in the passenger car department. Mengtniu raised a profit warning.

Ming Lu

CX Daily: Casino Plan Could Put Thailand Behind Only Las Vegas and Macao

TOP STORY Casinos / In Depth: Casino plan could put Thailand behind only Las Vegas and Macao The Thai government first proposed legalizing...

Caixin Global

Stimulus Policies Are Now the Biggest Determinant of Internet Ads Performances

​C3Q24 earnings show ad performances are highly correlated with stimulus spending. We expect continuing stimulus to sustain the benefit and...

Blue Lotus Research Institute

C3Q24 earnings show ad performances are highly correlated with stimulus spending. We expect continuing stimulus to sustain the benefit and...