China/Asia TMT

Shawn Yang

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

Equity Bottom-Up

<ul>
<li>IQIYI's 1Q23 top line beat our est. by 8.5%, while its non-GAAP net income beat our est./cons by 95%/82%, largely due to its blockbuster &lt;Knockout&gt;. </li>
<li>However, we expect its content pipeline is weaker compared with other key competitors in Q2. </li>
<li>Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due to the fierce competition. Maintain SELL and cut TP to US$ 5.0, implying 16.7X PE in 2023.</li>
</ul>


IQIYI's 1Q23 top line beat our est. by 8.5%, while its non-GAAP net income beat our est./cons by 95%/82%, largely due to its blockbuster &lt;Knockout&gt;. 
However, we expect its content pipeline is weaker compared with other key competitors in Q2. 
Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due to the fierce competition. Maintain SELL and cut TP to US$ 5.0, implying 16.7X PE in 2023.


[iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>IQ delivered upbeat 1Q23 results, with rev +15% YoY (5% above consensus) and adj. NP at RMB940mn (82% above consensus).</li><li>The breakthrough of The Knockout boosted subs up to 128.9mn in 1Q23, with net adds of 17mn.</li><li>2Q23E subs members might see a slight sequential decline (forecasting at 112mn) for soft seasonality, but we expect upcoming rich pipeline to support subs momentum in summer holiday and 2H23E (e.g. Story of Kunning Palace, The Demon Hunter's Romance). </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

IQ delivered upbeat 1Q23 results, with rev +15% YoY (5% above consensus) and adj. NP at RMB940mn (82% above consensus).The breakthrough of The Knockout boosted subs up to 128.9mn in 1Q23, with net adds of 17mn.2Q23E subs members might see a slight sequential decline (forecasting at 112mn) for soft seasonality, but we expect upcoming rich pipeline to support subs momentum in summer holiday and 2H23E (e.g. Story of Kunning Palace, The Demon Hunter's Romance). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

IQIYI (IQ US) – Looking into 2Q23E Rich Pipeline

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.</li>
<li>Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.</li>
<li>Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.</li>
</ul>


Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.
Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.
Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.


Greater China Equity Long/Short Analyst

Eric Chen

<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?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Event-Driven

<ul>
<li>On 2nd Dec 2021, Securities Exchange Commission (SEC) issued Final amendments to implement the Holding Foreign Companies Accountable Act (HFCAA).</li>
<li>On 24th Mar 2021, SEC had issued Amendments, Seeks Public Comment on HFCAA. This was a follow up on the HFCAA.</li>
<li>In this note, we'll talk about the final amendments and its possible timelines and implications, and a possible trade setup.</li>
</ul>


On 2nd Dec 2021, Securities Exchange Commission (SEC) issued Final amendments to implement the Holding Foreign Companies Accountable Act (HFCAA).
On 24th Mar 2021, SEC had issued Amendments, Seeks Public Comment on HFCAA. This was a follow up on the HFCAA.
In this note, we'll talk about the final amendments and its possible timelines and implications, and a possible trade setup.


China ADRs Delisting - US Tightens and HK Loosens Requirements - Long/Short Basket Trade

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)

[iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After

We expect its content pipeline is weaker compared with other key competitors in Q2. Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due...

Blue Lotus Research Institute

IQIYI (IQ US) – Looking into 2Q23E Rich Pipeline

2Q23E subs members might see a slight sequential decline (forecasting at 112mn) for soft seasonality, but we expect upcoming rich pipeline to...

CMB International

China Macro: Sector Positioning Update

Sector positioning among active China Funds. Industrials and Consumer Staples Remain Top Overweights, Energy shows signs of a turnaround, whilst...

Steven Holden

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

China ADRs Delisting - US Tightens and HK Loosens Requirements - Long/Short Basket Trade

On 2nd Dec 2021, SEC issued Final amendments to implement the Holding Foreign Companies Accountable Act. In this note we will talk about the final...

Sumeet Singh

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