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.

Equity Bottom-Up

<ul>
<li>Baidu launched a beta test of a ChatGTP-like function, WXYY.</li>
<li>Tencent announced it will close its digital collection platform, Huanhe, in June.</li>
<li>KE’s revenue decreased by 25% and new losses were RMB1.4 billion.</li>
</ul>


Baidu launched a beta test of a ChatGTP-like function, WXYY.
Tencent announced it will close its digital collection platform, Huanhe, in June.
KE’s revenue decreased by 25% and new losses were RMB1.4 billion.


China Internet Weekly (20Mar2023): Baidu, Tencent, KE

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

<ul>
<li>BEKE (Beike) reported 4Q22 revenue in-line/4.9% vs our est./cons. Non-GAAP operating income 65% higher than our estimate and non-GAAP net income 59%/122% higher than our est./cons. </li>
<li>We estimate 1Q23/2023 revenue to rise 46%/24% YoY. We think Beike’s strategy on focusing quality above scale is suitable under current real estate market trend, bode well for profitability.</li>
<li>We maintain BUY rating and raise the TP by US$2 to US$23 to reflect 1) the gross margin improvement, 2)narrower loss-making in new initiatives.</li>
</ul>


BEKE (Beike) reported 4Q22 revenue in-line/4.9% vs our est./cons. Non-GAAP operating income 65% higher than our estimate and non-GAAP net income 59%/122% higher than our est./cons. 
We estimate 1Q23/2023 revenue to rise 46%/24% YoY. We think Beike’s strategy on focusing quality above scale is suitable under current real estate market trend, bode well for profitability.
We maintain BUY rating and raise the TP by US$2 to US$23 to reflect 1) the gross margin improvement, 2)narrower loss-making in new initiatives.


[KE Holdings (BEKE US) Target Price Change]: Raise TP for Better Market Outlook and Profitability

Thematic (Sector/Industry)

<ul>
<li>Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. </li>
<li>Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;</li>
<li>Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso</li>
</ul>


Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. 
Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;
Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso


[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

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>BEKE’s strong 1Q23 guidance and YTD data proved our higher-than-market sales forecast published in January.</li><li>We expect the sales growth to further improve in 2Q and beyond based on our leading indicator, channel check and low base (2023E EHT at +20% YoY).</li><li>Together with the amplification effect via its ACN network, we expect 23/24E adjusted net profits to achieve RMB6.2/7.7bn, 17/13% higher than consensus now. </li></ul>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.

BEKE’s strong 1Q23 guidance and YTD data proved our higher-than-market sales forecast published in January.We expect the sales growth to further improve in 2Q and beyond based on our leading indicator, channel check and low base (2023E EHT at +20% YoY).Together with the amplification effect via its ACN network, we expect 23/24E adjusted net profits to achieve RMB6.2/7.7bn, 17/13% higher than consensus now. 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.

Ke Holdings (BEKE US) – 2Q23E will be another market surprise

<ul><li>We expect industry-wide Existing Home Transactions (EHT) recovery to be stronger than current market expectation (our forecast: 17% YoY GTV growth) in 2023E.</li><li>We also expect Beike’s network efficiency should amplify the benefits from such recovery, as EHT has higher than group average contribution profit margin (CPM).</li><li>In addition, increase in revenue contribution from high CPM (80%+) services revenue generated by Beike’s established agency cooperation network (ACN) could aid long-term margin expansion. </li></ul>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.

We expect industry-wide Existing Home Transactions (EHT) recovery to be stronger than current market expectation (our forecast: 17% YoY GTV growth) in 2023E.We also expect Beike’s network efficiency should amplify the benefits from such recovery, as EHT has higher than group average contribution profit margin (CPM).In addition, increase in revenue contribution from high CPM (80%+) services revenue generated by Beike’s established agency cooperation network (ACN) could aid long-term margin expansion. 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.

Ke Holdings (BEKE US) – Existing home sales recovery to be better than anticipated

China

KE Holdings Inc. operates as an integrated online and offline platform for housing transactions and services. The Company offers existing and new home sales, home rentals, home renovation, real estate financial solutions, and other services. KE Holdings conducts businesses in China.

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KE Holdings (BEKE US)

China Internet Weekly (20Mar2023): Baidu, Tencent, KE

Baidu launched a beta test of a ChatGTP-like function, WXYY. Tencent announced it will close its digital collection platform, Huanhe. KE’s revenue...

Ming Lu