Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

<ul>
<li>The competition between Alibaba and JD has been heating up after Alibaba abandoned its "exclusivity requirement”, JD sale GMV increased by 28.4% vs Alibaba only increased by 8.4% YoY.  </li>
<li>Live streaming has become a mainstream sales channel, Douyin and Kuaishou both achieved more than 200% sales increase YoY.  </li>
<li>Influencers and brands are fighting over price setting power. Many brands have opened their own official livestreaming channels this year.</li>
</ul>


The competition between Alibaba and JD has been heating up after Alibaba abandoned its "exclusivity requirement”, JD sale GMV increased by 28.4% vs Alibaba only increased by 8.4% YoY.  
Live streaming has become a mainstream sales channel, Douyin and Kuaishou both achieved more than 200% sales increase YoY.  
Influencers and brands are fighting over price setting power. Many brands have opened their own official livestreaming channels this year.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Back in April of this year, China's President Xi Jinping <a href="http://paper.people.com.cn/rmrb/html/2020-04/16/nw.D110000renmrb_20200416_1-09.htm" target="_blank" rel="noopener">mentioned</a> taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the <a href="http://cpc.people.com.cn/n1/2020/0515/c64094-31709627.html?mc_cid=28966ada58&amp;mc_eid=902fe70bde" target="_blank" rel="noopener">14 May</a> under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July <a href="https://web.archive.org/web/20200811045300/http://www.xinhuanet.com/politics/leaders/2020-07/21/c_1126267575.htm" target="_blank" rel="noopener">speech</a> to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping <a href="https://news.cgtn.com/news/2020-09-14/Xi-attends-China-Germany-EU-leaders-meeting-via-video-link-TMA0kfp5lK/index.html" target="_blank" rel="noopener">reiterated</a> that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

Back in April of this year, China's President Xi Jinping mentioned taking the initiative to seek change and turn "crises into opportunities".
This was expanded upon in a Politburo meeting on the 14 May under the guise of a "dual circulation" strategy, such that China will seek to primarily rely on "internal circulation" (domestic production, distribution, and consumption) for its future development. This "internal circulation" would be supplemented with "external circulation". 
During a 21 July speech to public and private business in Beijing, Xi emphasized that “We must gradually form a new development pattern with the domestic internal circulation as the main body and the domestic and international dual circulations mutually promoting each other.
When  co-hosting a China-Germany-EU leaders last week, Xi Jinping reiterated that "China is working toward the goal of fostering a new, dual-cycle development architecture with the domestic cycle as the mainstay and with domestic and international development reinforcing each other."
This “dual circulation/cycle” strategy may form a key government initiative in the 14th Five-Year Plan (2021-2025), which is expected to be released by the National People's Congress early next year, probably March. A Communist Party leaders’ meeting next month is expected to unveil more detail on this strategy. 
Does this strategy point to China turning its back to the world and taking on a closed and self-sufficient path?

China's Dual Circulation: Hedged Integration

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/922/original/BANNER-LOGISTICS-FINAL.png?1561080436" class="editor-image img-responsive" data-smartkarma-image-id="90922"></figure>Tracking Traffic/Express &amp; Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking Traffic/Express &amp; Logistics features analysis of relevant Chinese express and logistics data, notes from our conversations with industry players, sector news, and links to recent company and thematic research.<h2>May parcel volume up 25% YoY; growth in hinterlands slows</h2>Express sector volume and revenue growth remained steady in May, but it appears less-developed sub-markets away from wealthy coastal areas have lost momentum. If May’s shift becomes a trend, it could lift margins but eventually drag down volume growth.<h2>Headline ASP declined just 1%, but some firms fared far worse</h2>Although sector-wide pricing was down only 0.9% in May, monthly data from a few individual players suggests pricing remains weak. We expect pricing to remain weak for the remainder of 2019, which will likely put downward pressure on margins.<h2>Express models and margins converging; valuations haven’t though</h2>We expect express companies to migrate towards the fully-integrated model in the medium-term. As a result, the profitability gap between more and less profitable companies should narrow. However, valuations are not converging - yet.<h2>We retain a negative view of the express sector; Sell ZTO Express</h2>Price declines are putting downward pressure on margins. In addition, the sector is evolving in ways that will likely pull down returns in the medium-term. We continue to rate <a href="https://www.smartkarma.com/entities/zto-express" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express (ZTO US)</a> a Sell with a $13.31 target price.

Tracking Traffic/Express &amp; Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking Traffic/Express &amp; Logistics features analysis of relevant Chinese express and logistics data, notes from our conversations with industry players, sector news, and links to recent company and thematic research.May parcel volume up 25% YoY; growth in hinterlands slowsExpress sector volume and revenue growth remained steady in May, but it appears less-developed sub-markets away from wealthy coastal areas have lost momentum. If May’s shift becomes a trend, it could lift margins but eventually drag down volume growth.Headline ASP declined just 1%, but some firms fared far worseAlthough sector-wide pricing was down only 0.9% in May, monthly data from a few individual players suggests pricing remains weak. We expect pricing to remain weak for the remainder of 2019, which will likely put downward pressure on margins.Express models and margins converging; valuations haven’t thoughWe expect express companies to migrate towards the fully-integrated model in the medium-term. As a result, the profitability gap between more and less profitable companies should narrow. However, valuations are not converging - yet.We retain a negative view of the express sector; Sell ZTO ExpressPrice declines are putting downward pressure on margins. In addition, the sector is evolving in ways that will likely pull down returns in the medium-term. We continue to rate ZTO Express (ZTO US) a Sell with a $13.31 target price.

TRACKING TRAFFIC/Chinese Express & Logistics: Express Models Converging (But Not Valuations)

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>Parcel volume growth in April slowed to just 2-3% for the four China-listed express firms</li>
<li>This is a noticeable softening of the pace of growth seen in March and Q126 (around 7%)</li>
<li>It suggests that mainstream Chinese e-Commerce activity in early Q226 has slowed</li>
</ul>


Parcel volume growth in April slowed to just 2-3% for the four China-listed express firms
This is a noticeable softening of the pace of growth seen in March and Q126 (around 7%)
It suggests that mainstream Chinese e-Commerce activity in early Q226 has slowed


Monthly Chinese Express Tracker | April Volume Growth Just 2-3% Vs 7% in March/Q126 | EComm Softer?

<ul>
<li>Parcel volume in Q1 accelerated, posting growth of 13% Y/Y, and Revenue was up 22%</li>
<li>But Cost of Revenue grew even faster due to an increase in Key Account (KA) customers</li>
<li>With Net Income growth of just 5%, and unchanged guidance, little to excite investors</li>
</ul>


Parcel volume in Q1 accelerated, posting growth of 13% Y/Y, and Revenue was up 22%
But Cost of Revenue grew even faster due to an increase in Key Account (KA) customers
With Net Income growth of just 5%, and unchanged guidance, little to excite investors


ZTO Express Q126: Volume, Revenue Accelerate, But Net Profit Lags as 'Key Accounts' Crush Margins

China

Yunda Holding Co Ltd operates as a holding company. The Company, through its subsidiaries, provides industrial investment, enterprise management, business consulting, car rental, technical development, information technology, and advertising services. Yunda Holding serves customers in China.

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Yunda Holding (002120 CH)

A Quiet Single Day

Another year another Single's Day, but the pandemic has put a damper on this year's shopping bonanza. Faced with a shrinking pie, a new player is...

Evelyn Zhang

China's Dual Circulation: Hedged Integration

Back in April, Xi Jinping

David Blennerhassett

TRACKING TRAFFIC/Chinese Express & Logistics: Express Models Converging (But Not Valuations)

Tracking Traffic/Express & Logistics is the hub for all of our research on China's express delivery and logistics sectors. Tracking...

Daniel Hellberg

Monthly Chinese Express Tracker | April Volume Growth Just 2-3% Vs 7% in March/Q126 | EComm Softer?

In April, China-listed express companies reported slower parcel volume growth of just 2-3% versus the 7% pace of growth from March and Q126. This...

Tracking Traffic

ZTO Express Q126: Volume, Revenue Accelerate, But Net Profit Lags as 'Key Accounts' Crush Margins

ZTO in Q126 reported faster volume and Revenue growth in Q126, but Net Income growth lagged, up just 5% Y/Y. We blame increased exposure to 'Key...

Tracking Traffic

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