HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>The strength about Giant Biogene is that the founders have R&amp;D background, which helps build trust. Meanwhile, the financial performance was good, with three years of consistent high margins.</li>
<li>The sustainability of high-profit model will face pressure due to increasing competition. The establishment of long-term core competitiveness and second growth point is important. Complex related-party transaction is another concern.</li>
<li>Giant Biogene is in an industry that has a large potential for future growth in valuation. Its valuation should be lower than that of Bloomage and Imeik.</li>
</ul>


The strength about Giant Biogene is that the founders have R&amp;D background, which helps build trust. Meanwhile, the financial performance was good, with three years of consistent high margins.
The sustainability of high-profit model will face pressure due to increasing competition. The establishment of long-term core competitiveness and second growth point is important. Complex related-party transaction is another concern.
Giant Biogene is in an industry that has a large potential for future growth in valuation. Its valuation should be lower than that of Bloomage and Imeik.


Pre-IPO Giant Biogene - The Strength and the Concerns

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/giant-biogene-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:35950:1" rel="noopener">Giant Biogene Holding (GBH HK)</a>, a leading professional skin care product manufacturer, has started pre-marketing a US$500 million HKEx IPO.  </li>
<li>In <em><strong><a href="https://www.smartkarma.com/insights/giant-biogene-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:81963" rel="noopener">Giant Biogene IPO: The Bull Case</a></strong></em>, we highlighted the key elements of the bull case. In this note, we outline the bear case.  </li>
<li>The key elements of the bear case rest on a worrying performance of Collgene (the second flagship brand), an inexorable rise in S&amp;M expenses and margins on a downward trajectory.</li>
</ul>



Giant Biogene Holding (GBH HK), a leading professional skin care product manufacturer, has started pre-marketing a US$500 million HKEx IPO.  
In Giant Biogene IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.  
The key elements of the bear case rest on a worrying performance of Collgene (the second flagship brand), an inexorable rise in S&amp;M expenses and margins on a downward trajectory.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/giant-biogene-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:35950:1" rel="noopener">Giant Biogene Holding (GBH HK)</a>, a leading professional skin care product manufacturer, has started pre-marketing a US$500 million HKEx IPO.  </li>
<li>According to Frost &amp; Sullivan, Biogene was China's second-largest professional skin treatment product company by retail sales in 2021.  </li>
<li>The key elements of the bull case rest on a large and growing addressable market, regulatory tailwinds, the core brand’s stellar performance and high cash generation. </li>
</ul>



Giant Biogene Holding (GBH HK), a leading professional skin care product manufacturer, has started pre-marketing a US$500 million HKEx IPO.  
According to Frost &amp; Sullivan, Biogene was China's second-largest professional skin treatment product company by retail sales in 2021.  
The key elements of the bull case rest on a large and growing addressable market, regulatory tailwinds, the core brand’s stellar performance and high cash generation. 


Equity Bottom-Up

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. / Equity Bottom-Up

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd.

<ul>
<li>Due to the lockdown/pandemic, <a href="https://www.smartkarma.com/entities/zhangzhou-pientzehuang-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:15709:1" rel="noopener">Pientzehuang Pharmaceutical</a>’s 2022H1 performance slowed down. Considering the economic downturn and people's cutting back spending on non-rigid consumption, the full-year revenue growth could be around 10%-20%.</li>
<li>The Company's key challenge lies in revenue growth. However, it is not easy to increase sales largely due to the scarcity of raw materials, which limits the expansion of production.</li>
<li>Pien Tze Huang is overvalued. Share price could continue to fall,but it will bounce back due to its high moat. 2022 is a good time for bottom fishing this stock.</li>
</ul>


Due to the lockdown/pandemic, Pientzehuang Pharmaceutical’s 2022H1 performance slowed down. Considering the economic downturn and people's cutting back spending on non-rigid consumption, the full-year revenue growth could be around 10%-20%.
The Company's key challenge lies in revenue growth. However, it is not easy to increase sales largely due to the scarcity of raw materials, which limits the expansion of production.
Pien Tze Huang is overvalued. Share price could continue to fall,but it will bounce back due to its high moat. 2022 is a good time for bottom fishing this stock.


Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back

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>There are 28 changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> at the upcoming rebalance that will be implemented at the close of trading on 9 June.</li>
<li>We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.</li>
<li>There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.</li>
</ul>


There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.
There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.


CSI300 Index Rebalance: Big Sector Shift with 28 Changes

China

Yunnan Botanee Bio-Technology Group Co. LTD manufactures and sells skin care and cosmetics. The Company produces masks, toners, hand creams, and other cosmetics. Yunnan Botanee Bio-Technology Group also develops new biology technologies.

Yunnan Botanee Bio-Technology (300957 CH)

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Yunnan Botanee Bio-Technology (300957 CH)

Pre-IPO Giant Biogene - The Strength and the Concerns

Giant Biogene is in an industry that has big potential for growth in valuation. How to build long-term system advantage/core competitiveness is an...

Xinyao (Criss) Wang

Giant Biogene IPO: The Bear Case

The key elements of the bear case rest on a worrying performance of Collgene (the second flagship brand), an inexorable rise in S&M expenses and...

Arun George

Giant Biogene IPO: The Bull Case

The key elements of the bull case rest on a large and growing addressable market, regulatory tailwinds, the core brand’s stellar performance and...

Arun George

Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back

Pien Tze Huang's performance slows down this year. Shares could continue to fall due to overvaluation, but will bounce back due to its high moat....

Xinyao (Criss) Wang

CSI300 Index Rebalance: Big Sector Shift with 28 Changes

The June rebalance of the CSI300 Index will have 28 changes, a large sector skew, one-way turnover of 4.11% and a one-way trade of CNY 10bn. The...

Brian Freitas

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