Daily Brief China: China Shengmu Organic Milk, Knowledge Atlas Technology, XTX Technology, SHEIN, Dida, Shanghai Enflame Technology, Shanghai Henlius Biotech, China General Education, Lalatech Holdings Co Ltd and more

• China Shengmu Organic Milk (1432 HK)’s mandatory offer from China Modern Dairy (1117 HK) is HK$0.35, subject to a 50% minimum acceptance condition. The first closing date is 21 July.
• I previously opined that meeting the minimum would be challenging. However, based on CCASS data, including acceptances, CMD’s shareholding was 45.69% of outstanding shares as of 10 July.
• The offer is on track to be declared unconditional by the first closing date. At the last close and the 30 July payment, the gross/annualised spread is 7.7%/294%.

• Ministry of Industry and Information Technology (MIIT) issued a high-risk warning targeting Claude Code.
• Knowledge Atlas’ GLM-5.2 ranks No. 1 in China in terms of intelligence and speed.
• However, another batch of restricted stock, accounting for 40% of total shares, is scheduled to unlock in January 2027.

• XTX Technology Inc. is a Chinese Mainland fabless memory chip provider specializing in R&D, design, and sales of code storage flash memory, analog IC, and MCUs.
• XTX Technology achieved net profit of RMB75.9 million in the three months ended March 31, 2026, representing 278.8% of its 2025 full year.
• For the three months ended March 31, 2026, XTX reported RMB224,112 revenue, RMB124,674 gross profit, and RMB75,889 net profit.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

• More than three years after her arrest, Lijuan Chen was sentenced to 30 months in prison
• The California woman ran a scheme linked to tens of millions of parcels from China
• We believe US Feds may develop case against the companies who benefited from the fraud

• I summarise the latest spreads and newsflow for the merger arb situations covered across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, the Philippines, Thailand, and Chinese ADRs.
• Highest spreads: Skyworth (751 HK), Changhong Jiahua (3991 HK), Arclands Corporation (9842 JP), Cygnus Metals (CY5 AU), Atlantic Lithium (A11 AU), Continental Aerospace Technologies (232 HK). 
• Lowest spreads: Accent Group (AX1 AU), Kakaku.com Inc (2371 JP), Taiyo Holdings (4626 JP), Vault Minerals Ltd (VAU AU), Shinko Shoji (8141 JP), J.S.B (3480 JP). 

• Shanghai Enflame Technology (ENFLAME CH), one of the “Four Domestic GPU Little Dragons”, has just been approved by the CSRC to list on the STAR market, aiming to raise Rmb6bn.
• The company’s strengths lie in its comprehensive product portfolio, differentiated architecture (DSA vs. GPGPU), strong shareholder backing, and position for China’s AI self-sufficiency.
• At 27.1x P/S for FY26 (10% share capital enlargement), Enflame is inexpensive relative to A-share peers, Biren Technology (6082 HK) and Iluvatar CoreX (9903 HK). 

• Shanghai Henlius Biotech (2696 HK) reported 10% YoY revenue growth in China to RMB1.4B for core innovative product serplulimab. Henlius is now pursuing its globalization initiatives for serplulimab.
• Thus far, the drug has been approved in ~50 countries. With its license-out areas comprehensively covering over 100 countries and regions, the international commercialization has further growth potential.
• With continuous indication and geography expansion, serplulimab is accelerating toward its next milestone as a domestically developed blockbuster with the potential to exceed RMB10B (~$1.5B) in annual sales before 2030.

• China General Education operates in a challenging environment, marked by a consistent decline in revenue, net income, and profitability margins over the last three years. This is coupled with a highly negative free cash flow, signaling potential liquidity and investment constraints.
• The company faces significant regulatory uncertainty inherent in China’s private education sector. Government policies can shift rapidly, impacting operational models, profitability, and enrollment, representing a material risk for investors.
• Despite poor fundamental performance, the company’s valuation appears mixed, with a low price-to-book ratio suggesting potential value, but this is contrasted by strong share price momentum and a high P/E ratio relative to some peers. A recent acquisition in art examination training and a proposed name change to ‘Trillion Holding Group Limited’ signal a strategic shift, but the success of this pivot is uncertain.

This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

• Compared to open-loop platforms, LALATECH’s closed-loop model has stronger bilateral network effects.The downward trend in monetization rate is not a short-term phenomenon, but a structural trend under regulatory constraints/fierce competition
• If monetization rate drops to 8% and cannot recover, the efficiency of converting GTV into revenue will continue to decline.Even if GTV maintains growth, the incremental revenue will be eroded.
• Based on 2026 forecast, we think a conservative valuation range could be 18-22x P/E. A neutral valuation range could be 20-24x P/E. An optimistic valuation range could be 25-30x P/E. 

• HSTECH June 2026 added KNOWLEDGE ATLAS and MINIMAX-W and deleted KINGSOFT and KINGDEE INT’L. All event windows through the fourth post-implementation week are complete.
• Both ADDs fell in the first implementation week, far beyond the historical ADD first-week means. KNOWLEDGE ATLAS then gained +46.8% in weeks two to four.
• The positive-bridge DELETE rebound held for KINGSOFT at +3.9% but missed for KINGDEE INT’L at -12.3%.