Smartkarma Daily Briefs

• Weaknesses of BABA stock and China tech sector in general post their strong earnings recovery for March quarter suggest market’s concerns centering around growth outlook.
• BABA fundamental has tracked well to our projection since last November. P/E multiple contraction – which priced in too much pessimism – prevented our bullish call from materializing, for now.
• We stick to our thesis that March quarter results set stage for BABA re-rating on sustained recovery, well-executed overhaul effectively unlocking value and investors’ renewed appetite for China assets.

• We spent the second half of last week meeting ECM focused clients in Hong Kong.
• Overall, the mood remains somewhat grim for Hong Kong/China and it will be up to a few upcoming deals to open up the market again.
• In this note, we talk about some of the feedback for the upcoming IPOs and placements.

• The revenue growth rates of all business lines accelerated in 1Q23.
• Operating losses shrank to RMB1.3 bn in 1Q23, less than RMB3 bn in two previous quarters.
• We believe the stock has an upside of 66% for the yearend 2023.

• Lithium battery maker, EVE Energy (300014 CH), is expected to invest US$2.3bn in expanding its battery manufacturing capabilities in two new plants. 
• Both plants are expected to come online within 18-24 months, depending on market conditions and various approvals. 
• Eve is down 57% from its December 2021 high, and trading around its lowest level since November 2020, excluding a brief dip in April 2022. 

• Kuaishou Technology (1024 HK) ’s 1Q2023 earnings were above consensus estimates with the company reporting positive adj. EBITDA and adj. net profit during the quarter.
• Operating profit margin of the domestic business further improved while the company managed to significantly reduce operating losses of the overseas business during the quarter.
• Kuaishou also announced a small share buyback worth of HK$4bn which further affirms the company’s improving fundamentals and should help attract investors.

• In the evening of May 20th, NetEase held an online conference where it announced release dates for games…
• …that It has Previously Announced, and Unveiled New Titles that Will Be Launched in the Future.
• Overall, June Will Be the Peak Month for Newly Launched Titles from NetEase, with One Big Game (Justice Mobile) And Two Smaller Games (Badlanders and Racing Mobile)

• Despite unfriendly external environment in 2022, Consun Pharmaceutical (1681 HK) still achieved stable performance growth. The Company has maintained a consistently high level of dividend payout, which is commendable.
• The rapid sales expansion of commercialized products has laid the foundation for the high-quality growth of Consun, and the continuously improving profitability further confirms its growth certainty.
• Based on the current market value, we think Consun is undervalued considering its RMB3 billion cash balance by 2022. It is expected to usher in valuation repair in the future.

• Reported 1Q EPS of $0.11 on revenue of $22.1 million, up from the prior quarter’s loss of $0.08 per share on $19.34 million in revenue.
• The performance topped the results of the past three quarters, showing the continued recovery of the transmission business in China, which had been affected by the severe COVID restrictions and shutdowns.
• This is particularly encouraging as 1Q is typically the seasonally weakest quarter due to the Chinese New Year holiday and manufacturing restocking.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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