Category

China

Daily Brief China: Alibaba Group Holding , China Resources Beverage, Midea Group Co Ltd A, Shuangdeng Group Co Ltd, SUNeVision Holdings, Duality Biotherapeutics, China Vanke and more

By | China, Daily Briefs

In today’s briefing:

  • When Dissenting REALLY Pays Off
  • CR Beverage IPO: The Bear Case
  • Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
  • Shuangdeng Group Pre-IPO Tearsheet
  • BUY/SELL/HOLD: Hong Kong Stock Updates (September 12)
  • Duality Biotherapeutics (映恩生物) Pre-IPO: Too Early, Too Ambitious
  • Morning Views Asia: Adaro Energy, China Vanke , Greentown China


When Dissenting REALLY Pays Off

By David Blennerhassett

  • Back in August 2017, Xingxuan Technology, a privately held Cayman Islands company operating in the online food delivery space in China, was transferred by way of a statutory merger. 
  • The buyer was Alibaba Group (9988 HK)-backed Rajax, the key seller, Baidu (9888 HK). The dissenter, having paid US$125mn for its shares, was offered cash/scrip worth an estimated US$42mn.
  • The dissenter considered terms low-balled. The judge agreed. The uplift? 659%.

CR Beverage IPO: The Bear Case

By Arun George

  • China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.
  • In CR Beverage IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
  • The bear case rests on core business’ pricing pressure, a slow pace of revenue diversification, a sizeable pre-IPO dividend, and margin and FCF generation below its key peer. 

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

By Brian Freitas

  • Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
  • Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
  • The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

Shuangdeng Group Pre-IPO Tearsheet

By Akshat Shah

  • Shuangdeng Group Co Ltd (JISHUZ CH) is looking to raise about US$150m in its upcoming Hong Kong IPO. The deal will be run by CICC, CCBI and Huatai.
  • Shuangdeng Group Co Ltd is engaged in energy storage business for big-data and telecommunication industries with a focus on design, R&D, manufacturing and sales of energy storage batteries and systems.
  • It was ranked first among global telecom base station and data-center energy storage battery providers in terms of shipment volume, achieving a 10.4% market share in 2023, according to F&S.

BUY/SELL/HOLD: Hong Kong Stock Updates (September 12)

By David Mudd

  • Hong Kong market is range bound with conglomerates showing strength over the last few weeks.  As the CNY/HKD strengthens the A/H premium should narrow.
  • SUNeVision Holdings (1686 HK) reported good results on the back of increased demand driven by the AI sector. 
  • Yum China Holdings (9987 HK),Yum China Holdings (YUMC US) reported flat sales and an increase in operating profit in a difficult fast food retail environment in China.

Duality Biotherapeutics (映恩生物) Pre-IPO: Too Early, Too Ambitious

By Ke Yan, CFA, FRM

  • Duality Biotherapeutics, a China-based clinical-stage biotechnology company, plans to raise up to US$300m via a Hong Kong listing.
  • In this note, we examine the company’s two core products, namely DB-1313 (HER2 ADC) and DB-1311 (B7-H3 ADC). We think the company’s products are not yet convincing.
  • While the management has expertise as biotech investors, biotech-related operational experience seems to be lacking.

Morning Views Asia: Adaro Energy, China Vanke , Greentown China

By Leonard Law, CFA

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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Daily Brief China: China Shipbuilding Industry Group Power, Hozon New Energy Automobile Co Ltd, China Jinmao Holdings, Sinopharm Group Co Ltd H, China Water Affairs and more

By | China, Daily Briefs

In today’s briefing:

  • CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
  • Hozon New Energy Automobile Pre-IPO – The Negatives – Remains Far from Being Profitable
  • Morning Views Asia: China Jinmao Holdings, Continuum Green Energy, Sands China
  • Sinopharm Group (1099.HK) – Don’t Waste the Low Point of Performance, Valuation Will Bounce Back
  • Morning Views Asia: China Water Affairs, Meituan


CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

By Brian Freitas

  • There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
  • We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
  • Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

Hozon New Energy Automobile Pre-IPO – The Negatives – Remains Far from Being Profitable

By Sumeet Singh

  • Hozon New Energy Automobile is looking to raise up to US$1bn in its upcoming HK IPO.
  • Hozon New Energy Automobile (HNEA) is a NEV technology company which sells cars under the Neta brand. The prices of its vehicles generally range between US$15,000 to US$45,000.
  • In this note, we talk about the not-so-positive aspects of the deal.

Morning Views Asia: China Jinmao Holdings, Continuum Green Energy, Sands China

By Leonard Law, CFA

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.


Sinopharm Group (1099.HK) – Don’t Waste the Low Point of Performance, Valuation Will Bounce Back

By Xinyao (Criss) Wang

  • 2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).
  • Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.
  • Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).

Morning Views Asia: China Water Affairs, Meituan

By Leonard Law, CFA

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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Daily Brief China: Midea Group Co Ltd A, PC Partner, Rubber, NIO , China Tourism Group Duty Free, Cosco Shipping Energy Transportation Co. Ltd. (H), Akeso Biopharma Inc, Shougang Fushan Resources and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group HK IPO Valuation Analysis
  • PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
  • [Rubber, China, Futures] Typhoon Triggered Defaults Nudged Rubber Spot Prices and SHFE Futures Up
  • Midea HK Listing: Valuation Insights
  • [NIO Inc. (NIO US, SELL, TP US$1) Target Price Change]: Who Is Going to Give in a Slowing EV Market?
  • CTG Duty Free (1880 HK): Where Is the End of the Tunnel?
  • Cosco Shipping Energy Transportation – Capitulation in Oil and Related Equities Almost Complete?
  • Akeso Biopharma Inc (9926 HK) – Something Beautiful Is Happening
  • Shougang Fushan Resources (639 HK): Cash 83% of Market Cap, 11% Trailing Dividend Yield


Midea Group HK IPO Valuation Analysis

By Douglas Kim

  • We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares. 
  • We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
  • Pricing of this offering is expected to be completed on 13 September and listing on 17 September. 

PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore

By David Blennerhassett

  • On the 18th June, personal computer parts and accessories play PC Partner (1263 HK) (PCP) announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
  • PCP’s 30th August announcement provided clarity on a step-by-step approach for the HKEx withdrawal. I recently held zooms with the SFC and SGX for added clarification.
  • PCP’s exchange relocation is predicated on PCP’s operational expansion into new markets, in particular, Southeast Asia. How and when the SGX becomes the preferred trading exchange  remains an unanswered question. 

[Rubber, China, Futures] Typhoon Triggered Defaults Nudged Rubber Spot Prices and SHFE Futures Up

By Farah Miller

  • Physical rubber prices gained strength during the Asian trade day as a typhoon in Vietnam disrupted the supply chain, limiting supply in the market. 
  • In addition, increased inquiries from the Chinese tire makers for the prompt cargoes resulted in further support for the prices. 
  • Chinese state buying up to 100kt of rubber, prices to be announced on 13 Sep 2024. This would provide some short term support on the SHFE 

Midea HK Listing: Valuation Insights

By Shifara Samsudeen, ACMA, CGMA

  • Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
  • The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
  • As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively. 

[NIO Inc. (NIO US, SELL, TP US$1) Target Price Change]: Who Is Going to Give in a Slowing EV Market?

By Eric Wen

  • NIO Motors (NIO) reported C2Q24 top line, non-GAAP operating loss and GAAP net loss in-line, narrower and narrower vs. our estimate, and in-line, narrower and in-line vs. consensus. 
  • The brightest spot of the result is gross margin due to both vehicle and service gross margin improvements. 
  • We keep rating at SELL and raise TP to US$1 to reflect better OPEX control.

CTG Duty Free (1880 HK): Where Is the End of the Tunnel?

By Osbert Tang, CFA

  • Market consensus is unrealistic as it expects China Tourism Group Duty Free (1880 HK) to record 32.1% YoY and 14.6% HoH earnings growth in 2H24. More downgrade risk ahead.
  • Average per-customer duty-free sales in Hainan dropped by 19.2% YoY in Jul, indicating the negative wealth effect and deteriorating middle-class spending appetite.
  • Overseas duty-free sales to Chinese residents surged by almost 50% YoY in Aug, implying a diversion effect which is also detrimental. 

Cosco Shipping Energy Transportation – Capitulation in Oil and Related Equities Almost Complete?

By Rikki Malik

  • Speculative liquidation of crude oil positions opens up an opportunity
  • A seasonally strong period for crude tanker rates coming up
  • Company option scheme for senior management approved. Strike above current price

Akeso Biopharma Inc (9926 HK) – Something Beautiful Is Happening

By Xinyao (Criss) Wang

  • AK112’s HARMONi-2 results were impressive, but there’s still critical data gap before obtaining approval from FDA. The main concern is whether good PFS can be translated into significant OS benefits.
  • Akeso will be eligible to receive low double-digit royalties on net sales from Summit. So, Summit is actually a better investment because it has complete global rights of AK112.
  • Investors are betting Summit to be acquired by MNCs at a high price.Due to anti-monopoly issue, the narrowing pool of potential buyers would increase the difficulty of Summit being acquired.

Shougang Fushan Resources (639 HK): Cash 83% of Market Cap, 11% Trailing Dividend Yield

By Sameer Taneja

  • Shougang Fushan Resources (639 HK) ended H1 FY24 with over 10.5 bn HKD of net cash and investments, compared to 12.7 bn HKD of market capitalization. 
  • At 1600 RMB/ton coking coal prices (current spot price), the business will be able to generate 1.1 bn HKD of profits, with an 80% payout implying a 7% dividend yield. 
  • The current spot prices are 16% below the average five-year price of 1900 RMB/ton ( yield 10%), and at these prices, the company still makes an EBITDA margin of 40-45%. 

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Daily Brief China: Midea Group Co Ltd A, Haitong Securities Co Ltd (H), Great Wall Motor, Nongfu Spring , Shanghai Henlius Biotech , Lonking Holdings, Midea Real Estate Holding , Hozon New Energy Automobile Co Ltd and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group H Share Listing (300 HK): Valuation Insights
  • Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player
  • Midea A/H Listing – Bigger Deal, Better Pricing
  • Midea Group: Quick Overview of HK Offer, Post-Issue Valuations. Attractive.
  • The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 7)
  • Nongfu Spring (9633 HK):  Trading At Below 20x Forward PE With 15% NP 3-Year CAGR
  • Shanghai Henlius Biotech (2696.HK) Privatization Update – Some New Information Worth the Attention
  • Lonking (3339 HK): Small and Beautiful, Net Cash Equal 81% of Share Price
  • Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
  • Hozon New Energy Automobile Pre-IPO – The Positives – Has Been Ramping Up


Midea Group H Share Listing (300 HK): Valuation Insights

By Arun George


Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player

By David Blennerhassett

  • Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK), two of China’s leading state-backed brokerages, intend to merger via a share swap, subject to regulatory approvals.
  • Via a Merger by Absorption. GJS will issue new A and H shares to Haitong shareholders. The ratio hasn’t been firmed. Upon completion, the MergeCo creates China’s largest securities entity.
  • A merger is welcome – possibly mandated – amid challenging capital markets and a tightening regulatory backdrop.

Midea A/H Listing – Bigger Deal, Better Pricing

By Sumeet Singh

  • Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
  • Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
  • We have covered the deal background in our previous notes. In this note, we talk about valuations.

Midea Group: Quick Overview of HK Offer, Post-Issue Valuations. Attractive.

By Devi Subhakesan

  • Midea Group Co Ltd A (000333 CH)  is offering 492.1 million shares in Hong Kong, priced between HKD52 and HKD54.8 per share.The valuation looks attractive.
  • Nearly one-third of the Hong Kong share offering has already been subscribed by cornerstone investors.
  • Midea’s strong market share in home appliances, consistent revenue growth, margin expansion, and appealing return ratios make a compelling investment case.

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 7)

By David Mudd


Nongfu Spring (9633 HK):  Trading At Below 20x Forward PE With 15% NP 3-Year CAGR

By Steve Zhou, CFA

  • Nongfu Spring (9633 HK)‘s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.
  • The derating is largely due to the negative media portrayal of the company’s Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24. 
  • Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy. 

Shanghai Henlius Biotech (2696.HK) Privatization Update – Some New Information Worth the Attention

By Xinyao (Criss) Wang

  • Fosun Pharma will make every effort to promote the success of this privatization. The management has disclosed the afterwards arrangements- Henlius and Fosun Pharma will further expand/integrate in the future.
  • Henlius’ revenue is expected to reach RMB6 billion in 2024 and RMB8-9 billion in next 2-3 years. Even if the privatization fails, things are still manageable due to strong fundamentals.
  • Fosun Pharma will not stop its capital operation against Henlius, but the plans of re-listing could be based on a new entity. So, the Cash Alternative is a better choice. 

Lonking (3339 HK): Small and Beautiful, Net Cash Equal 81% of Share Price

By Osbert Tang, CFA

  • Industry wheel loader sales rose 15.2% in Aug, continuing the healthy momentum. A low base in 2H24 will be another favourable factor, and Lonking Holdings (3339 HK) is well placed.   
  • Forklift outlook will stay strong and serve as a growth engine. There is also a significant pick-up in demand for industry excavator sales in Jul and Aug.
  • Net cash amounted to 81% of the share price. Including investments, it will increase to 118%. Conservative FY24 consensus earnings forecast means potential upside surprise.

Midea Real Estate (3990 HK): Now Trading Ex-In-Specie

By David Blennerhassett

  • Back on the 23 June 2024, property developer Midea Real Estate Holding (3990 HK) announced the in-specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
  • The in-specie involved distributing 97.8% of Midea’s assets (involved in property development and sales); accounting for 95% of revenue and ~91% of profit. All figures as at FY23.
  • Midea went ex yesterday, closing down just HK$4.87/share. Midea, ex-in-specie, is currently trading at a trailing 0.6x P/B, and 2.3x PER. Pricing looks full.

Hozon New Energy Automobile Pre-IPO – The Positives – Has Been Ramping Up

By Sumeet Singh

  • Hozon New Energy Automobile is looking to raise up to US$1bn in its upcoming HK IPO. 
  • Hozon New Energy Automobile (HNEA) is a NEV technology company which sells cars under the Neta brand. The prices of its vehicles generally range between US$15,000 to US$45,000.
  • In this note, we talk about the positive aspects of the deal.

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Daily Brief China: Midea Group Co Ltd A, Haitong Securities Co Ltd (H), Anta Sports Products, Guangzhou Automobile Group, Stella International, JNBY Design Ltd, Hive Box Holdings, China Vanke and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
  • Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)
  • HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data
  • Pre-IPO Midea Group H Share (PHIP Updates) – Some Points Worth the Attention
  • A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up
  • HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market – Attractive Yield & Rapid Expansion Outside China – Sep 2024
  • JNBY Design (3306 HK): A Cash Cow
  • ECM Weekly (9th Sep 2024) – Midea, Bajaj Housing, Carote, Western Digital, Challenger, CICT, Premier
  • Hive Box Holdings Pre-IPO, Part 2: Segments, P&L, Balance Sheet & CF, Key Drivers, & More Questions
  • Morning Views Asia: China Vanke


Midea Group (300 HK): IPO Open Now; Upcoming Index Flows

By Brian Freitas

  • The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
  • Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
  • Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

By Arun George

  • On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange. 
  • The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
  • In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data

By Travis Lundy

  • SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
  • ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small. 
  • This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).

Pre-IPO Midea Group H Share (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

  • China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
  • However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
  • Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.

A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up

By Travis Lundy

  • Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
  • AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
  • It is not clear what impetus there might be for better H performance.

HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market – Attractive Yield & Rapid Expansion Outside China – Sep 2024

By Sameer Taneja

  • We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
  • We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
  • Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out – they have had positive inflections in their earnings/dividend payouts and capital allocation.

JNBY Design (3306 HK): A Cash Cow

By Osbert Tang, CFA

  • JNBY Design Ltd (3306 HK) is successful in capturing China’s niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
  • Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
  • Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.

ECM Weekly (9th Sep 2024) – Midea, Bajaj Housing, Carote, Western Digital, Challenger, CICT, Premier

By Sumeet Singh

  • Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
  • On the IPO front, we looked at Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN), which are two relatively large listings coming up. 
  • Placement were flowing through again this week, across the region.

Hive Box Holdings Pre-IPO, Part 2: Segments, P&L, Balance Sheet & CF, Key Drivers, & More Questions

By Daniel Hellberg

  • A change in depreciation policy boosted reported profits in Jan-May 2024
  • But Adjusted EBITDA margins have declined consistently in recent periods
  • Among our growing list of questions: why hasn’t Hive Box grown faster?

Morning Views Asia: China Vanke

By Leonard Law, CFA

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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Daily Brief China: Midea Group Co Ltd A, Shanghai Fosun Pharmaceutical (Group), Miniso, Trip.com and more

By | China, Daily Briefs

In today’s briefing:

  • Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res
  • China Healthcare Weekly (Sep.8) – Fosun Pharma, Medical Device Outlook, Biotech Investment Criteria
  • [Miniso Group (MNSO US, BUY, TP US$24) TP Change]: Management Might Have Been Overly Optimistic
  • Chinese Inbound Foreign Tourist Arrivals Up 153% Y/Y in H124?! Much Ado About (Almost) Nothing


Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res

By Arun George


China Healthcare Weekly (Sep.8) – Fosun Pharma, Medical Device Outlook, Biotech Investment Criteria

By Xinyao (Criss) Wang

  • The past “infrastructure-driven demand model” in medical devices has become “an updated model”. The future reasonable demand for medical devices may fall back to a quarter of pre anti-corruption levels.
  • Top innovative pharmaceutical companies worth investing in need to meet certain conditions. Currently, there is still a gap between Chinese pharmaceutical companies and companies like Regeneron in various aspects.
  • Henlius is of great strategic significance for Fosun Pharma, which actually increases the privatization success rate. Valuation logic of Fosun Pharma should be based on PE/VC firms not traditional pharma.

[Miniso Group (MNSO US, BUY, TP US$24) TP Change]: Management Might Have Been Overly Optimistic

By Eric Wen

  • Miniso (MNSO) reported C2Q24 revenue (3.2%)/1.9% vs. our estimate/consensus. Non-GAAP NI (5.6%)/(2.7%) vs. our estimate/consensus. 
  • Recent weak economic data in both China and U.S.,along with MNSO’s deceleration in overseas average store sales;
  • We cut TP from US$34 to US$24 and maintain BUY.

Chinese Inbound Foreign Tourist Arrivals Up 153% Y/Y in H124?! Much Ado About (Almost) Nothing

By Daniel Hellberg

  • Media rife with narrative of booming inbound foreign tourism to China
  • But the numbers are well below historical highs, and climbing up from low base
  • Chinese tourists, not foreign, determine strength of Chinese tourism recovery

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Daily Brief China: Midea Group Co Ltd A, PDD Holdings, DiDi Global, Travelsky Technology Ltd H, iQIYI Inc and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group: Initial Thoughts on the Hong Kong IPO Listing
  • PDD Holdings Inc.: How Are They Managing Competition and Consumer Demand? – Major Drivers
  • Didi Invests $94 Million in Smart Cockpit Developer
  • Travelsky (696 HK | HOLD | TP:HKD11.0): Making Good Progress
  • iQIYI Inc.: Can The Expansion into Overseas Markets Be A Potential Game Changer? – Major Drivers


Midea Group: Initial Thoughts on the Hong Kong IPO Listing

By Douglas Kim

  • Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
  • Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
  • In the past five days, Midea’s price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.  

PDD Holdings Inc.: How Are They Managing Competition and Consumer Demand? – Major Drivers

By Baptista Research

  • PDD Holdings, Inc. has shared their financial results for the second quarter of 2024 along with an overview of strategic actions and challenges.
  • The company saw substantial revenue growth, with total revenue reaching RMB 97 billion, marking an 86% year-on-year increase.
  • This significant growth stems mainly from robust online marketing and transaction services.

Didi Invests $94 Million in Smart Cockpit Developer

By Caixin Global

  • Didi Global Inc. is investing 670 million yuan ($94 million) in an affiliated firm of digital mapping company NavInfo Co. Ltd. (002405.SZ -3.09%) and has moved its team responsible for smart cockpit development to the venture, as the Chinese ride-hailing giant takes another step away from carmaking to streamline its business.
  • Beijing-based Didi’s smart transportation arm will take a 16.46% stake in AutoAI (Nanjing) Technologies Co. Ltd., becoming its second-largest shareholder, NavInfo said in a Shenzhen Stock Exchange filing dated Wednesday.
  • NavInfo, AutoAI’s largest shareholder, will also invest an additional 100 million yuan in AutoAI, diluting its stake from 30.29% to 27.01%, the filing said.

Travelsky (696 HK | HOLD | TP:HKD11.0): Making Good Progress

By Mohshin Aziz

  • 1H24 results was above expectation and showing good signs of cost control and topline recovery. We expect the momentum to continue. 
  • Air traffic in China continues to grow strongly, with domestic travel leading the way. International traffic is picking up momentum, but still 23% gap to pre-Covid’s numbers. 
  • Revised fair value of HKD11.10 (+18% UPSIDE) is based on 2025 PE 12.5x (1SD below mean). 

iQIYI Inc.: Can The Expansion into Overseas Markets Be A Potential Game Changer? – Major Drivers

By Baptista Research

  • iQIYI recently divulged its financial and operational results for the second quarter of 2024, revealing several intriguing aspects about its current business trajectory.
  • This analysis aims to distill the substantial information provided during the earnings call and form an even-handed view on iQIYI’s performance and future prospects.
  • iQIYI remains a significant player in the long-form video sector in China, holding a competitive edge in the drama and film categories.

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Daily Brief China: New World Development, Xingda International, Midea Group Co Ltd A, Baidu, Samvardhana Motherson Automotive Systems Group BV, NetEase , Medco Energi, Shui On Land and more

By | China, Daily Briefs

In today’s briefing:

  • We Need To Talk About New World (17 HK)
  • Xingda Int’l (1899 HK): Another Partial?
  • Xingda (1899 HK): Management to Reload with a Partial Offer?
  • Midea: Thoughts on HK Listing and Valuation
  • Baidu’s Launch of Advanced AI Model Ernie 4.0 Turbo
  • Morning Views Asia: Samvardhana Motherson International Ltd, West China Cement, Yuexiu Property
  • NetEase Inc.: An Expanding Game Portfolio with Worldwide Reach! – Major Drivers
  • Morning Views Asia: Greentown China, Medco Energi
  • Shui On Land – Earnings Flash – H1 FY 2024 Results – Lucror Analytics


We Need To Talk About New World (17 HK)

By David Blennerhassett

  • 0.08x P/B. That’s where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.
  • So, what’s going on? Announcing an expected HK$19-20bn loss for FY24 last week didn’t help matters. Shares are down 14% this week and 85% since Covid.
  • Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. 

Xingda Int’l (1899 HK): Another Partial?

By David Blennerhassett

  • Back on the 7 Dec 2023, Xingda International (1899 HK)  announced a partial Offer from a consortium comprising management at HK$1.88/share.
  • The consortium, at the time, held 45%, with the objective to hold >50.01% at the close of the Offer. The final % was 50.42%
  • The consortium was then free to take their stake up to 75%. However the shareholder structure has materially changed in 2024. Xingda is suspended (again) pursuant to the Takeovers Code.

Xingda (1899 HK): Management to Reload with a Partial Offer?

By Arun George

  • Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
  • Significant changes in substantial shareholders have occurred since the previous partial offer closed on 10 March 2023, which could be the catalyst for an offer. 
  • Management is likely reloading a partial offer to exercise statutory control and bypass the 2% creeper rule. The partial offer price could be around HK$1.60-1.70 per share. 

Midea: Thoughts on HK Listing and Valuation

By Shifara Samsudeen, ACMA, CGMA

  • Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
  • Midea Group Co Ltd A (000333 CH)  has a diversified product portfolio,  well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
  • Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

Baidu’s Launch of Advanced AI Model Ernie 4.0 Turbo

By Baptista Research

  • Baidu has reported its financial results for the second quarter of fiscal year 2024, showcasing resilience with its Baidu Core which posted a modest revenue growth to RMB 26.7 billion.
  • This growth was driven by the accelerating performance in the AI Cloud sector, which somewhat counterbalanced the drag provided by the online marketing segment.
  • Notably, there was an 8% year-over-year increase in non-GAAP operating profit for Baidu Core, reflecting continued operational efficiencies.

Morning Views Asia: Samvardhana Motherson International Ltd, West China Cement, Yuexiu Property

By Leonard Law, CFA

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.


NetEase Inc.: An Expanding Game Portfolio with Worldwide Reach! – Major Drivers

By Baptista Research

  • NetEase’s 2024 second quarter earnings report revealed considerable strategic progress, although accompanied by some operational challenges typical for a growing enterprise.
  • The company reported a total revenue of RMB 25.5 billion, indicating a 6% year-over-year increase, driven largely by the success in its gaming division and expanded efforts in international markets.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Morning Views Asia: Greentown China, Medco Energi

By Leonard Law, CFA

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.


Shui On Land – Earnings Flash – H1 FY 2024 Results – Lucror Analytics

By Leonard Law, CFA

Shui On Land’s (SOL) H1/24 results were weak, as the company reported reduced earnings, higher net debt and weaker leverage. Positively, rental income continued to grow. As a result, recurring operating income from rentals and property management covered 0.9x of interest expense for LTM June (FY 2023: 0.8x). In addition, asset values were stable, with consolidated investment properties covering 1.7x of net debt. We expect cash flows to improve in H2/24, supported by the planned delivery of two projects.  

That said, liquidity is poor. We view negatively management’s cautious tone during the earnings call. Going forward, we believe that SOL could seek to monetise its 100% stake in its property investment and management arm, Shui On Xin Tian Di. In addition, the company may raise fresh funding by further increasing the LTV on its investment property portfolio to the maximum of 45%, albeit this is uncertain (depending on its arrangements with banks). SOL may also carry out more asset sales.

Meanwhile, we believe that the company may be considering potential liability management exercises for the USD bonds in the event it fails to obtain sufficient financing for repayment.


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Daily Brief China: Midea Group Co Ltd A, PC Partner, China Tower , China Traditional Chinese Medicine, China Tourism Group Duty Free Corp Ltd, GoFintech Innovation, Zai Lab , Atour Lifestyle Holdings, Carote Ltd and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group H Share Listing: AH Discount Views
  • PC Partner: Relocating HQ and Listing to Singapore, 81% of Market Cap Is Cash
  • FXI Rebalance: China Tower (788 HK) Will Replace CICC (3908 HK)
  • China TCM (570.HK) Privatization Update- Pre-Conditions Won’t Be “An Obstacle” to the Entire Process
  • China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected
  • GoFinTech (290 HK)/Jinhai Medical (2225 HK): Double Bubble Trouble
  • China Tourism Group (601888 CH | BUY | CNY): When Falling Knife Turns into Value Investing
  • Zai Lab (9688 HK): Vyvgart Is Not the De-Risking Tool; Future Is Still Uncertain
  • [Atour (ATAT US, BUY, TP US$36) Review]: Retail Business Bigger and Longer than Market Thinks
  • Carote Limited Pre-IPO – PHIP Updates – Recent Growth Led by International Markets


Midea Group H Share Listing: AH Discount Views

By Arun George


PC Partner: Relocating HQ and Listing to Singapore, 81% of Market Cap Is Cash

By Nicolas Van Broekhoven

  • PC Partner showed a significant improvement in its 1H24 results YoY.
  • The company will be relocating HQ to Singapore and move its primary listing from HK to Singapore. If this move is successful, it will improve AI chips allocation from Nvidia.
  • Why Singapore? PC Partner is preparing itself for a future where China/USA political relationship does not improve.

FXI Rebalance: China Tower (788 HK) Will Replace CICC (3908 HK)

By Brian Freitas


China TCM (570.HK) Privatization Update- Pre-Conditions Won’t Be “An Obstacle” to the Entire Process

By Xinyao (Criss) Wang

  • We have seen positive progress of the privatization of China TCM, which is still considered an important project on the agenda. CNPGC’s new leadership is very supportive of the deal.
  • The SAMR process has begun. There should be no problem to meet the Pre-Conditions. If the approval process takes more time, Long Stop Date would be extended.
  • Considering China Resources has decided to acquire Tasly, we think the integration of TCM business by CNPGC is expected to accelerate. We remain optimistic and this deal will get up. 

China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected

By Brian Freitas


GoFinTech (290 HK)/Jinhai Medical (2225 HK): Double Bubble Trouble

By David Blennerhassett

  • Sanergy (2459 HK), a graphite electrode manufacturer, was added to the MSCI Small-Cap Index on 30th August; and was due to enter the Hang Seng Composite Index on 9th September.
  • However, the SFC announced a concentration warning on the 2nd September. Shares promptly cratered ~98% yesterday (the 3rd September). Expect the HSCI inclusion to now be yanked.
  • This Sanergy debacle should refocus investors on other heavily concentrated stocks, such as Jinhai Medical (2225 HK), in which GoFintech (290 HK) (another heavily concentrated stock) has inexplicably been buying. 

China Tourism Group (601888 CH | BUY | CNY): When Falling Knife Turns into Value Investing

By Mohshin Aziz

  • China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) share price on downtrend due to negative sentiment, increased competition, and Chinese being more frugal in their consumption  
  • 2024 and 2025 consensus earnings declined by -2%/-17%, but CTG will deliver +16% YoY earnings growth in 2025. CTG remains a growths stock, a fact we think many investors forget!  
  • We revise our target price to CNY71.3 pegged to 18.5x FY25 PE (1.5 standard deviation below mean). We think the share price decline is overdone and ignores its strong fundamentals.  

Zai Lab (9688 HK): Vyvgart Is Not the De-Risking Tool; Future Is Still Uncertain

By Tina Banerjee

  • Zai Lab (9688 HK) recorded Vyvgart revenue of $10M, $13M, and $23M in 4Q23, 1Q24, and 2Q24, respectively. The company raised 2024 Vyvgart revenue guidance to $80M from $70M earlier.
  • Despite strong momentum from Vyvgart, Zai Lab still has a lot of pain points. Decelerating revenue growth from Zejula is one of them.
  • Due to its in-licensing business model, Zai Lab has lower gross profit margin of 64–65%, compared with ~80% for a typical innovator biotech company.

[Atour (ATAT US, BUY, TP US$36) Review]: Retail Business Bigger and Longer than Market Thinks

By Eric Wen

  • Atour (ATAT) reported C2Q24 revenue 2.2%/8.3% higher than our est./cons., and non-GAAP NI 6.8%/12.3% higher than our est./ cons, driven by stronger hotel supply chain sales and better retail efficiency.
  • We keep 2024 revenue growth estimate at 53% YoY vs. the uplift company guidance at 48%-52% YoY. Potential catalysts are stronger off-season travel,old hotel renovation scheme, and new brand launch.
  • We keep TP unchanged at US$36/ADS and maintain the BUY rating.

Carote Limited Pre-IPO – PHIP Updates – Recent Growth Led by International Markets

By Clarence Chu

  • Carote Ltd (CARO HK) is looking to raise around US$120m in its upcoming Hong Kong IPO.
  • Carote Ltd is a distributor of kitchenware products. Expanding its lineup of products, Carote aims to meet its customers’ varied kitchen scenarios and enhance their culinary experience.
  • We had looked at the firm’s past performance in an earlier note. In this note, we discuss its PHIP updates.

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Daily Brief China: Kuaishou Technology, ASM Pacific Technology, Tencent, Electric Connector Technology, China Traditional Chinese Medicine, CPMC Holdings, Zhongsheng Group, Midea Group Co Ltd A, HKEX, DiDi Global and more

By | China, Daily Briefs

In today’s briefing:

  • HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)
  • Hang Seng, HSCEI, HSTECH Sep24 Rebal Final Capping Flows
  • MSC Aug 24 Rebalance: Brazil Takes the EM Flow, SA & China Downweighted Again (Tencent)
  • ChiNext/​​​ChiNext50 Index Rebalance Preview: 22 Changes & US$700m Trade
  • China TCM (570.HK) Update – The Disappointing 24H1 Results Will Not Affect the Privatization Process
  • CPMC (906 HK): Champion Tech Walks
  • Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): Chart Analysis Affirms Zhongsheng Is Too Cheap
  • Midea A/H Listing – Thoughts on A/H Premium and past A/H Listings
  • HK Exchanges:  Position Cuts Deepen Among Asia Ex-Japan Funds
  • Didi Global Q224 Results: EBITA Margin Up | OpCF Still Strong | But Growth Slowed Noticeably


HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)

By Brian Freitas


Hang Seng, HSCEI, HSTECH Sep24 Rebal Final Capping Flows

By Travis Lundy

  • The close of 3 September 2024 was the final price to determine capping for the Hang Seng Index Rebalances which will take place this Friday 6 September 2024 at close.
  • The numbers are largely unchanged, though price changes in the interim cause more Kuaishou Technology (1024 HK) to be bought, and more Xiaomi Corp (1810 HK) to be sold.
  • The biggest name in flows is, of course, ASM Pacific Technology (522 HK) which sees 15 days to buy.

MSC Aug 24 Rebalance: Brazil Takes the EM Flow, SA & China Downweighted Again (Tencent)

By Charlotte van Tiddens, CFA

  • South Africa was downweighted in ACW, EM and EM ex China for a second consecutive quarter. 
  • Brazil was the largest upweight in ACW, EM and EM ex China.
  • Tencent was downweighted in the EM index but upweighted in ACW.

ChiNext/​​​ChiNext50 Index Rebalance Preview: 22 Changes & US$700m Trade

By Brian Freitas

  • With 70% of the review period complete, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
  • There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
  • The potential adds have outperformed the potential deletes for both indices on a year-to-date basis, but near-term performance has been lackluster.

China TCM (570.HK) Update – The Disappointing 24H1 Results Will Not Affect the Privatization Process

By Xinyao (Criss) Wang

  • China TCM’s 24H1 results is weaker-than-expected. Net profit YoY growth for the whole year of 2024 could be negative. Based on calculation, without privatization, HK$3.26/share is fair for China TCM.
  • The remedial tax is a “one-time expenditure” to clear the “obstacle” so as to smooth the completion of privatization. Weak financial performance in 24H1 should help the shareholder vote. 
  • Due to the low base in 2024, 2025 is expected to see an obvious performance rebound.Long-term outlook of TCM granules business is still promising, reasonable share price is above HK$5/share.

CPMC (906 HK): Champion Tech Walks

By David Blennerhassett


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): Chart Analysis Affirms Zhongsheng Is Too Cheap

By Mohshin Aziz

  • Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years 
  • Chart analysis is to compliment our recent report Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play published yesterday
  • Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. 

Midea A/H Listing – Thoughts on A/H Premium and past A/H Listings

By Sumeet Singh

  • Midea Group Co Ltd A (000333 CH) aims to raise up to US$3bn in its H-share listing, as per media reports.
  • Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
  • We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premiums.

HK Exchanges:  Position Cuts Deepen Among Asia Ex-Japan Funds

By Steven Holden

  • Asia Ex-Japan fund managers continue to reduce their positions in Hong Kong Exchanges & Clearing.
  • Percentage of funds invested and the average weight of the stock in portfolios have been on a downward trend since the recent peak in early 2023
  • Wave of position closures in 2024 by Allianz, T Rowe Price, and Baillie Gifford has resulted in over half of the historical investor base exiting the stock

Didi Global Q224 Results: EBITA Margin Up | OpCF Still Strong | But Growth Slowed Noticeably

By Daniel Hellberg

  • Estimated take rate up vs year ago and vs Q124, and EBITA margin turned +ive
  • However, revenue growth in core China market slowed considerably in Q224
  • Cash Flow and Liquidity both appear ample, little pressure to raise new funds

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