China

• Tencent (700 HK) has surged 33.5% over the past 30 days, with its spot price outpacing the slow adjustment of call option strikes, shifting most contracts from out-of-the-money to in-the-money.
• The current concentration of in-the-money calls hints at active trading and potential strike adjustments ahead, amplified by upcoming events like the 19 March earnings.
• This analysis features a novel animated chart of option open interest distribution offering a dynamic visual of market behavior.

• Alibaba reported C4Q24 top line in-line with our estimate and consensus, but non-GAAP NI beat our estimate/consensus by 12%/11%, attributable to cost control and AntFin’s profitability improvement;
• But what drives the stock was the strong performance in AliCloud and an articulation of a clear investment logic on Generative AI (GAI), 
• While the AI inflection point has arrived earlier than we expected, we remain eying for the domestic e-commerce turnaround with Jiang Fan at the helms. 

• Mixue Group (MIX HK) has priced its IPO at HK$202.5/share and will raise up to HK$3.97bn (US$511m) if the oversubscription option is exercised, valuing the company at HK$76.35bn (US$9.8bn).
• Despite a US$10bn market cap, the stock will find it difficult to be added to global and local indices since 60% of the shares are unlisted.
• The stock is likely to remain in the shadows for one global index and could be added to the other in December. HSCI inclusion could take place in September.

• With the review cutoff done, there could be two changes for the iShares China Large-Cap (FXI) (FXI US) in March.
• Guotai Junan Securities (2611 HK) and ZTE Corp H (763 HK) are expected to replace China Tourism Group Duty Free (1880 HK) and China Coal Energy Co H (1898 HK). 
• ZTE Corp H (763 HK) has broken out to new highs (possibly on short covering) while China Coal Energy Co H (1898 HK) continues to sell off.

• With the review cutoff done, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) ETFs in March.
• Cambricon Technologies, Guotai Junan Securities and China United Network could replace Inner Mongolia Yili Industrial Group, CGN Power and Luzhou Laojiao in the ETFs.
• Guotai Junan Securities (2611 HK) is expected to be added to the iShares China Large-Cap (FXI) (FXI US) in March, so there should be inflows for the A-shares and H-shares.

• Mixue Group plans to complete its IPO, selling 17.1 million shares at the IPO price of HK$202.50 per share. The IPO is expected to start trading on 3 March.
• Our base case valuation of Mixue Group is implied market cap of HKD 96 billion or target price of HKD 254, which is 26% higher than the initial IPO price.
• Our valuation sensitivity analysis suggests a range of HKD 206 to HKD 308 per share for Mixue Group. 

• Trip Com, Contemporary Amperex Technology and Xiaomi all hit fresh highs in EM fund ownership.
• Rotation in all three was among the most positive across all China stocks, with all measures of fund ownership moving higher.
• Conviction opens from GIB, Putnam and Aubrey we among the funds driving ownership higher.

• Mixue Group (2097 HK), a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO.
• We previously discussed the IPO in MIXUE Group (2097 HK) IPO: The Bull Case and MIXUE Group (2097 HK) IPO: The Bear Case. 
• There are five cornerstone investors. Our valuation analysis suggests Mixue is attractively valued at the IPO price range. Therefore, we would participate in the IPO.

• Luckin reported C4Q24 revenue 6%/1% higher than our estimate/consensus, and non-GAAP operating profit 11%/38% higher than our estimate/consensus, driven by SSSG recovery and cost material savings;
• After turning around same-store-sales-growth (SSSG) via price hike in C3Q24, Luckin finetuned the cup sales to price ratio to reach an optimal point in C4Q24, 
• We upgrade Luckin from UR into BUY rating and set new TP at US$40.  

• Innogen’s business, financial condition, operation results and prospects for the next couple of years are substantially dependent on the successful approval and commercialization of Efsubaglutide Alfa, indicating single product risk. 
• Due to slower R&D progress and fierce competition brought by first movers and generic drugs, commercialization prospects of Efsubaglutide Alfa is highly uncertain, leading to potential lower-than-expected sales performance.
• After Series B+ financing, the post-investment valuation of Innogen is already RMB4.65 billion. However, share price of peers has not done well, which makes us cautious about Innogen’s IPO prospects.

• AH Premia continue to fall with the widest spreads narrowing more than the narrowest spreads, and liquid pairs seeing more narrowing than illiquid pairs.
• Average AH Premia are at a new 5yr low (longer, actually, but charts below only show 5yrs). The big warning sign? Rolling 52wk performance of A vs H in pairs.
• Momentum is going to work until it does not. A new Trump EO this weekend seems to have potential to lead to more restrictions on US ownership of Chinese stocks.

• BeiGene (6160 HK) and ZTO Express Cayman (2057 HK) will replace Sino Biopharmaceutical (1177 HK) and Li Ning (2331 HK) in the HSCEI INDEX at the close on 7 March.
• Estimated one-way turnover at the rebalance is 5% resulting in a round-trip trade of HK$6.4bn (US$825m). The final capping will use the close of trading on 4 March.
• ZTO Express Cayman (2057 HK) is also an inclusion to a global index with implementation scheduled for the close on 21 March.

• As expected, Horizon Robotics (9660 HK) replaces East Buy Holding (1797 HK) in the Hang Seng TECH Index (HSTECH INDEX) in March.
• In a surprise, Tencent Music Entertainment Group (1698 HK) will be added and ZhongAn Online P&C Insurance C (6060 HK) will be deleted.
• Horizon Robotics (9660 HK) is also an inclusion to the HSIII Index and HSCI Index and will be added to Southbound Stock Connect in May.

• This past week saw SOUTHBOUND Connect clear HK$800bn of gross value traded, and net value was near recent highs at +HK$51bn. Consumer and finance names continue to be the rage.
• Notable is the HUGE back-and-forth. If HK$800bn traded and SOUTHBOUND only bought HK$51bn, HK$375bn was round-tripped for short-term purposes.
• That is twice the “excess” traded seen for the past year. Tencent (700 HK) saw US$14bn traded but net buying was US$121mm. 

• The scorching rally continues with Alibaba saving a lackluster week with huge earnings driven move on Friday.  
• Implied vols are in the 85th percentile and struggling to move higher with spot.
• Third week in a row where Call volume as a percent of total slipped indicating that buying fatigue might be setting in.

• This Insight analyses Xiaomi Corp (1810 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
• These traders tailor structures to risk budgets and take calculated bets. Strategies are mostly bullish, and exclusively long volatility despite implied volatility in its 98th percentile.
• Call spreads can indicate where bullish traders expect the rally, driven by its own momentum, to peak. One trade suggests a ceiling of 70 by mid-year. 

• Mixue Group (MIX HK)‘s IPO price of HK$202.5 looks attractive, as it is priced at 16.6x FY24 and 13.5x FY25 PER, below the mainland China peer average. 
• We estimate a P/B of 4.6x, putting it marginally lower than the sector best-fit line. We think there is potential for at least a 20-30% upside after the IPO. 
• MIXUE offers the possibility to participate in the spin-off of its overseas businesses in the medium term, which is explicitly spelt out as a plan.

• Mixue Group (MIX HK)  is offering 17.1 million shares at a price of HK$202.50 in its Hong Kong IPO aiming to raise up to HK$3.45 Bn.
• The company demonstrated stellar growth in store count, revenue, and profits, focusing on the mass-market freshly made beverage segment despite a sector slow down in 2024.
• Mixue’s pace of store expansion may slow down going forward, however its ultra-low prices (RMB4-10) and scale provide a strong foundation for long-term sustainable performance.

• Late January timing of LNY holiday boosted last month’s travel and tourism statistics
• Chinese airlines are filling outbound flights, which should lift pricing & margins (eventually)
• Numbers suggest Chinese consumers eager to travel, but spending remains muted

• MIXUE’s valuation should be higher than peers such as Guming and Baicha Baidao Industrial. A comfortable valuation range is 18-20 P/E, higher than peers. So, the IPO pricing is attractive.
• 2024 full-year net profit is HK$4.8 billion.Net profit could reach HK$5.7 billion (up 19% YoY), HK$6.6 billion (up 16% YoY), HK$7.6 billion (up 15% YoY) in 2025, 2026, 2027, respectively. 
• Since Nongfu Spring’s revenue scale/net profit margin is higher than MIXUE, MIXUE’s valuation should be lower than Nongfu Spring. Investors need to be alert to the post-IPO performance growth pressure.

• Alibaba had a super charged move this week, risking 14.56% on its earnings release.
• We look at how price movement and volatility evolve in the month after earnings releases.
• Recommendations are made on how to position through options in this environment of enhanced volatility.

• There will be 5 changes for the Hang Seng Internet & Information Technology Index (HSIII Index) at the March rebalance. There is one surprise for us with Synagistics being added.
• Estimated one-way turnover at the rebalance is 6.5% resulting in a round-trip trade of HK$3.74bn (US$482m). 4 stocks will have over 1x ADV to trade.
• Horizon Robotics (9660 HK) is an add to the HSIII, Hang Seng TECH Index and HSCI. Inclusion in Southbound Stock Connect will take place in May.

• We continue to be led down the garden path – no constituent changes for the Hang Seng Index (HSI INDEX) in March means we remain at 83 members.
• Despite having an opportunity to add stocks to the index without increasing turnover, the index committee have done nothing. Which begs the question – what exactly are they waiting for?
• Float and capping changes result in an estimated one-way turnover of 3.8% and the resulting round-trip trade is HK$16.7bn (US$2.15bn).

• Bilibili (BILI) reported C4Q24 revenue and GAAP operating profit in line, 87% vs. our estimates and in line, 130% vs. consensus. 
• We see BILI’s content strategy to be working to drive higher and better traffic, benefiting the ads business. 
• We BUY and raised our TP to US$24 awaiting further details on game pipeline. The stock trading at 2025 PE of 31x.

• There are 29 adds and 41 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 505.
• We expect 27 of the 29 HSCI inclusions to be added to Stock Connect from the open on 10 March while Horizon Robotics (9660 HK) should be added in May.
• We expect 28 of the 41 HSCI deletions will be removed from Stock Connect and there has been increased Southbound holding in a lot of the stock this calendar year.

• In 2025, the NHSA will continue to deepen the VBP of drugs and centralized procurement of medical consumables, covering 700 drug varieties in total. 
• Valuation of the entire industry has been sluggish for three years. With the positive changes, we think it is the time to be optimistic on China healthcare in 2025.
• Due to the craze for DeepSeek/AI, PAGD’s stock price surged.Although this is a great story, the extent to which DeepSeek can bring substantial benefits to PAGD remains to be verified.

• Mixue Group is now looking to raise around US$450m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the IPO pricing.

• Mixue Group (MIX HK), a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO. 
• According to CIC, Mixue is the largest freshly made drinks company in China and worldwide, according to the number of stores as of September 30, 2024.
• The bull case rests on a strong brand, leading market share, peer-leading revenue growth, top-tier profitability and cash generation. 

• Mixue Group (MIX HK)  is offering 17.06 million shares at HK$202.50 apiece to raise HK$3.45 billion ($444 million) in its initial public offering in Hong Kong
• Mixue’s IPO was launched today morning  and will close on Wednesday 26th February. The stock is due to list on HK bourses on 3rd March.
• Mixue, China’s value-for-money freshly made beverage leader, has priced its IPO shares attractively given its robust growth track record and long term competitive strengths.

• BIDU reported C4Q24 top line, non-GAAP op. profit and GAAP net income in-line, (22%) and (7.0%) vs. our est. and (3.7%), (24%) and in line vs. cons. 
• While monetization on a largely in-house app repertoire can ensure AI revenue to start kicking in in C2H25, we are concerned on the size of this revenue, 
• We maintain our SELL but raise TP to US$80 to reflect a short-term trading opportunity around AI monetization.

• Genuine Biotech is looking to raise at least US$100 million via a Hong Kong listing.
• Genuine Biotech has commercialized product and is expanding indication of its core product from HIV to cancer.
• The company’s founder has experience of R&D in the relevant area in leading NMCs.

• In the US, the Conference Board leading economic index fell 0.3% (-0.1% e / 0.1% revised p) to 101.5 in January.
• Overall, the index recorded a 0.9% decline in the six months ended January 2025, which was lower than the 1.7% drop over the preceding six months.
• Separately, initial jobless claims for the week ended February 15th edged up to 219 k (215 k e / 214 k revised p). 

• Brookfield has sold a Sydney logistics complex for $210M to Ontario Teachers’, KIC, and Gateway.
• CapitaLand Investment has closed a $130M private credit fund in Korea.
• Sun Hung Kai has bought a $77M residential plot, the cheapest land sale in 11 years in Hong Kong.

• Our outlook remains bullish on global equities (MSCI ACWI). We’ve been bullish since early-November 2023, save for a two month period from late-July to late-September 2024 when we were neutral.
• We also believe the U.S. dollar (DXY) and Treasury yields have put in major tops, which is a crucial risk-on signal for global equities.
• With more and more countries breaking out, we remain bullish as long as ACWI-US is above $116, S&P 500 is above 5770-5850, and EURO STOXX 50 is above 5030.

• In the December quarter, CaiNiao’s revenue declined -1% Y/Y; EBITA margin fell, too
• CaiNiao’s revenue growth has de-coupled from the growth of Alibaba’s international segment
• We believe price pressure on Chinese X-border logistics exceeds pressure within X-border retail

• Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today. 
• The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
• Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK). 

• On the 6th December 2024, China National Building Material (3323 HK) (CNBM), China’s leading building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
• This elevated CNBM’s parent’s stake to 50.01% of total shares from 45.02% currently, necessitating  a whitewash waiver so the parent would not be obliged to make a full blown offer.  
• Independent H-shareholder overwhelmingly approved the waiver yesterday, the 19th February. Tendering closes on the 5th March. Minimum pro-ration is 19.24%. I’m estimating at least 35%. The Offer is now unconditional.

• Total revenue growth rate continued to rise in 3Q25 ending March 2025.
• Also, the growth rate of the largest business line, customer management, was close to double digits.
• The upside for the next twelve months was narrowed to 18%, as Alibaba’s stock surged after our preview note.

• Liang Wanfang became a celebrity overnight, with visitors from all over Guangdong coming to pay their respects
• Liang has been praised for his contributions to China’s tech sector, surpassing competitors and boosting national pride
• China’s tech sector has faced challenges, including regulatory crackdowns and decreased foreign investment, leading to a shift towards state-backed funding and increased risk for entrepreneurs.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Hong Kong’s secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.
• AAC Technologies Holdings (2018 HK) announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.
• Hua Hong Semiconductor (1347 HK) is well-positioned to cater to China’s increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.

• After rallying ~50% from its lows, Alibaba rallied another ~10% after reporting in-line result, despite saying it would spend more capex in the next 3 years than the previous 10; 
• Behind this performance is a sudden clarification of AI’s monetization future in China. Alibaba’s vision certainly has itself at the center of beneficiary, but a few other readings also exist;
• Alibaba suggested that partial replacement of human worker is possible in a platform with structured workflow, allowing AI users to reap benefits earlier than we have anticipated. 

• APAC investors are welcoming rate cuts, with Hong Kong remaining a buyers’ market, according to Colliers.
• KKR & M&G invest $509M in an Aussie Warehouse Portfolio, while PGIM JV acquires Queensland sheds.
• Vanke partners with government insurers for a $220M housing JV, demonstrating state support in the real estate sector.

• China National Building Material (3323 HK)‘s proposed H-share buyback has been approved. We continue to support existing shareholders to tender their holdings to accept the offer. 
• The buyback will enhance FY25 and FY26 EPS by 4.8% and 8.2%, respectively. Its book value will increase by 11% compared to without a buyback.
• The post-buyback FY25 PER of 9.6x is at a premium to the sector median of 7.6x. The proposal has led to significant outperformance, and we anticipate downside risks on completion. 

• The emergence of DeepSeek, a Chinese AI company, has sparked widespread discussion across industries, as evidenced by recent earnings calls from major corporations.
• From tech giants to industrial leaders, executives have weighed in on DeepSeek’s innovations, its potential to reshape AI development, and its broader market implications.

• The following synthesizes key insights from earnings calls between January and February 2025.

• Chifeng Jilong Gold Mining (600988 CH), a company owning multiple gold mines across the world, aims to raise around US$500m in its H-share listing.
• It is principally engaged in the mining, processing and sales of gold.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• The regulatory precondition concerning Canvest Environmental Protection Group (1381 HK)’s privatisation offer from Grandblue Environment Co A (600323 CH) has been satisfied. 
• The sole remaining precondition concerns resolving loan guarantee issues. Canvest is taking steps to resolve these issues, and satisfying this precondition is low-risk. 
• Despite peers’ re-rating, the offer remains attractive, and the vote is low-risk. At the last close, the gross/annualised spread was 4.5%/15.0% for a mid-June payment. 

• MIXUE Group Mixue Group is now looking to raise around US$500m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In our earlier notes, we have looked at the past performance, undertaken a peer comparison and spoken about valuations. In this note, we refresh the peer comparison.

• CSI Medical Service represents the top 50 largest and most-liquid stocks involved in medical devices, medical care, medical informatization, and other medical theme from the Shanghai, Shenzhen and Beijing Exchanges.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in June 2025.
• We expect up to three ADDs and three DELs for the CSI Medical Service index during this index review event based on the latest available data.

• Tam Jai’s performance in recent years has been consistently below expectations. Its fundamentals have undergone negative changes after IPO. Consumers’ preference change may disrupt Tam Jai’s business model.
• Based on our forecast and the Cancellation Price of HK$1.58/share, P/E will be higher than the industry average. Considering the low trading liquidity and concerns on outlook, HK$1.58/share is acceptable.
• The fundamentals/prospects of Tam Jai are different from the situation of Henlius’ privatization.We recommend investors not reject the privatization easily because internationalization won’t bring significant positive changes in short term.

• China Education Group (839 HK)‘s plunge in share price is due to management’s guidance for a 10-15% drop in adjusted net profit, significantly lower than the current consensus.
• Its decision to pause dividends for the foreseeable future on debt repayment burden and tight offshore refinancing environment for the sector has further disappointed the market.
• Based on guidance, its PER of 3.7x and nil dividend yield for FY25 make it unattractive relative to peers (1.7-2.9x PER). We shy away until things improve.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We provide updates on Taste Gourmet (8371 HK) / Perfect Medical Health (1830 HK) ,the Philippine Stock Exchange (PSE PM), and Sai Gon Cargo Service (SCS VN) .

• Mixue Group (MIX HK) is now looking to raise around US$500m in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In our earlier notes, we have looked at the past performance, undertaken a peer comparison and spoken about valuations. In this note, we refresh our valuation.

• Geek+ (1678559D CH) is looking to raise up to US$200m in its upcoming Hong Kong IPO.
• It is a leader in the global autonomous mobile robots (AMR) market, offering a series of AMR solutions to empower warehouse fulfillment and industrial material transport.
• In this note, we look at the firm’s past performance.

• After Canvest Environmental Protection Group (1381 HK) announced on the 23rd Jan it had secured Mofcom approval, after securing NDRC earlier that month, that left SAFE. Or so I thought. 
• SAFE has now been secured, yet two pre-cons concerning certain (internal) guarantees remain outstanding. It’s rare to see SAFE sign off with other pre-cons still hanging. 
• The consolation here is that KM Lai (ED, DC) and Loretta Lee (ED, CL) are on the hook for a chunk of change if they cause the proposal to lapse.

• MIXUE’s supply chain advantages and economies of scale remain ahead of peers. This creates a unique barrier. When peers engage in price wars, MIXUE can still gain greater cost advantages.
• MIXUE’s performance growth depends significantly on its ability to expand franchised store network. But MIXUE may have reached the growth ceiling in China market based on its current expansion speed.
• The market prefers the franchise models. Despite declining growth rate in the whole industry, MIXUE’s valuation should still be higher than peers – e.g. P/E of 17-20x is comfortable range.

• Xtapli is looking to raise around US$242m via a primary placement, after having raised US$145m in Jan 2025.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500 names.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in June 2025.
• Currently, we see 7 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

• Mixue Group is getting ready to complete its IPO in Hong Kong in the coming weeks. Mixue Group plans to raise about US$500 million from its Hong Kong IPO.
• The company has an excellent income statement with notable growth in sales and profits in the past four years.
• Net margin improved from 15.7% in 2023 and 18.7% in 1Q-3Q 2024, driven by higher sales base and lower major operating costs as a percentage of sales

• We expect BIDU to post C4Q24 top line,non-GAAP operating profit and GAAP net income (5.1%), (7.7%) and (8.7%) vs. consensus.We expect BIDU to issue C1Q25 top line guidance (1.2%) vs.consensus;
• BIDU’s problem is not only manifested in the loss of the Apple contract,it is also the loss of first mover advantage in both Generative Artificial Intelligence and Autonomous Driving Services. 
• Losing traffic advantage, BIDU has become a self-containing app ecosystem but all pillars of this ecosystem is facing intensifying competition. SELL @US$78.

• Tam Jai International (2217 HK)‘s privatisation price is lower than we expected, based on 1.37x 12-month forward P/B, against our expectation of 1.63x (the historical average).
• The PER of 21.1x for CY25, a premiuim to sector average of 13.7x, however, looks attractive enough for investors that entered in the last 12 months. 
• The 52.6% discount to IPO price (HK$3.33) and huge net cash have made some early investors unhappy. There is already letter from a minority shareholder calling to vote against it.

• This Insight analyses Alibaba Group Holding (9988 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
• These traders tailor structures to risk budgets and take calculated bets. Several large box trades appeared on the ticker.
• Expect more movement on Alibaba Group Holding (9988 HK)‘s Q3 earnings announcement tomorrow, 20 February 2025. Option-implied move at the end of this Insight.

• Mixue Group, the largest freshly-made drinks company in China, is reportedly set to begin book building for its Hong Kong IPO by end-February, targeting to raise approximately USD 500 million.
• Mixue Group (MIX HK)‘s mass-market pricing strategy and compelling value for money positioning targets price-sensitive consumers, especially in lower-tier cities and among youth, driving high-volume sales.
• Mixue Group (MIX HK) reported robust revenue and profit growth for first nine months of 2024 led by new store openings and margin expansion despite sector slowdown and intensifying competition.

• The ChiNext index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• We see 10 changes for the ChiNext index and 5 changes for the ChiNext 50 index in the next index rebal event. Collectively, there could be US$1.3bn one-way flows.

• Midea is a sound equity investment which is a market leader in the electronics products with just 12.8 trailing PE. 
• China newly launched consumer trade-in policy could become the new driver of Midea’s revenue stream. 
• Overseas business expansion could become the new game changer to re-rate the company’s valuation in the longer term.

• ADIA and Hines sell Shanghai Tower for $1.5B to insurer-backed fund, showcasing large-scale real estate transactions.
• Keppel DC REIT sells German data centre at 39% loss from 2019 purchase price, indicating potential challenges in the real estate market.
• TPG offers $65M for Econ Healthcare, Singapore nursing home operator, amidst growing interest in healthcare industry investments.

• Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 March.
• With no constituent changes, one-way turnover will be 2.75% with 3 stocks being capped downward. This gives the index committee the opportunity to add more stocks without significantly increasing turnover.
• The return of the high and medium probability inclusions has matched the performance of the Hang Seng Index over the last few months, Shorts have climbed in some names.

• Small-Cap property developer Soundwill Holdings (878 HK) is currently suspended pursuant to the Takeovers Code
• Soundwill is controlled as to 74.97% by Grace Foo (ED), and her descendants, Wai Ling Chan (deputy chairman), and Hing Tat Chan (chairman). 
• Soundwill is trading at a staggering 0.08x P/B, with the majority of its book value tied up in investment properties.

• Tam Jai International (2217 HK) announced a scheme privatisation offer from TORIDOLL Holdings Corporation (3397 JP) at HK$1.58 per share, a 75.6% premium to the last close price. 
• The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake. 
• The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal. 

• After Tam Jai  (2217 HK) was suspended, in Tam Jai (2217 HK) Suspended: Expect Toridoll (3397 JP) To Make An Offer I expected an Offer from TORIDOLL Holdings (3397 JP).
• I also thought an Offer price ~HK$1.50/share would be welcome, but wasn’t hopeful. We got both – a Scheme from Toridoll at HK$1.58/share (best & final).
• Clean deal. Just a question of timing. Docs may be delayed to incorporate FY25E (Mar Y/E) financials. 

• Soundwill Holdings (878 HK) has entered a trading halt “pending the release of an announcement relating to inside information and pursuant to the Codes on Takeovers and Mergers.” 
• It is likely that the controlling shareholder (Foo Family Trust), representing 74.94% of outstanding shares, is seeking to launch a privatisation through a Bermuda scheme. 
• While no disinterested shareholder holds a blocking stake, the headcount test necessitates an attractive offer. We estimate a potential offer price range of HK$7.53-19.44.

• In China, travelers grew by 13% YoY in 4Q24 and 15% in 2024, according to the National Bureau of Statistics.
• We expect total revenue will grow by 19% YoY in 4Q24 and 2024.
• We are confident in the company’s financial performance, but the stock price is overvalued.

• Discounts likely set for further narrowing as Chinese government adopts a more positive stance towards the private sector (Tencent).
• The discounts of Naspers and Prosus have recovered to levels last seen prior to the publication of the Chinese Military Companies list by the DoD at start of the year.
• Last week Friday, Tencent rallied 7.4% following news that the Chinese government are expected to host a summit with Jack Ma and DeepSeek founder, Liang Wenfeng.

• MIXUE invited experts to conduct calculations based on population data. The result is a maximum of 45,000 stores can be opened. So, MIXUE has reached the growth ceiling in China.
• The pain point is since MIXUE’s growth depends significantly on its ability to expand store network, once the growth of franchised stores slows down, a performance decline would be inevitable.
• Due to larger scale effect/stronger supply chains/higher net profit margin, MIXUE’s valuation should be higher than peers. Higher valuation depends on whether MIXUE is able to make breakthrough in internationalization.

• Complete rally mode across single stocks and sectors with the 3 highest single stock option volumes of the past 3 months recorded.
• More than 25% of issues experience more than 100% increase in options volume. 
• We highlight names with the largest increases in both Put and Call volumes including Alibaba, Alibaba Health, AIA, China telecom and Kingdee.

• We have visited three supermarkets in Shanghai, looking for Haitian Sauces.
• We believe Haitian is obviously the top brand among soy sauces.
• However, there are many competitors and Lee Kum Kee is the most important.

• Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
• That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
• We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.

• We believe the recent launches of AI Model will challenge the assumptions of AI training costs, and we are still in early stages of AI revolution
• It will maintain a sustainable growth of AI infrastructure like data centers, instead of reducing the demand. GDS and VNET are well positioned to capture this tailwind
• VNET and GDS were up 303% and 268% for last 12 months, we think it is not too late to chase the rally

• HSI’s 10-day return of 11.84% ranks it just below the 99th percentile of all 10-day moves since 2000.  
• This move has been unusual given the low level of historic volatility, ranking it as one of the lowest vol moves of this magnitude.
• The current move is abnormal for its return relative to volatility – we dig deeper into how returns and volatility are likely to evolve.

• HSCEI sets new 52-week high by a hair. Rally over the last 10 days ranks in the 97th percentile since 2000.
• Spot and implied maintain a positive correlation which will see implieds come off should this rally reverse course. 
• We recommend two trades for those looking to tactically lighten positions into the rally.

• Rally over the past 2 weeks has landed it in the 99th percentile since 2000 and has also been accompanied by low volatility.
• The up-trend has a number of characteristics similar to the 21% rally in May 2024 and is in line with levels from which market has failed to advance.
• Given how price and vol are likely to evolve over the next month we suggest tactical positions to reduce position size 

• China Mobile (941 HK) experienced a 6.8% increase over five consecutive positive weeks. This Insight builds on the work of quantitative analysis identifying resistance and support levels.
• This Insight presents four different options strategies to combine quantitative insights with volatility and option analysis. 
• Option strategies cater for both bullish, bearish, or neutral views, and can be tailored to fit a given risk budget.

• Mixue Group (MIX HK) has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.
• With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities’ potential and the franchise model drives expansion.  
• It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.

• 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, while Guming Holdings (1364 HK) added to the list of disaapointing tea chain, MIXUE is said to be gearing up for a launch soon.
• On the placements front, there were two smallish deals in Japan.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Kaonavi Inc (4435 JP), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US), ESR Group (1821 HK), Vesync (2148 HK). 
• Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Millennium & Copthorne Hotels Nz (MCK NZ), Avjennings Ltd (AVJ AU), Insignia Financial (IFL AU). 

• There was a HUGE jump in value traded this week – HK$655bn vs ~$300bn for 5-days of trading the last several weeks.
• Alibaba Group Holding (9988 HK) was the big buy with net buying 7 of 8 days post-CNY and a huge end of week. Tencent was sold.
• There appears to be a flight to Chinese equities by foreigners and SB are taking part with risk-on style trading. Watch Hang Seng rebal news this week!

• Chinese battery giant Contemporary Amperex Technology Co. Ltd. (CATL) has launched its secondary listing in Hong Kong, aiming to raise funds primarily for the construction of its Hungary factory, according to its prospectus disclosed by the Hong Kong Stock Exchange Tuesday.
• The move could become one of Hong Kong’s largest listings in recent years, with Bloomberg reporting a potential fundraising target exceeding $5 billion.
• Shenzhen-listed CATL’s stock closed Tuesday at 251.8 yuan ($34.47), down 2.57% from the previous day, with a total market capitalization of 1.1 trillion yuan. The company’s valuation peaked at 1.6 trillion yuan in December 2021.

• AH Premia are lower again (new 5yr low) in the first full week after the CNY holiday. HK stocks up BIG vs A-shares. H/A discounts slightly narrower on average.
• That tells you that the big winners in HK the past two weeks are those stocks without A-shares. This past week Healthcare sector pairs saw the best relative H-share performance.
• Foreigners returning to HK markets but less to the H in H/A pairs. They are buying HK/China “foreign-investor beta” not China breadth. Feels spivvy, and short-term.

• Our valuation analysis suggests that CATL is undervalued. Our base case valuation suggests implied market cap of 1.5 trillion CNY, which represents 33% higher than current levels. 
• Our valuation sensitivity analysis suggests a market cap valuation range of 1.2 trillion CNY to 1.8 trillion CNY. 
• We estimate CATL to generate revenue of 431.7 billion RMB (up 16.8% YoY) and net profit of 61.4 billion RMB (up 10.5% YoY) in 2025. 

• In our view, China’s biotech companies have sold their core pipelines/products too early, resulting in the loss of opportunities to gain much greater benefits in the future.
• We summarized the impact of tariff policy implemented by the US on China’s healthcare industry. Short-term headwinds are inevitable, but in long term, it helps force the industry to upgrade.
• After Spring Festival, the acquisition progress of Tasly by CR Sanjiu has significantly accelerated – SASAC/SAMR approvals have been received. It’s possible for the deal to be completed in 25Q1.

• Contemporary Amperex Technology (CATL) (300750 CH), the world’s largest supplier of EV and ESS batteries, has filed for an H Share listing to raise US$5 billion.     
• CATL’s global EV battery market share, measured in GWh, rose from 27.6% in 2019 to 36.8% in November 2024.
• The investment case rests on a leading market position, forecasted return to growth, peer-leading profitability, cash generation, peer-leading FCF margin and an attractive valuation.