China

• Taste Gourmet (8371 HK) will report its H1 FY25 earnings in early November. The company isn’t reporting quarterly earnings because GEM board stocks are no longer required to do so. 
• We expect revenue and profit growth of 22% %/20% YoY, as the average number of HK restaurants has increased from 45 to 54, and most have ramped up. 
• Trading at 4.5x PE with a 12% dividend yield, 27% of the market cap in cash and a mainboard listing on the horizon there abundant catalysts for the future. 

• The essence of Eternal Beauty’s business model is to earn a “price difference” of the brand and product portfolios, but this business model is difficult to generate high profit margins.
• The situation and prospects of China’s perfume market are facing major changes. It‘s uncertain whether the perfume sales in the China market can maintain double-digit growth in the long term.
• Eternal Beauty’s financial performance would face challenges due to changes in consumer preferences, shifts in China’s domestic policies, international trade disputes, geopolitical conflicts, etc. Valuation could be lower than peers.

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.

• New World Development

• Today, in a press conference held jointly by the Governor of the PBOC, the Director of the Financial Regulatory Bureau, and Chairman of the CSRC, China announced market stimulus measures.
• The PBOC will cut RRR 50bp, the 7-day repo rate 20bp, guide effective mortgage rate cuts, and lower minimum down payments on second homes. There are other commercial RE measures.
• Three major stock market measures were announced. A RMB500bn collateral swap programme, PBOC backing RMB300bn bank loans for corps to buy stocks, and a Plan to increase Central Huijin investments.

• Xingda International (1899 HK) has disclosed a voluntary conditional offer from Mr Liu Jinlan (Chairman) at HK$1.30 per share, which aligns with the last close price. 
• The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. The offeror and concert parties represent 37.03% of voting rights.  
• The offer is a reaction to Mr Zhao Yue’s “hostile” emergence as a substantial shareholder. It is unattractive and will require a bump to satisfy the minimum acceptance condition.   

• After tyre component manufacturer Xingda International (1899 HK) was suspended recently pursuant to the Takeovers Code, an Offer seemed more likely, not another Partial Offer. 
• On cue, Liu Jinlan, chairman and executive director, plus concert parties (collectively holding 37.03%), have tabled a voluntary conditional Offer (50% acceptance hurdle). But the price? A surprising zero-premium HK$1.30/share
• However, this Offer is a pre-emptive strike against former employee Yue Zhao, who holds 9.24%; and was recently appointed ED and vice-chairman of Shougang Concord (103 HK), Xingda’s major competitor.

• ADD slapped on the US, the EU, the UK, and Singapore imports
• ADD probe initiated against Canada, Japan and India
• Russia to be a major beneficiary of the measures

• MINISO‘s  acquisition of a 29.4% stake in the loss-making supermarket chain Yonghui  for USD 890 million has been viewed negatively by investors, leading to a sharp decline in Miniso’s stock.
• The deal’s size, combined with Yonghui Superstores (601933 CH) unprofitable track record and   MINISO(9896 HK) ‘s unexpected move into the low-margin, highly competitive supermarket space, has likely fueled investor concerns.
• However, we believe the acquisition provides Miniso with a strategic opportunity for growth and diversification to a sector that remains vital in the offline retail landscape at undemanding valuations.  

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.

• Samvardhana Motherson International Ltd
• Wynn Macau Ltd
• Yankuang Energy Group

• The imagination brought to the market by Kelun’s traditional businesses (infusion business, antibiotics and bulk pharmaceutical chemicals, generic drugs) is not high. So, the only highlight is Kelun-bio’s ADC pipeline.
• Considering that Kelun has lost pricing power due to VBP, and both Chuanning and Kelun bio have been spun off and listed independently, Kelun’s valuation will not be too high.
• Our forecast is net profit attributable to shareholders in 2024-2026 is in the range of RMB3-5 billion. Reasonable market value is RMB30-50 billion. Subsidiary Kelun Bio is a better bet.

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.

• Meituan

• The conglomerate sector continues to show momentum in Hong Kong while the materials and energy sectors lag
• Weibo (9898 HK)Weibo Corp (WB US) was rated a BUY as valuations and potential catalysts from parent Alibaba Group Holding (9988 HK) could support a higher stock price.
• China East Education (667 HK) was upgraded to BUY with higher higher price target due to profit increase. Dongfang Electric (1072 HK) was initiated with a BUY with strong upside.

• The sharp decline in revenue/profits indicates that Fu Shou Yuan’s business model is not as excellent as previously imagined. The Company’s performance would still be heavily influenced by macro factors.
• Once Fu Shou Yuan slows down external expansion and explores endogenous growth, it usually doesn’t require too much capital, which means the Company would have greater motivation to distribute dividends.
• The economic downturn leading to performance headwinds is just short-term logic. In the long run, the logic behind the increasing demand in funeral industry has not changed. Valuation would rebound.

• August parcel volume growth moderated, but easing price pressure matters more
• In July & August, Chinese X-border parcel volume growth re-accelerated
• We believe easing price pressure should lead to express margin expansion

• Adverse weather impacts Chinese prices   
• Arbitrage buying spurs prices up  
• TSR inventory drops in September 

• In 2Q24, KE’s revenue grew by 20% YoY despite the weak property market.
• We believe property developers and personal landlords need KE more than the prosperous time.
• We believe the stock has an upside of 148% for the end of 2025. Buy.

• Hong Kong tech sector leads the market higher with increased momentum and lower volatility.  Short selling has abated with unwind of HKD carry trade.
• Sands China (1928 HK) had a breakout from a Falling Wedge pattern. The share price broke above its short-term averages with increasing momentum.
• China Feihe (6186 HK) broke out from its downtrend with a Reversal from its U-Shaped Bottom.  Techtronic Industries (669 HK) broke out to a new YTD high.

• 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: Canvest Environmental Protection Group (1381 HK), Shinko Electric Industries (6967 JP), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK), China Traditional Chinese Medicine (570 HK). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Dyna Mac Holdings (DMHL SP), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Seven & I Holdings (3382 JP). 

• 90% of the way through the review period, there could be 1 change for the SSE STAR50 (STAR50 INDEX) and 5 changes for the STAR100 Index.
• We estimate turnover of 1% for the STAR50 INDEX and 5.5% for the STAR100 Index. The net round-trip trade is CNY 3.2bn (US$453m).
• The forecast add to the SSE STAR50 (STAR50 INDEX) has massively outperformed the forecast deletion from the index over the last two months.

• 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 December 2024.
• We expect up to five ADDs and five DELs for the CSI Medical Service index during this index review event based on the latest available data.

• SMIC’s revenue might be looking at around US$2bn in 4Q24 and it’s a bit reduction of GM from 3Q24 because of the seasonality at the year end.
• Since around 2019, US was putting an sanction on China, no matter how the argument is true.
• SMIC continued delivering 7nm chips, and even the 5nm chips could be further delivered using a similar method, although the yield rate may be a concern.

• Declining customer retention rate indicates that a slowdown in future revenue growth seems inevitable. If revenue growth stagnates, it means Taimei’s business model hasn’t been fully validated by the market.
• Taimei’s IPO on SSE STAR Market was rejected. This means regulatory authorities don’t recognize Taimei’s core technology/performance prospects. Taimei has to take a step back and list on the HKEX.
• Post-Investment valuation reached RMB8.1 billion after Series F financing. However, considering the continuous decline in valuation of its peers, we are concerned about Taimei’s future stock price performance after IPO.

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.

• Adaro Energy
• Medco Energi
• Meituan

• I tally 42  – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Four new deals: scrip mergers forAuswide Bank (ABA AU), Latin Resources (LRS AU) & Platinum Asset Management (PTM AU); and the Tender Offer for Trancom Co Ltd (9058 JP).
• Key updates took place on: Pacific Smiles (PSQ AU), China TCM (570 HK), Greatview Aseptic Packaging (468 HK), Shin Kong Financial Holding (2888 TT), and Seven & I Holdings (3382 JP).

• 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.
• In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.

• Price momentum in August eased slightly vs July, the first M/M dip since March
• In the next two months, seasonality will moderate and Y/Y comps will get tougher
• If Q4 momentum wanes, we feel continued strong share performance less likely

• STAR 50 index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
• In this insight, we take a look at the potential ADDs/DELs for the STAR 50 and STAR 100 indices for the December 2024 index rebal event.

• Anhui’s new VBP included OTC TCM for the first time, which poses a big challenge to the pricing autonomy of CR Sanjiu. This makes Sanjiu’s acquisition of Tasly more important/urgent. 
• Novo Nordisk’s performance has raised concerns. The capacity bottleneck for weight-loss drugs seems resolved. Could this signal that the market for weight-loss drugs is reaching its peak?
• Keymed Biosciences (2162 HK)’s CM310 will miss this year’s NRDL negotiations, putting the company at a disadvantage. Considering the competitive landscape, we are concerned about Keymed’s performance.

• We continue our coverage of the Hang Seng Index : in our previous insight we theorized a continuation of the rally in September.
• So far the index is following the path outlined (pullback, then rally). What is going to happen in the next few weeks, if September closes up?
• Broadly speaking we see a potential continuation of the rally in October, but there may be some resistance in the short-term.

• Asian ETF flows have been subdued during September as markets start to react positively to Fed rate cuts.
• Sands China (1928 HK) parent Las Vegas Sands (LVS US) continued to increase its stake as Macau tourists rise.  Shenzhou Intl Group Holdings (2313 HK) is seeing increased China sales.
• Metallurgical Corporation of China Ltd (1618 HK) reported a decrease in new contracts for 1H24. Kuaishou Technology (1024 HK) early investor sold most of its remaining stake in the company.

• US ADD measure expected to be in force from Sept 27
• Bombarded by Chinese exports Canada too join ADD league
• Tesla exports from China faces ADD in Canada, EU excuses

• Swire Pacific (19 HK) is coming up “cheap” on my monitor vs. Swire Properties (1972 HK) and Cathay Pacific (293 HK), after Cathay settles its Hong Kong government tab.
• Preceding my comments on Swire and Cathay are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• China’s State Administration for Market Regulation has formally accepted  Shandong Xinjufeng Technology  (301296 CH) (XJF)’s filing. That’s positive. SAMR previously okayed XJF’s initial 28.22% stake from Jardine Matheson (JM SP).
• No new update on co-founders Jeff Bi and Gang Hong’s non-binding Offer. 
• Separately, the EGM requisitioned by XJF to appoint two XJF-friendly directors progresses.

• DCM Investments is looking to raise US$484m via selling its remaining stake in Kuaishou Technology (1024 HK).
• While the current block deal isn’t entirely well flagged per se, it appears that DCM has since been trimming its stake on the open market.
• In this note, we run the deal through our ECM framework and comment on deal dynamics.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
• Since our last insight in August, there has been a sharp increase in reported AUMs tracking CSI 300 and CSI 500. This has caused our flow expectations to rise sharply.

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
• We currently see 5 ADDs/DELs for the SSE 50 index and 18 ADDs/DELs for the SSE 180 index. 

• China State Shipbuilding Corp. Ltd. (CSSC) and China Shipbuilding Industry Corp. (CSIC) on Wednesday announced a stock exchange proposal in their merger deal.
• Analysts said the proposed exchange terms are not favorable for shareholders of China Shipbuilding Industry.
• The two largest state-owned shipbuilding conglomerates determined the exchange ratio at 0.1335 shares of CSSC for each share of CSIC.

• Company specializes in battery products for electric vehicles and energy storage
• Competes with itself to continuously innovate and invent new chemistries
• Relies on state support in China to quickly meet consumer needs and roll out products efficiently

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

• A partial disposal of Club Med is positive for Fosun Tourism (1992 HK). The market is speculating CapitaLand Investment /Sing (CLI SP) is paying EUR500m for a 20-30% stake.
• Club Med generated 91.7% of its 1H24 operating profit. The rumoured valuation will boost its value by HK$6.9/share, 1.2x of the share price if true.
• We see reasons for such disposal, and if happens, this will align the stock’s valuation to international peers – 26.2x for FY24, vs. its 11.3x currently.

• Beijing Fourth Paradigm Technology (6682 HK) was listed in Hong Kong on 28th Sept 2023 after raising US$130m. Its one-year lockup will expire on 27th Sept 2024.
• Beijing Fourth Paradigm is a platform-centric AI enterprise solutions provider. It was the largest player by revenue in the platform-centric decision-making AI market in China in 2022, as per CIC.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Relying mainly on online channels and successful internationalization strategy, CAROTE’s performance growth showed strong momentum in recent years. However, after the short-term demand outbreak, future performance growth could slow down.
• CAROTE adopts a product strategy similar to ZARA, launching a massive product matrix, constantly attracting consumers’ interest, but the innovation capability and core competitiveness of products are not high.
• Valuation of CAROTE could be higher than Vesync (2148 HK).If Trump is elected, the friction/trade war between China and US may escalate, which is detrimental to CAROTE’s future valuation performance.

• Delivery workers would like to pay to save their time.
• Retailers would also like to pay for return delivery to raise their service quality.
• However, product buyers have to pay, but would not like to pay the delay fee.

• In its latest monthly update, China Traditional Chinese Medicine (570 HK) fleshes out the latest on the various PRC regulatory applications. 
• Comparing the two most recent monthly updates side-by-side, apart from modifying the documentation for the MOC and NDRC process; the SAMR filing has been formally accepted, as previously flagged. 
• The upshot? These regulatory approvals will be secured. The key question is whether this can take place before the 18th October pre-condition long stop date. Or an extension is required.

• The sudden high growth in 2023 was benefited from the cooperation with related party Shandong LinkChem. Is the performance growth driven by LinkChem’s reliance on related party transactions sustainable?
• LinkChem relies heavily on limited number of customers to contribute performance but the customer stability is not strong.Due to “low voice” in front of customers, cash flow is under pressure.
• The barrier of terbium chloride product is not high and LinkChem will face fierce competition in the future, leading to decreasing YoY growth revenue. Valuation should be lower than peers.

• Midea Group Co Ltd A (000333 CH) priced its H Share at HK$54.80 to raise HK$31,014 million (US$4.0 billion) in gross proceeds. The H Share will be listed tomorrow.
• The H Share listing price implies an AH discount of 21.4% at the A Share price of RMB63.51. This compares to Haier Smart Home (6690 HK)‘s AH discount of 13.8%.
• Futu grey market data shows that the H Shares closed 5.1% higher at HK$57.60. Our valuation analysis suggests that the H Share listing price is attractive.

• Midea Group Co Ltd A (000333 CH) raised around US$4.6bn in its H-share listing (including over-allocation), after the deal was upsized.
• 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 the trading dynamics.

• Alibaba’s Taobao and Tmall apps decide to accept WeChat Pay, the online payment way from Tencent.
• JD announced that it will raise employee salaries up to 20 months within two years.
• Hive Box, the market dominator of parcel locker in China, submitted its IPO proposal.

• Hong Kong Conglomerate Sector is showing renewed strength with Materials and Energy under pressure.  HK market 30 day volatility at 5 year low as market continues to de-risk.
• Hengan International Group (1044 HK) chart broke down from its Descending Triangle pattern after reporting its 1H24 results. J&T Global Express (1519 HK) broke down from its double bottom pattern.
• China Galaxy Securities (H) (6881 HK) price relative to the MSCI China index broke to a new high.  The company reported good results in a difficult environment for China brokers.

• The sales volume growth rate began to accelerate in August.
• Geely’s revenue grew strongly by 39% YoY in 2Q24 and 47% YoY in 1H24.
• The operating margin had improved YoY for the past one year and a half.

• Orient Overseas International (316 HK) sits on decent yields of 12% for FY24 and 9.6% for FY25. Its net cash (66.2% of the share price) can support such dividends.
• Despite the retreat from the recent peak, the spot freight rates are 9.7% and 145% higher than 1H24 and 2H23 respectively, pointing to better 2H24 earnings.
• Operationally, it recorded the first YoY realised rate increase in 2Q24 after 6 quarters of consecutive decline. Its load factor also grew 2.3pp YoY in the quarter.

• On the surface, it seems that Hengrui’s performance growth in 24H1 is very high, but if excluding the upfront payment from Merck, the Company’s performance actually falls short of expectations.
• Our forecast of revenue growth in 2024, 2025, 2026 (excluding Merck’s upfront payment) is 12% YoY, 8% YoY, 15% YoY, respectively. By 2026, Hengrui may still suffer from VBP.
• Hengrui is overvalued and reasonable P/E is about 30 (or lower). We also don’t think Hengrui’s valuation should be higher than that of BeiGene. Current high valuation cannot be justified.

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.

• Meituan
• Samvardhana Motherson International Ltd