China

• Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
• The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
• Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.

• With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
• Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
• Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

• Nongfu Spring (9633 HK) announced a set of strong 2023 results last week, with 2H23 net profit up 62% yoy and sales up 33% yoy. 
• The best performing category in 2023 has been tea beverage products (30% of sales), which grew 83% yoy for the year and 105% yoy in 2H23, picking up speed.
• Nongfu Spring is trading at 33x 2024 earnings, which I believe is attractive. 

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in June 2024.
• The index changes for the June 2024 index rebal will be announced on 17th May 2024.
• The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.

• Oriental Watch (398 HK)  has begun Q4 2024 slowly, with its SSSG dropping by double-digit levels in all its major markets (HK/China and Macau).
• As the year almost draws to a close, we expect profits to drop 10-15% YoY for FY24 and the company to pay out 100%, resulting in a 14% dividend yield.
• The company also has 1.2 bn HKD of net cash, representing 70% of its market capitalization. Additionally, it has 700 mn HKD of investment property. 

• Hansoh Pharmaceutical Group (3692 HK) reported a whopping 55% YoY net profit growth to RMB3 billion on just 13% YoY revenue growth to RMB6 billion in 2H23.
• Revenue from innovative drugs zoomed 52% YoY to RMB4 billion and its proportion to total revenue increased to 73% in 2H23 from 54% in 2H22 and 62% in 1H23.
• Although Hansoh is not expected to receive marketing approval for any in-house innovative product in 2024, existing portfolio of innovative drugs will continue to drive the growth of the company.

Anton Oilfield’s FY 2023 results were strong, with revenue growth accelerating to levels not registered since H1/19. The strong FCF boosted the cash balance. The company’s financial risk profile improved significantly, with Net Debt/EBITDA below 1x and healthy interest coverage ratios. Liquidity is adequate.

We expect the business’ positive momentum to continue in FY 2024. H1 is projected to be significantly better y-o-y, while H2 is anticipated to improve only marginally due to the high base effect.

• Besides the core product Utidelone Injection, the rest pipelines are mostly related to the indications expansion/new formulations R&D for Utidelone Injection. Excessive dependence on single product is hard to improve. 
• We’re not optimistic about the future sales growth of Utidelone Injection due to fierce competition/inconvenient administration methods/expired patent protection. Biostar is facing survival risks if new financing cannot be obtained.
• Biostar’s post-investment valuation is already RMB4.49 billion. Given the gloomy sentiment and the concerns about the pipeline/prospects, we think it could fall below this valuation level after IPO in HKEX.

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.

• Gajah Tunggal
• Rakuten
• Road King Infrastructure
• SK Hynix

• Soon-To-Be ex-healthcare technology platform play IntelliCentrics Global Holding (6819 HK) is a pseudo risk arb. 
• IntelliCentrics is selling its key ops, declaring a special dividend from the sale proceeds, subsequently being wound up, then delisted. 
• Shareholders have the option of voting on a raft of resolutions on the 18th April. Irrevocables total 72.1%. This is done. Just the final dividend amount needs to be confirmed.

• Zadaxin is the biggest performance driver of SciClone. However, due to the challenge of generic drugs/VBP, sales of Zadaxin wouldn’t maintain strong growth momentum.  SciClone’s revenue/profit would face a significant decline.
• The capital participating the IPO had reduced their holdings or exit entirely. Considering the low valuation/poor liquidity in HKEX, we think this privatization provides investors with a great exit opportunity.
• For arbitrage investors, the annualized return depends on the time it takes to complete the privatization (e.g. about 5%-10%). If the privatization fails, share price could fall back to HK$14.

• China Communications Construction (1800 HK) believes its FY24 new contracts and revenue growth can be faster than FY23, particularly fuelled by strategic new industries and overseas. 
• Its end-FY23 contract backlog of Rmb3.45trn (+1.8% YoY) translates into coverage of 4.1x of FY24F revenue, providing a secured stream of revenue over the next few years.
• Its improving cash flow allows for a 1pp increase in the payout ratio. Efforts in realising underlying asset value should narrow its 82% discount to book value.

• Midea Group Co Ltd A (000333 CH) posted strong 4Q23 results, with net profit up 18% yoy and sales up 10% yoy. 
• In terms of 2024 outlook, management targets a 5-10% yoy growth in both the top and bottom line. 
• The stock is has rerated up to 12x 2024E earnings, compared to an average of 13x over the last 10 years. 

• Spirits were high as we attended the TCL Electronics (1070.HK ) (“TCL”) investor conference last Thursday (28 March) at the Shangri-La in Hong Kong, following its after-market earnings release.
• The results topped our own expectations in some areas, which we outlined in our recent write-up on the Company .
• We decided to summarize the results, as well as management insights shared at the conference for added context.

• We like Dream International (1126 HK), the plush toy maker listed in HK for its long-term association with Disney and revenue growth profile (12% CAGR over 15 years).
• The 15-year ROE has averaged 18%, and the company currently has 40% of the market capitalization (1.3 bn HKD) in net cash on the balance sheet. 
• Trading at 3.7x FY23 PE, with a 12% dividend yield (and the company’s high likelihood of maintaining a payout ratio), this is an idea worth exploring.

• The sBLA of Carvykti is under review by FDA with a target PDUFA date of April 5. If approved for 2L therapy, Carvykti would become “a game changer” in MM treatment.
• The peak sales of US$5 billion is becoming possible. From this perspective, as Carvykti advances towards earlier line treatment, the subsequent valuation leap of legend Bio is becoming more certain.
• However, considering lower gross margin and Legend Bio/J&J’s 50/50 split ratio, Legend Bio’s market value performance could be inferior to BeiGene. Investors should also closely monitor the changes in macro.

China Vanke’s FY 2023 numbers were somewhat soft in our view. While its top line and profitability declined in tandem with industry trends, the company’s property development gross margin remained robust (relative to peers) at c. 15%. Negatively, OCF (after interest and tax) was weak and net debt continued to rise. Leverage and coverage metrics deteriorated, but remained at reasonable levels (vs. peers).

Vanke’s liquidity at the holdco level is likely tight. In particular, the migration of bank borrowings to the project level has pressured the company’s holdco-level financing. The development may also indicate lenders’ reduced risk appetite towards Vanke. In addition, we view negatively that management did not disclose the amount of cash held under escrow restrictions. Moreover, it is unclear whether the Shenzhen government would provide extraordinary support (above and beyond market-oriented measures) to the company.

• Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities International.
• Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
• HR was the first and the largest Chinese company providing integrated ADAS and AD solutions in terms of annual installation volume since 2021, according to CIC.

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.

• China Hongqiao
• Nickel Industries

• There is a rumor in social media that Tencent will dismiss 10% – 30% of its employees.
• Alibaba withdrew the IPO application of its subsidiary Cainiao and all the other IPOs were halted as well.
• Xiaomi began to sell its first vehicle model SU7, but it is too late for the company to enter the market.

• The IntelliCentrics Global Holding (6819 HK) IFA considers the terms for the disposal of assets to symplr software as fair and reasonable. The EGM vote is on 18 April.
• The consideration will be distributed to shareholders as a special dividend with a minimum and maximum of US$0.52 (HK$4.07) and US$0.55 (HK$4.30), respectively. 
• Irrevocables ensure that the EGM vote will pass. At the last close and for a 7 May payment, the gross and annualised spread of the minimum dividend is 2.8%/33.6%.

• Shenzhen International (152 HK) saw its FY23 earnings reaccelerated, supported by gains from the logistics park transformation business. Earnings even surged 169.1% YoY in 2H23. 
• REIT issuance on two logistics assets, increase in areas of logistics projects, gains from South China Logistics Park transformation, and better Shenzhen Expressway (548 HK) will fuel FY24.
• A better debt structure will save finance costs. Its 0.45x P/B, or 1.5SD below the 5-year average, is cheap given its proven ability to realise underlying asset value.

• CSPC Pharmaceutical Group (1093 HK) reported steady growth in finished drugs in 2023. New products including Mingfule, Yilouda, and Anfulike achieved rapid sales ramp-up due to inclusion in the NRDL.
• The company expects to launch 50 innovative drugs in the next five years, which will provide continuous momentum. The company further aims for 17 common generic launches during 2024–2025.
• CSPC Pharmaceutical shares are trading at a P/E of 11.3x, lowest level seen in last five years, and cheaper than peers. Dividend yield remains attractive at 4%+.

• Tencent Music Entertainment Group (TME) posted robust results in its fourth quarter and full year 2023 earnings call.
• Increasing subscribers and expedited revenue growth were notable positives, taking the total number of subscribers to the 100 million milestone due to the company’s focus on content leadership, platform value, and offering a high-quality user experience.
• Yet, the company also faced some headwinds, particularly in the social entertainment business.

• This is our first report on Polestar.
• The company saw their highest-ever delivery volume for the Q3 2023 period.
• The said period witnessed record deliveries of 13,976 vehicles, representing a growth of 51% compared to the same period in the previous year.

• Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
• Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
• DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.

• WuXi Bio’s profit was disappointing.The 41 new orders added last December were small orders, which cannot contribute decent revenue/profits.The goal of gross margin to reach 45% by 2026 seems challenging.
• The management has become more cautious in its guidance for 2024. 2024H1’s performance could be disappointing. The key is to see whether the performance in 2024 full-year would meet expectations.
• Due to BIOSECURE Act, foreign CXOs are planning to seize WuXi Bio’s market share. We are not sure whether Europe (the US’s ally), will follow suit and enact similar legislation.

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.

• Kawasan Industri Jababeka
• Rakuten
• Tata Motors ADR

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
• Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market.  7 recommendations this week.

• 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: Sciclone Pharmaceuticals (6600 HK), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Southern Cross Media (SXL AU), China Traditional Chinese Medicine (570 HK), QV Equities.
• Lowest spreads: Tietto Minerals Ltd (TIE AU), Roland DG Corp (6789 JP), Chilled & Frozen Logistics Holdings (9099 JP), Pact Group Holdings (PGH AU), Mma Offshore (MRM AU). 

• Chinese outbound travel demand continued to recover nicely in February
• Major airlines’ decision to slow capacity rebuild now looks very prudent
• But the airlines have underperformed, surprisingly; Buy Trip.com below US$43

• After Sciclone Pharmaceuticals (6600 HK) was suspended on the 19th March pursuant to the Takeovers Code, I speculated a Scheme at the March 2021 IPO Price. And that’s what unfolded.
• Li Zhenfu (SciClone’s NED), Assicurazioni Generali (G IM) and concert parties (collectively controlling 36.61%) have made an Offer at $18.80/share, a 33.9% premium to last close. Terms are final.
• The long stop date is the 31 October. That’s too conservative. This could be wrapped up late July. 

• Licensing-Out deals of Chinese pharmaceutical assets are indeed significant milestones, but we should not exaggerate its significance. The product strength itself/subsequent progress are the true sources of clinical benefits/commercial value.
• In the field of weight loss drugs, first-mover advantage may not be that obvious. The possibility of latecomers to disrupt first-mover would not be that low or time-consuming.
• For Aier, 23Q4 results could show an obvious rebound, leading to relatively high growth in 2023 full year. However, Aier’s problems are still there, which means Aier is not undervalued.

• China announced game approval for the Feb batch. The number of games approved remained at a higher level than 2023.
• The pace of China game approval appears to have accelerated to the same level as pre-tightening.
• However, neither Tencent and Netease got any approval in March.

• Theoretically, there’s no need to doubt WuXi XDC’s growth momentum. What needs to be proven is how large the actual ADC market is, which determines how much valuation it deserves.
• However, the biggest problem currently is geopolitical risks, which make performance forecasts groundless. In the context of Sino-US confrontation, there is “a hesitation” towards sustained high growth of WuXi XDC.
• If several pieces of news are put together, this is not just about China CXO/TikTok being sanctioned by US. New balance point in the game between great powers will emerge.

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.

• China Vanke
• First Pacific Co
• Xiaomi Corp

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.

• China Vanke
• First Pacific Co
• Xiaomi Corp

• This report identifies stocks at the extremes of their positioning or momentum ranges within our Asia Ex-Japan fund universe.
• We have pinpointed eight stocks either at their historical positioning extremes or undergoing significant changes in fund ownership, providing detailed ownership profiles for each.
• Pinduoduo Inc and UltraTech Cement make gains, Sunny Optical sees ownership drift south, New Oriental Education moves off the lows.

• A shares were down on the week, but rallied Thursday and Friday.
• Net SOUTHBOUND buying was +HK8.5bn after $57bn the two weeks before. SOUTHBOUND ended its consecutive net daily buy streak Monday, then started buying again.
• The flavour of SOUTHBOUND buying has been high-div SOEs for months and months. That is starting to change slightly. Tencent was the top net buy this week. Again.

• Lawson Inc (2651 JP)‘s Tender Offer is still too cheap. It is also a somewhat non-transparent and unfair process. And it does not adhere to the METI Fair M&A Guidelines.
• Samsonite (1910 HK)‘s pursuit of a dual listing (primary or secondary?) appears to be put the buyout on the backburner. For now.
• Socionext (6526 JP) and ZOZO Inc (3092 JP) have a large part of the Max Real World Float to displace. Neither of those two names are outlandishly expensive.

• Atour reported C4Q23 revenue vs. our estimate/consensus by 18%/21% and guided a robust 30% yoy revenue growth for 2024, outpacing the consensus by 12% and our estimate by 7%
• C4Q23 operating margin decline was due to one-off leased hotel impairment and seasonality in retail marketing. We foresee stable margin in 2024;
• We maintain our BUY rating and keep our TP at US$37.5, implying a 2024 P/E of 34x, vs. currently trading at 16x.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 5.4bn of A-shares on decent volume after buying RMB 25bn net the two weeks before.
• The volume is still chasing momentum, and dip buying on the buys. Selling dips on losers. CATL the big buy, and less passive-feeling than last week.

• Pinduoduo Holdings, Inc. closed its fiscal year of 2023 in a positive trajectory.
• The company reported sustained growth in consumer engagement on its platform in its fourth quarter results.
• High-quality development remains a key strategy for the company.

• On the 6th Dec 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF). 
• A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag – this Offer looked done. Then ORG announced a possible competing proposal.
• Nearly four months have elapsed and details on ORG’s Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.

• Sciclone Pharmaceuticals (6600 HK) disclosed a scheme privatisation offer from GL Capital at HK$18.80 per share, a 33.9% premium to the undisturbed price (HK$14.04 on 15 March).
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The Bank of China, which holds a blocking stake, should be supportive.
• The offer price has been declared final. It is reasonable, aligning with the all-time high and the IPO price. This is a done deal.

• Citic Securities, China’s leading brokerage, has shifted over 100 investment bankers from initial public offering (IPO) roles to other divisions, in a major overhaul to address slowing business amid the stock market downturn.
• Most of the employees affected were transferred to debt financing business while the rest were relocated to mergers and acquisitions, and investment departments, a person close to the matter said.
• “The adjustment is an internal optimization of personnel, involving a broad range of investment banking positions,” said the person.

• Hywin [NASDAQ:  HYW] announced a broad business transformation plan in response to overall market and regulatory conditions in China.
• The stock price, under considerable pressure since November last year, has clearly anticipated some of this uncertainty.
• As part of its transformation, Hywin will shift is wealth management product distribution away from asset-backed products.

• The looming threat of a business ban on TikTok in the United States is driving millions of users and advertisers to seek alternatives to the popular short video platform, presenting a significant opportunity for rivals such as YouTube and Meta.

• Data released by Sensor Tower in March indicates that, over the past 90 days, nearly 94% of TikTok users in the U.S. have begun using Alphabet’s YouTube.

• Additionally, 80% of TikTok users have shifted their attention to Instagram, 68% to Facebook, and 55% to Snapchat.

China Jinmao has released FY 2023 numbers that were weak in our view, as the company reported a lower top line and reduced margins. However, the earnings decline was in line with expectations, as it reflected industry trends and the company had issued a profit warning in March 2024.

Negatively, leverage further deteriorated to a very weak level. In addition, we are concerned about whether Jinmao would be able to maintain access to domestic bond markets. This is as the company has seemingly stopped issuing domestic notes since July 2023. Instead, it issued perpetual bonds to immediate parent Sinochem HK in December. Going forward, Jinmao may have to increase its reliance on Sinochem for financing.

• Shenzhou Intl Group Holdings (2313 HK) reported 2023 results yesterday.  2H23 continued to be weak, with sales down 6% yoy.  Net profit grew 10% yoy in 2H23.
• Most importantly, the company sounded quite bullish on 2024 during the results briefing, which greatly improves the visibility in the order recovery thesis of the company.
• I continue to believe that Shenzhou is the best proxy for gaining exposure to the global sportswear sector, especially given the improved visibility now. 

• I mentioned Noah holdings as a trade to buy before earnings since I anticipated an announcement of significant capital returns.
• This has worked out well with over $2 in dividends announced. Half of that dividend will be recurring.
• So I sold out all of my shares at just under $12. This was never a high conviction investment, but merely a trade. Marking it as a 18% return.

• Full -year 2023 results  and 2024 forecasts indicate business going to plan
• The Baijiu division, key to a rerating, grew sales 50% y/y in the first two months of the year
• The beer division continues to reap the benefits of its premiumisation strategy

• Despite a 3.8% decline in FY23 net profit, China Everbright Environment (257 HK)‘s profitability has still outperformed its peers by significant magnitudes. 
• Positive notes in the result are an increase in operation service revenue proportion, expansion in EBITDA margin, improvement in financial position, and addition of new projects.
• It is easy for CEE to achieve the market expectation of a 9.8% growth in FY24. Yet, it just trade on 3.6x PER, 8.5% yield, and 0.34x P/B. 

Yuexiu Property’s (YXP) FY 2023 results were largely stable and in line with our expectations. The company reported strong contracted sales and top-line growth, albeit the margins weakened in tandem with industry trends. Leverage was mixed, as net debt crept up slightly. Importantly, liquidity appears sound, supported by YXP’s healthy access to financing. The company remains active in land acquisitions and has a good quality land bank, with 95% of its projects in Tier 1 and 2 cities.

• The industry in which LANTIAN operates has basically bid farewell to the era of high-speed growth. The baby diaper products market is nearing saturation, with limited future growth potential.
• The economy baby diaper products market is the last segment to bring alpha. However, it’s not easy for LANTIAN to break through considering strong international big names and local brands.
• Profit margin of LANTIAN is low. If this is the characteristic of this industry, then baby diaper products isn’t a profitable business.Investors could have other options to achieve higher returns.

• Beijing Wantai Biological Phar (603392 CH) announced that its net profit for 2023 declined 71–75% YoY to RMB1.20–1.35B mainly due to the market competition.
• China’s HPV vaccine market is highly competitive. Beijing Wantai has no presence in higher valent HPV vaccine segment, which dominates the domestic market.
• Although the company will be one of the early movers in domestically developed nonavalent HPV vaccines, at least three more players will follow soon, thereby making the space more competitive.

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.

• China Oil And Gas
• Meituan

• Sichuan Baicha Baidao Industrial (SBBI) is looking to raise up to US$300m in its upcoming HK IPO.
• SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
• We have looked at the company’s past performance in our earlier notes.  In this note, we provide our initial thoughts on valuations.

• Since my previous insight on March 5, the share price is up 32% in less than a month.
• The company reported 2023 results on March 26, as net profit was up 15% yoy while sales growth was flat for the year. 
• The company also announced a strong dividend payout ratio of 90% compared to below 30% previously, making the dividend yield of the stock at 6%. 

• Total revenue increase by 42% and automobile revenue increased by 49% in 2023.
• The gross margin improved significantly in 2023, especially in 4Q23.
• We believe BYD will move its focus from ‘low price for sales volume’ to ‘development of new vehicle models’.

• At noon time today, Anta Sports Products (2020 HK) released strong 2023 results which beat expectations. 
• Anta currently trades at a forward PE of 18x based on estimated 2024 earnings (assuming a conservative 15% yoy growth in 2024 earnings). 
• I expect the company’s net profit to grow 15-20% CAGR in 2024-2026.  Anta’s historical forward PE is around 24x since 2017. 

• CIMC Vehicle Group Co Ltd (1839 HK) has despatched the offer document, and the H Share HK$7.50 offer is open. The H Shareholders class vote is on 18 April.  
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection) along with a 90% minimum acceptance condition.  
• The de-rating of peers and ongoing US investigation favours meeting the 90% threshold. However, the dire minority AGM/EGM participation rates suggest that retail apathy may derail the offer. 

• Tencent reported C4Q23 revenue, IFRS operating profit, and non-IFRS net income in-line with our estimates and in-line with consensus, with non-game revenues exceeding while game revenue missing expectations;
• We believe the shift from game to non-game should enhance Tencent multiples but the market might have concerns on the sustainability of this change. 
• We believe this change is sustainable with game revenue reaccelerating and non-game revenue continues to gain weight. We cut TP by 3% to reflect slow game recovery in C1H24.

• Alibaba Pictures (1060 HK) is expanding rapidly into complimentary areas such as online ticketing of cinema and live events with the recent acquisition of  Damai.cn from parent Alibaba.
• Alibaba Group Holding (9988 HK) is considering injecting other media platform assets like Youku  to realize synergies among its portfolio of companies.
• Ali Pictures (Alipics) legacy film production business continues to expand globally with its American film production company, Amblin which is a partnership with Steven Spielberg.

• Cost and business optimisations lead to increased profits as revenues drop due to freight rate declines
• Successfully pivoting by geography as the global trading environment changes
• The company increases its dividend payout in a sign of confidence for the future

• Meituan reported C4Q23 revenue beat our estimate/consensus by 0.7%/1.4%; operating profit beat our estimate/consensus by 37.3%/48.6%, mainly due to order volume surprise, which is unsustainable in our view.
• However, we think Meituan’s near term pressures did not change: (1) core biz OPM drop due to rising low-price orders and subsidies; (2) resuming competition from Eleme/Douyin/PDD
• We maintain the stock as SELL rating but raise TP by HK$13 to HK$70 to factor in the loss cutting commitment in the community group buying biz.

Greentown China’s FY 2023 performance was satisfactory in our view, given the above-industry sales, stable top line and acceptable (albeit reduced) gross margin. Importantly, its access to onshore financing appears healthy and liquidity is adequate. In addition, the company remains active in land acquisitions and has a good quality land bank, mostly in high-tier cities in the Yangtze River Delta.

That said, leverage remained somewhat weak. Moreover, Greentown is more exposed to a prolonged industry downturn (vs. peers such as Longfor Group and China Vanke), due to its low recurring income and outsized exposure to the property development segment. This means that the company’s contracted sales and margins are likely to remain soft despite outperforming the industry. In the meantime, Greentown will likely focus on improving operating efficiency by maintaining a high sell-through rate and fast churn for its projects.

We revise our fundamental Credit Bias to “Negative” from “Stable”, and move our trade recommendation on the GRNCH 5.95 ’24s to “Buy” from “Hold” .

• Despite weaker 2H23 results, CIMC Enric Holdings (3899 HK) guided for solid recovery in FY24. Order backlogs reached Rmb22.9bn, which almost equals the full-year revenue.
• Clean energy segment will be supported by vessel demand, hydrogen orders, and Angang Steel project contribution. Chemical and environmental segment should rebound in 2H24.
• Liquid food spin-off is in process and it has won several domestic whiskey projects. As net cash equals 13% of share price, payout will be maintained at 50% (FY22: 40%). 

• Binjiang Service Group (3316 HK) posted a 42% YoY increase in revenue and 19% YoY in profits for FY23, aided by 170% revenue growth in VAS services (24% of revenues).
• Margin decline remains a concern, with a GPM(%) decline of 510 bps to 24.8%, with declines across all business segments. 
• Net cash increased to 74% of market capitalization, with the company declaring a dividend of 1.37 HKD/share ( implying an 8% trailing yield). 

• Xiaomi released healthy financial results inspite of the shrinking market.
• Alibaba Freshippo founder, Mr. Hou, retired from his role as the CEO of Freshippo.
• JD began to provide aftermarket service to BYD, the largest new energy vehicle producer.

• It’s time to revisit the network of Alibaba’s ( Alibaba Group Holding (9988 HK) ) affiliated listed companies for near term investment opportunities
• After investing in an ecosystem of online and offline companies over the last 10 years, Alibaba is rapidly restructuring its businesses to refocus on its most profitable opportunities
• Sun Art Retail (6808 HK) will benefit from the synergies of Baba’s restructuring

• Total revenue grew by 22.6% YoY in 4Q23, three percentage points higher than we expected.
• MT’s operating profit broke even for the fiscal year 2023.
• We conclude an upside of 113% and a price target of HK$188. Buy.

• Strong uptick in price momentum in February reflects booming spot market
• February container throughput growth in key regions also firm, up 7.4% Y/Y
• We suggest Short Evergreen vs Long Maersk (or ZIM) pair trade idea

Longfor Group’s FY 2023 results were acceptable in our view. The earnings decline was in line with expectations, driven by reduced revenue from the property development segment. The gross margin for property development was decent at 11%, relative to some distressed peers with negative to low single-digit gross margins. Recurring revenue from rentals and services rose by 6%, with recurring operating profit covering 1.4x of interest expense. Net debt declined marginally, supported by slightly positive FCF generation.

Liquidity was adequate, with Unrestricted Cash/ST Debt of 1.4x. We note positively that the company has been repaying some debt well in advance of maturity, possibly using cheaper and longer tenor loans backed against its commercial properties. We believe near-term default risk for Longfor is low, albeit its financial flexibility would gradually diminish as the company pledges more assets for funding.

• Kunlun Energy (135 HK)‘s 2.2% drop in core earnings in FY23 is distorted by the expiry of exploration rights of oilfield projects. All other segments have done well.  
• FY24 outlook is positive – reduction in E&P distortion, addition of more city gas projects, higher utilisation of LNG plants and terminals, and optimisation of gas pricing mechanism.
• Net cash of Rmb20.4bn equals 29% of market capitalisation, providing room for a higher dividend payout. A re-inclusion into the HSI is not totally out of the cards.

• Headline February numbers look pretty good — but they’re misleading
• On a combined basis, January-February data show ASPs still under pressure
• Recent results from ZTO and J&T Global have been unimpressive, in our view

• The real market space of China’s HPV vaccines is much smaller-than-expected. Investment logic of vaccine companies is different from biotech – They either become large vaccine enterprises or are eliminated.
• Low-Valent HPV vaccines would easily enter a price war or be included in National Immunization Program. 9-valent HPV vaccines would be the main battlefield, which is a highly competitive market.
• Health Guard is facing increasing survival risks. Based on the concerns about the commercialization outlook of HPV vaccines, we’re not sure if the Company would bring expected returns to investors.

Meituan has released FY 2023 numbers that were excellent in our view, with significantly improved profitability and solid cash generation. The financial risk profile has strengthened further, with a large and growing net cash position coupled with robust leverage and coverage ratios. Liquidity is sound. We expect FY 2024 to be a better year for the company.

We revise our Credit Bias on Meituan to “Positive” from “Stable”, given the material increase in profitability and strong cash-flow generation following the pandemic. That said, we do not expect ratings upgrades in the near future.

• GL-Carlink Technology (1818017D CH) is looking to raise >US$100m in its upcoming HK IPO. The deal will be run by CCBI.
• GL-Carlink (GLC) is a connected services provider for players within the automotive aftermarket industry in China, selling in-vehicle hardware products and the provision of SaaS marketing and management services.
• As per CIC, connected services refer to connecting vehicles with the Internet and providing comprehensive hardware products, software services, and value-added services for customers such as 4S stores.