China

• A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
• Preceding my comments on Japan Post 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%.

• Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$400 million HKEx IPO, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: The Investment Case, Growatt Technology IPO: Growing Watts, Growatt Technology IPO: The Bear Case, Growatt Technology IPO: The Bull Case. 
• In this note, we outline our updated forecasts and present our updated look at Growatt’s potential valuation range.

The Asia HY Trade Book for May 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
• Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.
• HSBC Holdings (5 HK) and  Citic Ltd (267 HK)  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

• In 1Q23, total revenues grew by 27% YoY with all business lines up by more than 10% YoY.
• The real operating profits turned positive after nine quarters’ losses.
• We believe the stock has an upside of 35% for yearend 2023. Buy.

• XPeng reported soft 1Q23 results, with topline of RMB 4.03bn, missing cons by (4.4%); GPM of 1.7% missing cons. and our est. by (4.5ppt)/(4.8ppt. 
• The 2Q23 guidance implies a QoQ recovery of 15.2%-20.7%, thanks to increasing order intake of the all-new P7i and recent channel transformation. 
• We maintain BUY. We cut TP to US$ 10 due to pressure amid intensified competition.

• VIPS reported C1Q23 top-line, GAAP operating profit, and non-GAAP net income 6.6%, 27%, and 31% vs. our est., and 5.6%, 20%, and 36% vs. cons.; 
• We expect VIPS profitability to remain steady given its relative immunity to competitor price competition, mainly due to its high apparel exposure, high member loyalty, and differentiated product sourcing strategy; 
• Given improving apparel demand and EPADS on share buy-backs, we maintain BUY and US$ 16.3 TP, implying 8.1x 2023 non-GAAP P/E.  

• Xiaomi reported C1Q23 top-line and non-IFRS net income (6.9%) and 20.7% vs. our est., and in-line and 39.9% vs. consensus; 
• We suggest that higher margins are transitory, as (1) key IC component prices may have bottomed, (2) EV spend is likely to ramp up further. 
• We maintain SELL and HK$ 8.2 TP, implying 26x FY23 PE.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Water Affairs’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• BZ reported 1Q23 cash billing 2.9% higher than our est.; revenue in-line with our estimate and consensus;  and non-GAAP NI 36.3%/35.3% higher than our est. and cons.
• As BZ approaching the proxy of China’s labour market, its primary hurdle is the slow recovery of labour demand and mismatch of supply and demand.
• We maintain SELL rating and TP at US$13.5., as we are still waiting for signal for the overturn of job seeking market in China.

• JD Industrials (JDI)  is looking to raise about US$1bn in its upcoming HK IPO. 
• JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
• In this note, we will undertake a peer comparison versus domestic and international peers.

• Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value). 
• The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value. 
• With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

• On May 22nd, Meituan launched its food delivery platform called KeeTa in Hong Kong SAR.
• KeeTa’s expansion stratgies include Collaboration with branded chain merchants,lower ASP, subsidy campaign, and launching “On-time Guarantee”.
• Sofar the initial results after launch seems to be in-line with expecation, while  there will still be a lot of challenges, like small market size and stabilized competition landscape.  

• Alibaba Health Information Technology (241 HK) ’s 2HFY03/2023 revenues beat consensus by 1.4% while adjusted operating losses of RMB1.74m (0.01% of revenue) is significantly lower compared to 2HFY03/2022 and consensus.
• Improvement in profitability was driven by improved GPM coupled with decrease in SG&A costs which helped offset increase in fulfilment costs as a result of the Covid-19 outbreak.
• Our quantamental analysis suggests that Ali Health’s margins have very little room for improvement unless the company cuts down SG&A significantly while improving revenue % from non-direct pharmaceutical businesses.

• Industry and company reports show ASP declines gained momentum in April
• April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
• Our thesis: pricing is getting weaker, and this trend will soon impact margins

• The odds are high for PDD to miss consensus for 1Q results this Friday due to high base and deflating domestic growth drivers, despite TEMU’s momentum.
• Among major China tech companies, PDD is likely to be the only one to register stagnant or even negative earnings growth for FY23, which has not been in the price.
• A down cycle for PDD’s earnings growth leads us to assign 12x P/E to an estimated non-GAAP net profit of RMB39 billion for FY23, implying 15% downside. 

• Despite solid outperformance, share price of Xinhua Winshare (811 HK) is more than 100% covered by net cash of Rmb7.6bn. DPS has also risen uninterruptedly in the last 3 years. 
• 1Q23 result demonstrated operating resilience as recurring profit soared 48.5%. Its franchise in textbook publication and distribution stayed well protected, securing profitability outlook.
• We like XW’s boring businesses in the current depressed market. It trades on 4.5x PER with secured 6.6% dividend yield. The HA discount has widened to 10pp deeper than average. 

• JD Industrials is looking to raise about US$1bn in its upcoming HK IPO. 
• JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
• We undertook a peer comparison in our previous note, in this note we talk about some additional useful information that we found interesting from peer filings.

• MicroPort Cardiac Rhythm Management (1813053D CH) is looking to raise about US$200m in its upcoming HK IPO. The deal will be run by Goldman Sachs and CICC.
• Microport Cardiac Rhythm Management (MCRM) is a R&D-driven, commercial-stage medical technology company specializing in active implantable medical devices for cardiac rhythm management (CRM). 
• Its operations are dedicated to the design, development and commercialization of products and solutions to treat and manage arrhythmias and heart failure. 

• Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO.
• HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
• In this note, we will talk about the trading dynamics and valuation.

• Alibaba Group Holding Ltd. outlined timetables for several key business units to complete spinoffs or pursue independent share sales, kicking off major moves in a sweeping reorganization to break up the gigantic conglomerate and unleash new growth momentum.
• Alibaba’s board of directors approved a full spinoff of its cloud services division while exploring initial public offerings for the logistics and grocery arms, the company said Thursday.
• The e-commerce giant plans to carve out the Cloud Intelligence Group within 12 months through a stock dividend distribution to shareholders, meaning it could relinquish control of China’s biggest cloud services platform.

• Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$400 million HKEx IPO, according to press reports.  
• We previously discussed the IPO in Growatt Technology IPO: Growing Watts, Growatt Technology IPO: The Bull Case and Growatt Technology IPO: The Bear Case. 
• The updated PHIP which disclosed the 2022 results and latest developments suggests that Growatt continues to deliver profitable and cash-generative growth. 

• China just announced game approval for May batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Both Tencent and Netease received approval for one game. We saw a pattern of approval rotation for the duo.

• Angelalign’s business model is easily challenged by lower priced similar competing products. Once Angelalign’s products lose price advantage, it would lead to a rapid decline in overall sales performance. 
• Performance growth could still be under pressure this year due to unsatisfactory demand.The potential price war, further price reduction and increasing selling/marketing expenses would put more pressure on profit margin.
• Angelalign hasn’t accumulated enough data size due to few overseas customers, which could lead to product quality issues and slow internationalization progress. There is downside risk due to overvaluation.

• Kuaishou reported 1Q23 top-line 4% vs. our est., and non-IFRS net profit of RMB 42mn vs. our est. of RMB (688mn); 
• We raise 2023 live-streaming/ads/ecommerce revenue growth from 12%/ 17%/26% YoY to 18%/20%/43% YoY, and non-IFRS net income from RMB 860mn to RMB 3.89bn due to a series of monetization methods; 
• We maintain SELL due to the competitive pressure of Douyin and WeChat Video Account, reflected by decelerated user growth and time spent.  

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

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

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

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

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

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

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

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

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

• Golden Eagle Retail
• Vedanta Resources

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), HKBN Ltd (1310 HK), United Malt Group Ltd (UMG AU), Hailan Holdings (2278 HK), Aag Energy Holdings (2686 HK).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Allkem Ltd (AKE AU), Penguin International (PBS SP).

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Tata Technologies (TATATECH IN), Horizon Construction Development (1887128D HK), Growatt Technology (1833969D CH) IPOs; Yuexiu Property (123 HK) rights trading.
• Event-Driven developments – Invocare Ltd (IVC AU), Newcrest Mining (NCM AU), United Malt Group Ltd (UMG AU), Golden Energy & Resources (GER SP), Penguin International (PBS SP).  

• The weak share price performance of Haier Smart Home Co Ltd (6690 HK) is unwarranted given the healthy earnings trend, solid net cash position and undemanding valuations.
• The 15.9% 1Q23 recurring earnings growth showed its low correlation with the property market while demonstrated the achievement in cost control and rising premium product contribution.
• It is set to benefit from government’s push for higher penetration of household appliances in rural areas. Meanwhile, recent Rmb depreciation may bring exchange gain for 1H23.

• TAVR was once envisioned with infinite optimism as a “hundred billion yuan market”, attracting massive amounts of capital/companies to enter. However, the commercialization status of TAVR companies is much bleak.
• High cost of TAVR surgery without medical insurance reimbursement and limited number of qualified hospitals to carry out such complicated surgery are the major reasons for the unsatisfactory sales growth. 
• Venus Medtech’s market share would continue to be challenged. MicroPort CardioFlow’s low gross margin and slow product iteration are the problems. Peijia could be “dark horse” if positive momentum continues. 

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• The Beijing Medical Insurance Bureau issued a notice soliciting opinions on the linkage program of DRG payment and VBP policy in the city, involving sports medicine, neuro-intervention, and electrophysiology.
• The basic logic of CXO is that there should be no significant fluctuations with the success or failure of a specific drug, unless this drug significantly increases total medical expenditure.
• Zylox-Tonbridge Medical Technology (2190 HK) achieved high performance growth in 2022, and is a beneficiary of centralized procurement policy at the current stage.However, it still has to face some challenges.

• BEKE (Beike) reported 1Q23 revenue 10.4%/12.2% vs our est./cons. non-GAAP net income 65.6%/60.9% higher than our est./cons.
• Although Beike has stated no intention to lower existing home (EH) commission rate, we still expect EH commission rate to slightly trend down in 2023. 
• We maintain BUY rating and raise the TP by US$1 to US$22 to reflect 1) steady recovery of property sales in China; 2) better outlook on profitability.

• BABA reported 1Q23 revenue/non-GAAP net income in-line/17.7% vs. cons. International commerce and local services revenues beat our est., while Cloud missed.
• We expect there is still room for margin improvement in FY24. Although Taobao/Tmall will increase spending, the cost savings of other business groups will lead to an overall improvement; 
• We maintain BUY and US$ 109 TP as (1) Douyin’s impact is becoming less significant; (2) International business is growing quickly; and (3) Positive on the effect of separate listing.  

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Melco Resorts & Entertainment
2. Hopson Development
3. China Jinmao Holdings
4. Lifestyle International Holdings
5. Geely Auto

and more…

• Atour reported its 1Q23 revenue 2.8%/4.3% higher than our est./cons., and non-GAAP NI 22.7%/38.8% higher than our est./cons. The bottom-line beat is driven by strong sales growth from Occ. 
• We expect 2Q23/2023 rev. to grow 75%/65% YoY, implying 115%/112% of RevPAR recovery rate vs. 2019 and 85/291 net new hotels. 
• We maintain the BUY rating, and raise TP by US$1 to US$35 to factor in the higher gross margin expectation at 40% in 2023.

• TME reported 1Q23 results with topline beat our est. by 5.0% and bottom line beat our est. by 25.2%, due to cost-saving measures. 
• As more offline entertainment activities resume after reopening, it would adversely impact both its online music and social entertainment segments. 
• Maintain SELL and cut TP to US$ 6.0 to reflect concert impact and limited catalysts, which implies 12.5X PE in 2023.

• Amid general disappointment over China’s post-COVID recovery, high beta names like Akeso have sold off in recent days; 
• Management called for an update which specified on (1) why Ivonescimab (AK112) was absent in ASCO 2023, (2) sales update of Cadonilimab (AK104), (3) NDA and data readout timelines. 
• We came away positive;  We view management’s confirmation on progress a positive development that enhances certainty. We raise TP by HK$1 to HK$60.

• On 28th Mar 2023, Alibaba Group (9988 HK)  announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous note, we highlighted which division could list. In this note, we will look at the Cloud segement.

• Alibaba’s revenue from physical stores decreased year over year for the first time.
• The operating margin declined despite that Alibaba cut losses in minor businesses.
• We conclude an upside of 15% and a price target at HK$101. Downgrade to Hold.

• Sing Tao News Corp (1105 HK), which owns Hong Kong’s oldest and third-largest Chinese language newspaper, is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
• A takeover of Sing Tao was mooted in 2019-2021 when Charles Ho, the former chairman, sought to exit his 48.98% stake; but that transaction fizzled out.
• At a market cap of just US$50mn, this (likely) Offer hardly rates a mention. Yet a takeover of a Hong Kong newspaper is still newsworthy.

• Alibaba (ADR) (BABA US)‘s 4QFY23 OP beat consensus by around RMB 2.5bn (20% beat) through cost cutting, but YoY revenue growth remained sluggish at 2.0%.
• Consensus expectations of Alibaba achieving an OP of RMB 150bn by FY25 may be overly optimistic due to declining dominance of Taobao and Tmall, and lack of profitable alternative businesses.
• Alibaba Group (9988 HK) would need to excel to reach RMB100bn OP, resulting in a high FY+2 EV/OP of 14.0x. This seems steep for a company with minimal earnings growth.

• Tencent’s latest financial results are in line with expectations, with revenue and non-IFRS profit of 2.5%/(2.1%) vs cons. While we anticipate weak growth in the gaming sector,
• We suggest that advertising presents several catalysts for Tencent, including the recovery of Ecommerce and gaming, WeChat Video Account’s growth, and inter-connections with Baba and Mihoyo. 
• We maintain a BUY rating with an unchanged target price of HK$433, implying 34X PE in 2023.

• Tencent (700 HK) reported 1Q2023 results. Revenue grew 10.7% YoY and beat consensus estimate by 2.3% while reported operating profit was 2.25 below consensus estimates.
• Key highlight was the YoY growth in domestic game revenue (+6%) which was mainly driven by strong performance of newly launched titles.
• There has been strong recovery across all business segments during the quarter and current valuations are still at a discount to historical trading multiples and offer a good entry point.

• ZTO reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income (3.1%), 30%, and 30% vs. our est. ZTO raised volume est. to 20-24% YoY; 
• Margin beat as parcel cost was (8%) vs. our est., but we suggest also due to (1) parcel mix improvements, (2) output-based pay, and (3) lower % of KA customers; 
• Maintain BUY and raise TP to US$ 38 due improving gross profit per parcel and an end in-sight for CAPEX spending. Our TP implies 24x P/2023E.

• IQIYI’s 1Q23 top line beat our est. by 8.5%, while its non-GAAP net income beat our est./cons by 95%/82%, largely due to its blockbuster <Knockout>. 
• However, we expect its content pipeline is weaker compared with other key competitors in Q2. 
• Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due to the fierce competition. Maintain SELL and cut TP to US$ 5.0, implying 16.7X PE in 2023.

• Cainiao Smart Logistics (1437124D HK) ‘s March 2023 quarterly and full-year results can be found within Alibaba’s full-year earnings report, which was released on Thursday May 18
• In both the March quarter and its fiscal year, CaiNiao showed improved Adjusted EBITDA results, though in both periods the tech-centric logistics network still reported losses
• Revenue growth slowed to 18% Y/Y in the March quarter, and parent Alibaba (ADR) (BABA US) indicated CaiNiao will target an IPO in 2024, a bit later than some expected

• Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
• Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
• In this note, we will talk about the not so positive aspects of the deal.

• On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.

• Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH))) are at multi-year lows.
• Preceding my comments on China Everbright are the weekly setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• In 1Q23, the revenue growth rose significantly to 11% YoY.
• The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
• We set an upside of 28% and a price target of HK$440 for yearend 2023.

• Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%. 
• We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC. 
• Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.

• Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
• Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
• In this note, we will talk about the positive aspects of the deal.

• China Travel International Investment Hong Kong (308 HK) should have more upside from here given the sharp earnings recovery over FY23-25. But the market seems to have overlooked this.
• Its FY18 net profit reached HK$687m; but dipped to HK$356m loss in FY22. With its businesses now behind issues like HK social unrest and border closure, there is immense upside. 
• All of CTII’s business segments have experienced recovery in FY23, especially following the resumption of HK-mainland China traffic. Its 0.54x P/B is still 52% down from the peak. 

• Tencent Music reported 1Q2023 results. Revenue increased 5.4% YoY to RMB7.0bn (vs consensus RMB6.9bn) while adj. OP more than doubled to RMB1.09bn (vs consensus RMB1.13bn) vs RMB518m in 1Q2022.
• Online music services revenue grew 33.8% driven by strong growth in both paying users and monthly ARPU. Social Entertainment further declined during the quarter.
• 1Q2023 earnings were primarily driven by Online music services and we do not expect a recovery in social entertainment segment’s earnings in the short-term.

• HUTCHMED has been a company that is easily overlooked by investors. However, its BD capabilities have been verified after the deal with Takeda, and its commercialization performance is also commendable.
• Based on our forecast, total oncology/immunology consolidated revenue in 2023 could reach about US$220 million. If product sales growth remains benign, together with good cost control on R&D/SG&A, eventual breakeven is reachable.
• However, based on the current development trend, HUTCHMED could have to remain at the stage of a biotech, and is difficult to become a biopharma. Investors should be aware of this.

• MNSO reported its C1Q23 revenue (3.7%)/1.1% vs. our estimate/consensus, while non-GAAP net income beat our estimate/consensus by 17.7%/26.1% respectively, driven by gross margin ramp-up strategy and G&A reduction; 
• We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales. 
• We maintain Buy rating and raise TP by US$0.5 to US$25.5 to factor in the better gross margin and store expansion outlook.

• ZTO Express (ZTO US) parcel volume increased by 20.5% Y/Y in Q1, better than market growth
• Unit prices fell by 3.7%, slightly worse than peers in Q1 2023, and Revenue missed consensus
• EPS beat expectations on lower unit costs, and management raised full-year volume target

• We believe BABA’s upcoming 4QFY23 results will surprise the market to the upside by a wide margin in terms of recovery in bottomline, catalyzing trading opportunity for short-term investors.
• We also expect that the results will usher in a period of sustained re-rating for the stock due to China’s continued yet slow consumption recovery and Alibaba’s well-executed restructuring plan.
• Geo-Political risks will not go away, but have been very much reflected in current pricing in our view. Buy ahead of results on Thursday.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• Our multi-quarter outlook for Tencent Holdings Ltd (700 HK) remains extremely bullish with a multi-quarter target towards 451.95. In April we identified the 302/330 range as a potential buy zone.
• The recent low of 323.20 has preceded an impulsive bullish daily confirmation. This week we await a bullish weekly close (above 343.99) to confirm a renewed MT uptrend bias.

• JD Industrials is a pure trading platform for third party wholesalers.
• The company avoids the competition with its clients and the risk of overdue account receivable.
• JD Industrials has brand support from JD.com and logistics support form JD Logistics.

• ImmuneOnco, a China-based clinical-stage biotechnology company, plans to raise up to US$ 100m via a Hong Kong listing.
• In this note, we examine the company’s core product, namelyIMM01, a CD47 target fusion protein. We also look at the company’s management and pre-IPO investors.
• We think its clinical data is not yet convincing and we are not so keen on the company.

• Hua Hong reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income in-line, (15.3%), and 13.3% vs. our est., and in-line, (3.4%), and 34.9% vs. cons., respectively. 
• Hua Hong reported 1Q23 utilization rate of 103%, higher than peers, which we believe is due to (1) large EV and new energy exposure, and (2) 8” price cuts. 
• Despite near-term margin deterioration, we maintain Hua Hong’s BUY and HK$ 35 TP due to auto IC exposure and localization, implying 11x FY24 PE.

• On May 15th, Tencent holds its annual game conference “Spark 2023” and releases its latest game pipeline, including updates of 15 launched games and 20 new games.
• Considering Tencent’s large size, only a game that has the potential to exceed RMB 10 bn in annual gross billing could be considered as a positive sign.
• Yet, we don’t find any game title that could reach over RMB 10bn annualized gross billing in the game pipeline.

• Different from other TCM companies, Pientzehuang is based on the investment logic of consumer goods, which breaks away from the price constraints of drug market. Meanwhile,  Pientzehuang has formed a “monopoly”.
• As a well-known trademark/time-honored brand in China, and representing the quintessence of Chinese culture, Pientzehuang would be supported by national policies,and is consistent with China’s efforts to expand domestic demand/consumption.
• Although Pientzehuang’s performance was disappointing last year, its strategic height and significance are obviously different from other TCM. We think that this is crucial to the investment value of Pientzehuang.