China: Li Auto, Evergrande, Horizon Robotics, New Horizon Health, Hong Kong Hang Seng Index, Asia High Yield Bond Index, MTR Corp, JD.com Inc (ADR), Indika Energy, SJM Holdings and more

• The March rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Alibaba Group (9988 HK), JD.com Inc. (9618 HK), Meituan (3690 HK), Nongfu Spring (9633 HK), Li Auto (2015 HK) and Lenovo (992 HK). 
• The largest outflows will be on HSBC Holdings (5 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and Tongcheng-Elong Holdings Ltd (780 HK).

• Debt-ridden China Evergrande Group has announced it will sell stakes in four unfinished real estate projects to two state-owned trust firms
• The move shows the lengths Evergrande is willing to go to comply with government directives for developers to complete projects they have already started
• Two Evergrande subsidiaries are selling their 10% and 9.87% stakes in two projects in the cities of Chongqing and Dongguan

• Horizon Robotics is an artificial intelligence chips developer for automobiles, specifically smart vehicles, and robots. 
• Its latest Series C funding round in late 2020-early 2021, raised a combined total of US$900m, led by Great Wall Motors, Hillhouse, Baillie Gifford, CATL, CPE, Yunfeng Capital and others.
• There were news reports doing the rounds that the firm had aimed to look at a potential US listing, in a deal that could raise up to US$1bn.

• New Horizon Health (6606 HK) has made some improvements based on 2021 preliminary financial data. The newly launched UU Tube also enriches the product line. 
• However, the industry is still at the early stage. In front of fierce competition, ColoClear’s bottleneck is obvious. The cheaper products (Pupu Tube, UU Tube) could have more market acceptance. 
• Based on our analysis, our view is that the Company may rebound temporarily, but it is too early for a complete reversal.

• HSI has been a top short in Asia and nearing our 22,200 tactical target to reduce short exposure. A50 represents the perform long to build as the bull wedge matures.
• HSI RSI nearing oversold level where a rally is expected. Intermediate cycle remains down to sell a rally attempt in March.
• A50 15k and 15,350 barriers to clear. Failing would require re setting near lower wedge support.

• Zero COVID policy calls for another lockdown in Hong Kong as the number of cases rises.
• A reduction in the number of services will help to cushion the blow but may not help the overall grim prospect of the firm. 
• Lower traffic is negative for MTR Corp (66 HK)transport revenue as well as the commercial business from the station which combined make up to 50% of total revenue.

• We believe revenue will grow by 23% YoY in 4Q21 and by 18% in 2022.
• We believe JD is the most promising direct-sales e-commerce company in China.
• However, short video apps have been taking advertising market share from e-commerce apps.

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.

• Indika Energy
• Jingrui Holdings
• Tata Motors ADR

SJM Holdings’ FY 2021 results remained weak, in a continuation from the soft H1 numbers. The company continued to report sizeable negative EBITDA in contrast to peers (which are all likely to report small positive EBITDA for the year). Moreover, operating cash burn has persisted in the two months YTD.

Liquidity is weak, given SJM’s low cash balance and lack of RCF availability. Moreover, the company would need to refinance its loans due February 2023. SJM’s delay in obtaining new long-term facilities is disappointing in our view, and reflects negatively on management’s execution. Still, we believe the company would not face issues seeking extensions or an eventual refinancing of its loan facilities, especially since the loans are secured against SJM’s assets.