Daily Brief China: Alibaba (ADR), Growatt Technology, Tencent, Angelalign Technology, Kuaishou Technology and more

In today’s briefing:

Alibaba Kicks Off Overhaul With Spinoff and Share Sale Targets
Growatt Technology IPO: The Investment Case
Tencent/Netease: Game Approval Rotation in May
Angelalign Technology (6699.HK) – 2023 May Not See a Turnaround in Performance
[Kuaishou (1024 HK) Target Price Change]: Solid Monetization Amid Decelerated User Growth

Alibaba Kicks Off Overhaul With Spinoff and Share Sale Targets

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.

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