In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 14 Feb 2025); HUGE Jump in Value Traded, Consumer Names Get a Bid
- CATL Launches Hong Kong Secondary Listing to Fund European Expansion
- A/H Premium Tracker (To 14 Feb 2025): AH Premia Fall but Foreigners Buying Non-H/A Pair HK Stocks
- CATL IPO (Hong Kong) Valuation Analysis
- China Healthcare Weekly (Feb.16)-Update on CR Sanjiu’s Acquisition of Tasly, the Impact of US Tariff
- CATL H Share Listing: The Investment Case
HK Connect SOUTHBOUND Flows (To 14 Feb 2025); HUGE Jump in Value Traded, Consumer Names Get a Bid
- There was a HUGE jump in value traded this week – HK$655bn vs ~$300bn for 5-days of trading the last several weeks.
- Alibaba Group Holding (9988 HK) was the big buy with net buying 7 of 8 days post-CNY and a huge end of week. Tencent was sold.
- There appears to be a flight to Chinese equities by foreigners and SB are taking part with risk-on style trading. Watch Hang Seng rebal news this week!
CATL Launches Hong Kong Secondary Listing to Fund European Expansion
- Chinese battery giant Contemporary Amperex Technology Co. Ltd. (CATL) has launched its secondary listing in Hong Kong, aiming to raise funds primarily for the construction of its Hungary factory, according to its prospectus disclosed by the Hong Kong Stock Exchange Tuesday.
- The move could become one of Hong Kong’s largest listings in recent years, with Bloomberg reporting a potential fundraising target exceeding $5 billion.
- Shenzhen-listed CATL’s stock closed Tuesday at 251.8 yuan ($34.47), down 2.57% from the previous day, with a total market capitalization of 1.1 trillion yuan. The company’s valuation peaked at 1.6 trillion yuan in December 2021.
A/H Premium Tracker (To 14 Feb 2025): AH Premia Fall but Foreigners Buying Non-H/A Pair HK Stocks
- AH Premia are lower again (new 5yr low) in the first full week after the CNY holiday. HK stocks up BIG vs A-shares. H/A discounts slightly narrower on average.
- That tells you that the big winners in HK the past two weeks are those stocks without A-shares. This past week Healthcare sector pairs saw the best relative H-share performance.
- Foreigners returning to HK markets but less to the H in H/A pairs. They are buying HK/China “foreign-investor beta” not China breadth. Feels spivvy, and short-term.
CATL IPO (Hong Kong) Valuation Analysis
- Our valuation analysis suggests that CATL is undervalued. Our base case valuation suggests implied market cap of 1.5 trillion CNY, which represents 33% higher than current levels.
- Our valuation sensitivity analysis suggests a market cap valuation range of 1.2 trillion CNY to 1.8 trillion CNY.
- We estimate CATL to generate revenue of 431.7 billion RMB (up 16.8% YoY) and net profit of 61.4 billion RMB (up 10.5% YoY) in 2025.
China Healthcare Weekly (Feb.16)-Update on CR Sanjiu’s Acquisition of Tasly, the Impact of US Tariff
- In our view, China’s biotech companies have sold their core pipelines/products too early, resulting in the loss of opportunities to gain much greater benefits in the future.
- We summarized the impact of tariff policy implemented by the US on China’s healthcare industry. Short-term headwinds are inevitable, but in long term, it helps force the industry to upgrade.
- After Spring Festival, the acquisition progress of Tasly by CR Sanjiu has significantly accelerated – SASAC/SAMR approvals have been received. It’s possible for the deal to be completed in 25Q1.
CATL H Share Listing: The Investment Case
- Contemporary Amperex Technology (CATL) (300750 CH), the world’s largest supplier of EV and ESS batteries, has filed for an H Share listing to raise US$5 billion.
- CATL’s global EV battery market share, measured in GWh, rose from 27.6% in 2019 to 36.8% in November 2024.
- The investment case rests on a leading market position, forecasted return to growth, peer-leading profitability, cash generation, peer-leading FCF margin and an attractive valuation.
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