ChinaDaily Briefs

Daily Brief China: Alibaba Group, Li Auto, XPeng, Lalatech Holdings Co Ltd, Kuaishou Technology, China Everbright Environment, Indika Energy, China Oil And Gas, China Jinmao Holdings, Remegen Co Ltd and more

In today’s briefing:

  • Alibaba’s Sum of the Parts Valuation:  Why the Initial Excitement May Be Overblown
  • Hong Kong CEO & Director Dealings (30 Mar): Tian An, CSPC Pharmaceutical, Li Auto
  • XPeng Inc (9868 HK) – Bullish Technical Triggers Confirm MT Uptrend – Target 25-30% Upswing
  • Huolala Parent Lalatech Files for Hong Kong IPO
  • [Kuaishou (1024 HK) Target Price Change]: Video Account Continues to Be the Threat
  • China Everbright Environment (257 HK): The Dust Should Have Settled
  • Morning Views Asia: Indika Energy, Meituan
  • China Oil & Gas – Earnings Flash – FY 2022 Results – Lucror Analytics
  • China Jinmao – Earnings Flash – FY 2022 Results – Lucror Analytics
  • [RemeGen (9995 HK) Target Price Change]: Provision for License Out Absence Is Adequate

Alibaba’s Sum of the Parts Valuation:  Why the Initial Excitement May Be Overblown

By Oshadhi Kumarasiri

  • Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
  • Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
  • Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

Hong Kong CEO & Director Dealings (30 Mar): Tian An, CSPC Pharmaceutical, Li Auto

By David Blennerhassett


XPeng Inc (9868 HK) – Bullish Technical Triggers Confirm MT Uptrend – Target 25-30% Upswing

By David Coloretti, CMT

  • 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.
  • XPeng Inc (9868 HK) has this week broken above the falling wedge pattern that captured its Dec/Mar correction. The bullish trend breakout in the weekly RSI confirms the uptrend bias. 
  • Wedge patterns are commonly referred to as “Half Mast” patterns. They typically occur in the middle of trends, making textbook targets easy to calculate. Target 56.10 (+29%) in Q2 2023.

Huolala Parent Lalatech Files for Hong Kong IPO

By Caixin Global

  • Lalatech Holdings Co. Ltd., the operator of on-demand delivery services known as Lalamove in Hong Kong and other global markets and as Huolala on the Chinese mainland, filed for an initial public offering Tuesday on the Hong Kong Stock Exchange.
  • The company didn’t disclose a fundraising target or a timeline.
  • The startup originally filed an IPO application confidentially in U.S. in June 2021 with an aim to raise at least $1 billion, but it later pulled out of the plan after Beijing’s crackdown on overseas share sales.

[Kuaishou (1024 HK) Target Price Change]: Video Account Continues to Be the Threat

By Shawn Yang

  • Kuaishou’s 4Q22 top line beat our est. by 3.9%, and non-IFRS net income was higher than our est. by 85% due to cost-saving measures.  
  • We raise forecasts for its ads and eCommerce growth due to on-track macro recovery. However, we are still concerned about the intensified competition from WeChat Video Account.
  • Maintain SELL for competition scenario, but slightly raise TP to HK$ 58 to reflect macro recovery. Our TP implies 2.1X PS/239X PE in 2023.

China Everbright Environment (257 HK): The Dust Should Have Settled

By Osbert Tang, CFA

  • Plunge in net profit, high gearing and slowdown in new projects are market concerns, but should have well reflected in its share price. Its 3.6x PER is just too cheap. 
  • FY23 will see profit recovery, backed by decent project pipeline and lack of one-offs like impairment and exchange losses. Consensus forecast of 15% profit growth is too conservative.
  • Cash flow will improve over the next two years as collection of national subsidies accelerates, capex moderates and contribution from operating projects increases. 

Morning Views Asia: Indika Energy, Meituan

By Charles Macgregor

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 & Gas – Earnings Flash – FY 2022 Results – Lucror Analytics

By Charles Macgregor

COG’s FY 2022 results were in line with our expectations. The credit profile remains satisfactory, supported by a decrease in borrowings. We view positively that long-term debt and time deposits were lower.

We agree with management that the operating environment is likely to be favourable in 2023. According to the company, volume growth was 15% y-o-y in January and February 2023. COG is keen to reduce financing costs and extend its maturity profile by refinancing a portion of bank borrowings with a syndicated loan. Management said that COG is currently in talks with banks over a syndicated loan.

Management confirmed that the company is not keen on increasing indebtedness for expansions or acquisitions.


China Jinmao – Earnings Flash – FY 2022 Results – Lucror Analytics

By Leonard Law, CFA

China Jinmao’s FY 2022 results were slightly weak, but in line with expectations. The company reported a slight top-line decline, while the gross margin contracted further to 16%. In addition, net debt continued to climb, due to acquisitions. For FY 2023, we expect revenue recognition to improve, although margins could remain weighed down by lower profitability at Jinmao’s city operations projects.

Positively, the company’s access to financing remains strong, as it was able to issue onshore bonds at low interest costs without having to provide credit enhancements. According to Jinmao, its average interest cost fell to a record low of 3.9%, despite the generally poor financing environment for the industry.

In other news, there were onshore rumours over the past week that the company may be merged with China Resources Land, with the energy businesses of China Resources Group to be integrated into Sinochem. All of the companies involved have denied the rumours. Still, we note that the business combination (if it materialises) will be positive for the CHJMAO notes, as China Resources Land is a stronger entity than Jinmao. That said, the merger is unlikely to trigger the Change of Control put, as the put option can only be triggered with a ratings downgrade.


[RemeGen (9995 HK) Target Price Change]: Provision for License Out Absence Is Adequate

By Shawn Yang

  • RemeGen reported C2H22 top line in-line with our estimate but 9.4% below consensus. Gross margin, however, beat our estimate by 21ppt. Net-net, non-IFRS operating income missed our expectation by 15%; 
  • The result highlighted RemeGen’s investment case hinging on successful license out. Product revenue itself cannot carry the company to profitability; 
  • With WACC of 17%, we have already provisioned for the license out absence. But we still cut TP by HK$6 to reflect the increasing spending going forward.

💡 Before it’s here, it’s on Smartkarma

Sign Up for Free

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars