In today’s briefing:
- CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- Melco (200 HK) Trading “Cheap” Into Rights Issue
- Trip.com (TCOM): 1Q25, Hotel Booking Revenue Up by 23%
- CSI All Share Semiconductor Index Rebalance Preview: 13 Potential Changes in June
- [Baidu (BIDU US, SELL, TP US$88) Preview]: Search Traffic’s Decline in Relevance the No.1 Issue
- [JD.com, Inc (JD US, BUY, TP US$54) TP Change]: C1Q25 Review: The Good Time Is About to Pause
- ZTO Express Q125 Results: Adj EBITDA Barely Moved Despite +19% Y/Y Parcel Volume Growth | AVOID
- RERE: 1Q25 Earnings
- Pre-IPO Shouhui Tech (PHIP Updates) – Some Points Worth the Attention
- Eastroc Beverage A/H Listing – Energized – Fast Growth, Better Margins
CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- CATL (3750 HK) is trading at a 6.9% premium to Contemporary Amperex Technology (CATL) (300750 CH) – if that is due to expectations of Fast Entry, that premium could drop.
- CATL (3750 HK) has not announced the overallotment option as exercised and that puts Fast Entry at risk. An announcement prior to the close tomorrow could lead to Fast Entry.
- The earliest inclusion could be at the close on 30 May while the other global index inclusion looks likely in December.
Melco (200 HK) Trading “Cheap” Into Rights Issue
- In my stub monitor flagged in StubWorld: Toyota Industries/Motors, GMO Internet, I see Melco International Development (200 HK) is trading “cheap” to Melco Resorts & Entertainment (MLCO US).
- Last month, Melco proposed one new rights share for two existing shares at a subscription price of HK$1.0286/share, a 72.93% discount to undisturbed, and a 64.28% discount to the TERP.
- Lawrence Ho will backstop ~54% of the rights, if need be. Depending on the level of support for the rights, expect Lawrence to further chip away against minorities.
Trip.com (TCOM): 1Q25, Hotel Booking Revenue Up by 23%
- Total travelers grew by 26% YoY in China in 1Q25, up from 13% YoY in 4Q24.
- Trip.com’s total revenue grew by 16% YoY in 1Q25, among which hotel booking grew by 23%.
- We believe operating margin will be stable, as the growth of sales and market expense has been slowing down.
CSI All Share Semiconductor Index Rebalance Preview: 13 Potential Changes in June
- The review period for the June rebalance of the CSI All Share Semiconductor Index ended 30 April. The changes should be announced on 30 May and implemented on 13 June.
- We forecast 4 adds and 9 deletes for the index with a one-way turnover of 2.7% and a round-trip trade of CNY 1.2bn (US$167m).
- Some stocks have overlaps with changes to the CES China Semiconductor Chips Index and the CNI Semiconductor Chips Index and there will be increased passive flow for those stocks.
[Baidu (BIDU US, SELL, TP US$88) Preview]: Search Traffic’s Decline in Relevance the No.1 Issue
- We expect Baidu to report C1Q25 top line,non-GAAP operating profit and GAAP net income inline, (4.2%) and (8.2%) vs. the consensus, and C2Q25 top line guidance (2.7%) vs. the consensus
- Although we expect rebounding consumption to help BIDU’s advertising business, its traffic share losses were alarming. Further, we expect some of BIDU’s core advertising categories to experience sluggish recovery;
- We maintain our view that Baidu lacks visible growth drivers, reiterate our SELL rating, and cut its TP to US$88.
[JD.com, Inc (JD US, BUY, TP US$54) TP Change]: C1Q25 Review: The Good Time Is About to Pause
- JD.com C1Q25 revenue exceeded our estimate/consensus by 2.4%/4.3% and adjusted NI by 19%/20%, thanks to better-than-expected cross selling from trade-in subsidies and gross margin;
- We, however, raise full year new businesses operating loss from RMB(6bn) to RMB(12bn). We estimate 80% of the loss will come from food delivery;
- In lieu of the continued uncertainty in take-out investments, we remove JD.com from TOP BUY while cut TP from US$58 to US$54.
ZTO Express Q125 Results: Adj EBITDA Barely Moved Despite +19% Y/Y Parcel Volume Growth | AVOID
- In Q125, ZTO’s rate of volume growth accelerated, but it still lagged overall market growth
- Despite a sharp (-18% Y/Y) decline in SG&A expenses, OpInc margin fell by -70 bps Y/Y
- Guidance suggests ZTO will chase volume share rest of FY25, pressuring margins further
RERE: 1Q25 Earnings
- Key 1Q25 takeaways include: 1) rising trade-in activity continues to drive growth, powerful lead indicators around ongoing government subsidies on new mobile phones, accelerating momentum with JD.com, and continued growth in AHS offline stores 2) more recent initiatives to enhance AHS Recycle’s brand, with a focus on the company’s comprehensive suite of services and competitive pricing, likely further stimulates growth in 1P business volumes and related contributions and 3) while management remains focused on reinvesting in the business to further accelerate top line growth, we look for senior officials to increasingly return excess capital to shareholders as profitability continues to scale via ongoing share repurchases and the potential for introducing a regular quarterly dividend in the not-too-distant future.
Pre-IPO Shouhui Tech (PHIP Updates) – Some Points Worth the Attention
- Shouhui’s business model does not have high barriers, with weak ability to resist risks.For investors, this is a bet on the industry’s prospects and a test of the management’s ability.
- The “unified reporting and underwriting” policy has become the turning point in this industry. If financial performance continues to deteriorate, Shouhui may undergo business restructuring or seek M&As.
- Due to increasing competition, decreasing commissions, disintermediation trend, tightening policy environment, we are not optimistic about the outlook of Shouhui. The valuation of Shouhui would be lower than peers.
Eastroc Beverage A/H Listing – Energized – Fast Growth, Better Margins
- Eastroc Beverage Group (605499 CH) (EB), a China-based functional beverage company, aims to raise around US$1bn in its H-share listing.
- According to Frost & Sullivan (F&S), EB has been the largest functional beverage company in China in terms of sales volume for four consecutive years since 2021.
- In this note, we look at its past performance and other deal dynamics that might impact the listing.
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