Daily Brief China: International Housewares Retail, Pinduoduo, Taste Gourmet, Fu Shou Yuan, Vedanta Resources, Growatt Technology, Onewo, JOYY and more

• International Housewares Retail (1373 HK) is an interesting value/growth (5-10% CAGR) play with a high-dividend yield of >10%, trading at 8.1x FY23 PE. 
• The claim to fame for this company is the investment of legendary HK mid/small cap investor David Webb (who has a 6.9% stake in this company). 
• At a market cap of 2 bn HKD, the company has about 400 mn HKD net cash (20% of market cap), making it 6.9x ex-cash PE.

• With the impact of cost-cutting and monetisation wearing out, consensus looks overly aggressive to expect revenue and OP CAGRs of 24% and 35% respectively over the next two years.
• Based on Pinduoduo (PDD US)’s revenue and cost trends discussed below, we think the steady state OP margin could be substantially lower than consensus.
• Expecting consensus to downgrade expectations, we don’t think it is worthwhile paying up to 45.0x FY+2 OP (on our steady-state OP margin) for Pinduoduo at its current EV of $80.5bn.

• Over the past 12 months, we have written insights on 14 stocks in the small/mid-cap space with high dividend yields, inexpensive valuations, and a great margin of safety. 
• We re-examine these to shortlist 3-4 names of our highest conviction amidst the current macroeconomic climate.
• Our high conviction shortlist includes Water Oasis (1161 HK), Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), and Taste Gourmet (8371 HK).

• Fu Shou Yuan (1448 HK)’s 2022 results were below our expectations. Affected by the 22Q4 pandemic, the performance recovery in 22H2 was lower than expected. 
• The high demand due to soaring death rate since 22Q4 would be reflected in 23H1 results. Together with low base last year, strong performance rebound in 23H1 is worth expecting.
• The reason behind short-term trade and long-term hold is different. But considering the Company has no obvious flaws in its long logic, every pullback can be a good buying opportunity.

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.

• Sino-Ocean Service
• Vedanta Resources

• Growatt Technology (1833969D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance, peer comparison and shared our thoughts on valuation. In this note, we will talk about its refiling updates.

• Onewo (2602 HK) (OST) had raised around US$730m in its Hong Kong IPO in Sep 2022. Its six-month lockup is set to expire soon.
• OST is a property management service provider in China, primarily owned by China Vanke (H) (2202 HK). 
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• PDD reported C4Q22 total revenue and non-GAAP net income (5.1%) and 8.4% higher than cons. Topline miss mainly comes from the deceleration of online marketplace services. 
• We expect that PDD’s domestic eCommerce will experience slowdown in growth.  Temu is likely to grow GMV rapidly with high losses from branding and subsidies.
• PDD still outpaces its peers including JD, BABA and Shein, in both domestic and oversea markets. Maintain BUY rating on PDD with TP of US$95, which implies 24x P/2023E.

• JOYY reported 4Q22 top line of US$ 605 mn, beat our est. by 3.2%, and GAAP net income turned negative mostly due to investment loss. 
• With limited catalyst for top line, increasing operating expense and content cost to cope with competition would put pressure on bottom line. 
• Maintain SELL rating and cut TP to US$ 23.7, implying 12.6X PE in 2023.