In today’s briefing:
- CSI Hong Kong Connect Internet Index Rebalance Preview: 6 Changes & US$700m Trade
- StubWorld: First Pacific (142 HK) Looking Stretched
- HK Strategy: Some Consumer IPO Pipelines and Their Proxies
- Silergy (6415.TT): Annual Growth Could Be Lower Than Earlier Expectation Of 20-25%.
- Pinduoduo: Record Ownership Decline Amid Sharp Rotation
- Seres Group A/H Listing – Rapid Growth but Its Partner’s Sanctions Risk Might Keep Some Away
- [Baidu (BIDU US, SELL, TP US$85) TP Change]: C1Q25: Accelerated AI Search Transition Releases Risk
- Kuaishou (1024 HK): 1Q25, Just Stable, But Undervalued Stable
- [XPeng Inc. (XPEV US, BUY, TP US$30) TP Change]: C1Q25 Review: Early Signs of a Chinese Tesla
- [Atour Lifestyle (ATAT US,BUY,TP US$37) Review]: Peer-Beating Performance Now W/ Shareholder Returns
CSI Hong Kong Connect Internet Index Rebalance Preview: 6 Changes & US$700m Trade
- There could be 3 constituent changes for the CSI Hong Kong Connect Internet Index in June. Plus there are some fairly large capping changes for some stocks.
- Estimated one-way turnover is 4.9% and the round-trip trade is HK$5.4bn (US$694m). The impact on the deletes will be a lot larger than the impact on the adds.
- The forecast adds have outperformed the forecast deletes over the near-term, though the trade has been quite volatile over the medium term.
StubWorld: First Pacific (142 HK) Looking Stretched
- Via 49.9%-held MPIC, First Pacific Co (142 HK) is spinning off Maynilad, a provider of water and wastewater services in the Greater Manila Area, on the Philippine Stock Exchange
- Maynilad will tentatively have a market cap of US$2.7bn. Other key investors include DMCI Holdings (DMC PM) and Marubeni Corp (8002 JP). Listing is expected in July.
- I see First Pac’s discount to NAV at ~30%, around its narrowest level in a decade.
HK Strategy: Some Consumer IPO Pipelines and Their Proxies
- Hong Kong’s IPO market has gathered momentum lately, especially with the overwhelming response to CATL (3750 HK). Consumer IPOs are the next ones to gather interest.
- Foshan Haitian Flavouring & Food Co (FHF HK) is the most imminent one, potentially seeking up to US$1bn. Without significant peers in Hong Kong, it should attract good attention.
- The other interesting ones include Zhou Liu Fu Jewellery Co., Ltd. (1716396D CH), Three Squirrels (TRS HK), and Eastroc Beverage Group (EBG HK).
Silergy (6415.TT): Annual Growth Could Be Lower Than Earlier Expectation Of 20-25%.
- Looking ahead to the second quarter, Silergy Corp (6415 TT) did not provide specific guidance targets but emphasized that uncertainty in customers’ decisions regarding chip production locations could impact seasonal demand.
- Despite short-term challenges, Silergy Corp (6415 TT) still anticipates 2025 to be a year of growth.
- In terms of profitability, Silergy Corp (6415 TT) expects that capacity at Chinese foundries will approach full utilization, leading to supply chain tightness and helping maintain stable gross margins.
Pinduoduo: Record Ownership Decline Amid Sharp Rotation
- Pinduoduo sees one of the steepest ownership drops in EM funds, with 95 net sellers and 28 closures in six months.
- Major closures from Aubrey, AllianceBernstein, UBS, and BNP Paribas; largest outflows from Fidelity and BlackRock.
- Despite sharp declines, PDD remains in 36.5% of GEM funds and a top 10 holding in China & HK.
Seres Group A/H Listing – Rapid Growth but Its Partner’s Sanctions Risk Might Keep Some Away
- Seres Group (601127 CH), a Chinese NEV manufacturer, aims to raise around US$2bn in its H-share listing.
- Seres Group (SG) is principally engaged in the research and development, manufacturing, sales and services of new energy vehicles (NEV) as well as core NEV components.
- In this note, we look at its past performance and other deal dynamics that might impact the listing.
[Baidu (BIDU US, SELL, TP US$85) TP Change]: C1Q25: Accelerated AI Search Transition Releases Risk
- BIDU reported C1Q25 top line, non-GAAP operating profit and GAAP net income 4.5%, 8.6% and 58% vs. our estimates. Baidu Core revenue beat our estimate by 3.4%,
- We believe BIC’s outperformance stemmed from enterprise demand for AI adoption. Further, BIDU’s integrated AI offering should allow it to capture AI’s 2C revenue quicker.
- We cut the TP from US$88 to US$85 and maintain SELL.
Kuaishou (1024 HK): 1Q25, Just Stable, But Undervalued Stable
- KS performance was just fine in 1Q25, but KS stock is undervalued.
- In 1Q25, revenue grew by 11% YoY and the operating margin was flat with 1Q24.
- We believe KS just moved part of e-commerce revenue from online marketing to live streaming.
[XPeng Inc. (XPEV US, BUY, TP US$30) TP Change]: C1Q25 Review: Early Signs of a Chinese Tesla
- XPeng (XPEV) reported C1Q25 top line (3.3%)/1.6% vs. our estimate/consensus, non-GAAP operating loss and GAAP net loss are 25%/50% better than our estimates,
- Given XPEV will launch 5 models updates in C2Q25 and 2 new models in C3Q25 and project an operating breakeven in C4Q25,
- We raise the TP from US$26 to US$30 and elevate the rating to TOP BUY
[Atour Lifestyle (ATAT US,BUY,TP US$37) Review]: Peer-Beating Performance Now W/ Shareholder Returns
- Atour (ATAT) delivered a steady C1Q25 with revenue (3.9%)/1.6% vs. our est./cons., and non-GAAP operating profit (5.0%)/5.5% vs. our est./cons.;
- We see catalysts from the “low-before-high” RevPAR trend, legacy hotel renewals and retail profitability improvement.
- We keep the TP at US$37/ADS and reiterate as travel sector TOP BUY
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