ChinaDaily Briefs

Daily Brief China: Meituan, Aag Energy Holdings, CIMC Enric Holdings, Bilibili, China Power International, Kelun Biotech and more

In today’s briefing:

  • Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
  • Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy
  • Meituan (3690 HK): 4Q22, High Growth, Better Margin, and 45% Upside
  • Meituan: Pandemic Driven Top Line Growth Is Only Temporary
  • CIMC Enric (3899 HK): Growth Outlook Secured by Encouraging Orderbook
  • China Internet Weekly (27Mar2023): Douyin, Bilibili, Tencent, NetEase, JD Health, Zhihu
  • China Power International (2380 HK): This Will Be a Rewarding Year
  • Pre-IPO Kelun Biotech – Debut Is the Peak, and Then It Wanes?

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!

By Sumeet Singh

  • On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
  • At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
  • We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy

By Arun George


Meituan (3690 HK): 4Q22, High Growth, Better Margin, and 45% Upside

By Ming Lu

  • In 4Q22, the growth rates of total revenue and most business lines are better than our expectation.
  • The operating margins have stayed at a low level for the third quarter.
  • We believe the stock has an upside of 45% and a price target of HK$204 for year end 2023.

Meituan: Pandemic Driven Top Line Growth Is Only Temporary

By Shifara Samsudeen, ACMA, CGMA

  • Meituan (3690 HK) reported 4Q2022 results. Revenue increased 21.4% YoY to RMB60.1bn (vs consensus RMB57.7bn) while reported operating losses dropped to RMB732m (vs consensus RMB1.4bn) from RMB5.0bn in 4Q2021.
  • Covid outbreak in China in 4Q2022 led to strong growth in food delivery service revenues, however, losses have widened compared to 3Q2022 due to increased rider costs and others.
  • We expect Meituan’s top line growth to slow down and margins to remain under pressure with Douyin’s entry into food delivery and the company’s expansion into Hong Kong.

CIMC Enric (3899 HK): Growth Outlook Secured by Encouraging Orderbook

By Osbert Tang, CFA

  • After posting a decent FY22 result, earnings momentum for CIMC Enric Holdings (3899 HK) should sustain, underpinned by clean energy recovery and chemical and environmental equipment demand.  
  • 2M23 new orders growth stayed healthy at 10.7%, evidencing positive demand outlook. Hydrogen Energy is a growing driver as revenue will reach Rmb700m in FY23 and Rmb3bn in FY25.
  • The stock’s PERs of 11.7x and 9.5x for FY23 and FY24, respectively, appear inexpensive in view of 19% earnings CAGR. Net cash position also adds an appeal to us.

China Internet Weekly (27Mar2023): Douyin, Bilibili, Tencent, NetEase, JD Health, Zhihu

By Ming Lu

  • Chinese Apps’ time on site decreased to 26.7 hours in 2022 from 28.5 hours in 2021.
  • The Press and Publication Administration approved 27 imported games in March.
  • Douyin launched a medium-duration video app, which can be Bilibili’s competitor.

China Power International (2380 HK): This Will Be a Rewarding Year

By Osbert Tang, CFA

  • China Power International (2380 HK) will enjoy another year of strong earnings improvement in FY23, as coal-fired segment returns to profit and new energy capacity drives growth.
  • Solar and wind capacity will increase 66.5% and 23.1%, respectively, raising new energy’s proportion to over 70%. Profitability for hydropower also looks to recover in this year.
  • There is huge room for asset injection from SPIC given the parent’s new energy capacity of 139GW, with only 20GW in CPI. Its FY23 PER of 8.4x PER is attractive. 

Pre-IPO Kelun Biotech – Debut Is the Peak, and Then It Wanes?

By Xinyao (Criss) Wang

  • Kelun-Biotech did not get widespread attention until it reached three license and collaboration agreements with Merck, with upfront and milestone payments totaling up to US$11.8 billion.
  • The remaining products have limited investment value. After Kelun-Biotech out-licensed all of its valuable core assets in pipeline, it could mainly remain at the stage of biotech in the future.
  • The original core R&D team members have left, which means the “root of Kelun-Biotech is broken”. The lack of sustainable follow-up R&D capability would have negative impact on valuation performance.  

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