Daily Brief China: Pony AI, All Winner Technology, BYD, China Medical System, Ningbo Joyson Electronic, Milian Technology, Impro Precision Industries, Car Inc and more

• Pony.ai has finalized the Hong Kong public offering price at HK$139 per share and it expects to raise HK$6.71 billion (US$860 million) from its planned secondary listing in Hong Kong. 
• Our base case valuation of Pony.Ai is HK$178.2 per share over the next 6-12 months, which represents 28% higher than the Hong Kong public offering price. 
• Given the solid upside, we have a Positive View of Pony.ai. Despite our Positive view, there have been increasing concerns about the overstretched valuations of major AI/tech related companies globally.

• Pony AI (PONY US) raised around US$860m and WeRide (WRD US) raised around US$310m in their HK Secondary offering.
• We have looked at the deal dynamics in our previous note.
• In this note, we talk about the trading dynamics for the two deals.

• All Winner Technology (300458 CH) could replace StarPower Semiconductor (603290 CH) in the CES China Semiconductor Chips Index at the close of trading on 12 December.
• Cambricon Technologies Lt (688256 CH)‘s index weight is currently higher than 10% and the stock will be capped to limit its index weight.   
• The forecast add has outperformed the forecast delete over the last year and recent market volatility (and valuations) has narrowed the gap.

• BYD (1211 HK) does not seem ready yet to reverse its downtrend, sentiment is still negative (not too negative), Q3 revenues decreased (no surprise, as recently noted by Ming Lu).
• BYD is short-term OVERSOLD, this is a tactical WEEKLY view presenting an actionable opportunity with a 1-3 week trade horizon (probably a 2 weeks rebound, maximum).
• Our quantitative models say the stock will not correct for more than 3 weeks when this pattern is encountered (the stock is currently in its second consecutive week down).

• The company’s founder Mr. Lam Kong serves as Chairman, Chief Executive and President.
• The other key management personnel are Ms. Chen Yanling who is the Executive Director and CFO.
• The company’s six -member board comprises two executives, one non -executive, and three independent non -executive directors. Committees cover Audit, Remuneration, Nomination, and ESG, with INEDs forming the majority on committees.

• Ningbo Joyson Electronic (600699 CH) is looking to raise up to US$471m in its upcoming Hong Kong IPO.
• NBJ, is an intelligent automotive technology solution provider, offering advanced products and solutions across the auto part industry’s key areas including automotive electronics and automotive safety.
• In this note, we examine the IPO dynamics, and look at the firm’s valuation.

• Milian Technology files for Hong Kong IPO and seeks fresh capital for further expanding its global presence and accelerating overseas market penetration.  
• Xiaomi backed online social networking platform company is one of the fastest growing marriage and dating platforms in China, reaching RMB2,373m revenue in 2024, up ~129% YoY.
• I expect Milian Technology may seek unicorn valuation in upcoming HK IPO as growth is exceptionally high and profitability improved.

• Diversified End-Market Exposure Mitigates Cyclicality: Impro serves a wide range of industries, including automotive, high-horsepower engines, aerospace, medical, and construction. This diversification helps to cushion the impact of downturns in any single sector. Recent strength in the aerospace and high-horsepower engine (driven by AI data center demand) segments has offset weakness in others.
• Strong Financial Performance and Shareholder Returns: The company has demonstrated a solid growth track record, particularly over the last three years, with an 18.95% CAGR in net income and a 40.46% CAGR in free cash flow. This financial strength supports a consistent and attractive dividend yield, which stood at 8.2% in the most recent fiscal year.
• Strategic Global Footprint and ‘One-Stop Shop’ Capabilities: With manufacturing facilities in China, Mexico, Turkey, and Europe, Impro is well-positioned to serve its global customer base and mitigate geopolitical risks. Its comprehensive service offering, from design and casting to precision machining and surface treatment, provides a key competitive advantage and deepens customer relationships.

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• VNET Group is a leading carrier- and cloud-neutral data center services provider in China, poised to benefit from the country’s growing digital economy, particularly the demand for cloud computing and artificial intelligence (AI) infrastructure.
• The company’s ‘dual-core’ strategy, catering to both wholesale hyperscale clients and retail enterprise customers, provides a diversified revenue stream and positions it to capture growth across different market segments.
• While experiencing strong revenue growth, particularly in its wholesale segment driven by AI demand, VNET faces challenges related to profitability, high capital expenditures, and a significant debt load in a competitive market.

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• Privatization and Delisting: Car Inc. was privatized by private equity firm MBK Partners and delisted from the Hong Kong Stock Exchange on July 8, 2021, following a period of significant financial distress and corporate governance concerns. This report analyzes the company’s performance and position leading up to this event.
• Market Leadership Under Pressure: Historically one of China’s largest car rental companies, Car Inc.’s market position was eroded by intense competition, the negative impact of the COVID-19 pandemic, and its association with the Luckin Coffee accounting scandal through its founder, Charles Lu Zhengyao.
• Challenging Financial Trajectory: The company exhibited a significant deterioration in financial performance, with declining revenue, negative margins, and substantial net losses in the period leading up to its privatization. This was a stark reversal from its previously profitable operations.

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