In today’s briefing:
- FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out
- Henderson Land (12 HK): Large Passive Flow Coming Up as Shorts Cover
- Kelun-Biotech Placement – Recent Run-Up Makes Its Tricky
- China A50 ETF Rebalance: One Set of Changes
- Guangzhou Xiao Noodles Catering Management Pre-IPO – Fast-Growing Noodle Chain Navigates Competition
- CMOC Group Limited (HKEX: 3993) – High-Growth, Low-Cost Producer Positioned for Re-Rating
- Jiangsu Hengrui Medicine (600276 CH): ADC Drug Approval Presents Long-Term Opportunity
- Mao Geping IPO Lockup – Stock Is up 4x, US$400m Cornerstone Lockup Release
- Chow Tai Fook (1929 HK) – H2FY25 Outlook, Cost Management & Pricing Optimization to Drive Growth.
- Shanghai Forest Cabin Biological-Tech Pre-IPO Tearsheet
FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out
- Pop Mart (9992 HK) and S.F. Holding (6936 HK) will replace China Railway Group (390 HK) and China Merchants Securities (6099 HK) in the iShares China Large-Cap (FXI) (FXI US).
- Passive trackers will need to buy between 0.4-0.6x ADV in the adds and sell between 0.5-1.3x ADV in the deletes. There are some small capping flows too.
- There are a lot of shorts in Pop Mart (9992 HK), China Railway Group Ltd H (390 HK) and China China Merchants Securities Co Ltd (H) (6099 HK).
Henderson Land (12 HK): Large Passive Flow Coming Up as Shorts Cover
- Henderson Land Development (12 HK) will be added to a global sector index at the close on 20 June.
- Estimated passive buying in Henderson Land Development (12 HK) is 42m shares (US$131.5m; 7.5x ADV).
- The stock is up over the last 2 months as shorts have covered. Performance is in line with peers and positioning does not appear to be excessive.
Kelun-Biotech Placement – Recent Run-Up Makes Its Tricky
- Sichuan Kelun-Biotech Biopharm (6990 HK) is looking to raise up to US$200m from a primary placement. The offering is priced at HK$ 330.2-341, a 5-8% discount to last close.
- The company plans to use the proceeds for research and development, clinical trials of its core products and as working capital.
- In this note, we will talk about the placement and run the deal through our ECM framework.
China A50 ETF Rebalance: One Set of Changes
- The iShares A50 China (2823 HK) and CSOP China A50 (HKD) (2822 HK) ETFs will rebalance their holdings at the close on 20 June.
- Bank of Jiangsu (600919 CH) will replace Great Wall Motor (601633 CH) in the ETFs and passives will need to trade between 0.4-0.6x ADV in the stocks.
- This change is a surprise to us and there could be a short-term move in the stocks.
Guangzhou Xiao Noodles Catering Management Pre-IPO – Fast-Growing Noodle Chain Navigates Competition
- Guangzhou Xiao Noodles Catering Management (GXNCM) is looking to raise about US$200m in its upcoming Hong Kong IPO.
- GXNCM has shown strong growth momentum by expanding its network of corporate-owned restaurants and improving overall profitability, benefiting from post-COVID recovery and economies of scale, with operational performance turning positive.
- However, its reliance on price cuts to stay competitive, coupled with weakening same-store sales and a highly fragmented market, raises concerns about long-term sustainability.
CMOC Group Limited (HKEX: 3993) – High-Growth, Low-Cost Producer Positioned for Re-Rating
- EBITDA more than doubled (25% CAGR) over 3 years, with copper and cobalt output up ~3.5x and ~5.7x on ramp-up of TFM and KFM.
- $4.3 bn invested in DRC; low-cost leaching drives margins; gold entry via Cangrejos adds diversification and long-term optionality.
- Strong cash flows, growth pipeline, and ~4x EV/EBITDA valuation position CMOC for sustained upside amid rising energy transition metal demand.
Jiangsu Hengrui Medicine (600276 CH): ADC Drug Approval Presents Long-Term Opportunity
- Jiangsu Hengrui Medicine (600276 CH) received conditional marketing approval for its self-developed Class 1 innovative drug, Trastuzumab Rezetecan for Injection (SHR-A1811).
- In 1Q25, Jiangsu Hengrui reported revenue growth of 20% YoY to RMB 7.2B. Innovative drugs and Licensing should help keep this momentum in near future.
- The near-term trigger for the stock would be a further marketing approval from the US FDA.
Mao Geping IPO Lockup – Stock Is up 4x, US$400m Cornerstone Lockup Release
- Mao Geping Cosmetics raised around US$345m in its Hong Kong IPO. The lockup on its cornerstone investors is set to expire soon.
- Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
- In this note, we will talk about the lockup dynamics and possible placement.
Chow Tai Fook (1929 HK) – H2FY25 Outlook, Cost Management & Pricing Optimization to Drive Growth.
- Despite short-term demand headwinds, Chow Tai Fook Jewellery (1929 HK) remains well-positioned for structural growth via product premiumization(e.g.,CTF Rouge,Palace Museum), omni-channel scaling, and selective global expansion in culturally aligned markets.
- Company continues to defend margins through product mix optimization (fixed-price gold up to 25.6% of gold RSV),disciplined SG&A control, and aggressive retail network rationalization.
- Trading at ~26xx TTM P/E, it commands premium to peers, backed by industry-leading ROE (~25%),brand strength,and high dividend payout (~79%), though clear earnings rebound remains key to justify the multiple.
Shanghai Forest Cabin Biological-Tech Pre-IPO Tearsheet
- Shanghai Forest Cabin Biological-Tech Co., Ltd. (SFC) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The deal will be run by Citic, and Huatai.
- SFC is the leader among China’s premium domestic skincare brands with a focus on anti-wrinkle and firming skincare market In 2024, its flagship brand, Forest Cabin.
- As of FY24, Forest Cabin had 188 SKUs with its core products at a recommended retail price range of RMB 200-800, targeting primarily consumers aged 25-40.
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