In today’s briefing:
- Tencent (700 HK) – Surging Price, Strikes, and Volatility. A Novel Look with an Animated Chart
- [Alibaba (BABA US,BUY, TP US$150) TP Change]: AI’s Inflection Point Arrived, Will E-Commerce’s Also?
- MIXUE Group (2097 HK) IPO: Small Float to Keep Stock Out of Most Indices
- FXI Rebalance Preview: Two Sets of Changes as ZTE Breaks Out, China Coal Dumps
- China A50 ETFs Rebalance Preview: China Rally Takes Cambricon Up, Up & Away
- Mixue Group IPO Valuation Analysis
- Breaking New Ground: Xiaomi, Trip Com and CATL Hit Record Highs
- MIXUE Group (2097 HK) IPO: Valuation Insights
- [Luckin (LKNCY US, BUY, TP US$40) Rating Change]: Optimum Cup Sales and Price Mix Hit the Sweet Spot
- Pre-IPO Guangzhou Innogen Pharmaceutical Group- The Good Story of GLP-1 May Not Bring High Valuation
Tencent (700 HK) – Surging Price, Strikes, and Volatility. A Novel Look with an Animated Chart
- Tencent (700 HK) has surged 33.5% over the past 30 days, with its spot price outpacing the slow adjustment of call option strikes, shifting most contracts from out-of-the-money to in-the-money.
- The current concentration of in-the-money calls hints at active trading and potential strike adjustments ahead, amplified by upcoming events like the 19 March earnings.
- This analysis features a novel animated chart of option open interest distribution offering a dynamic visual of market behavior.
[Alibaba (BABA US,BUY, TP US$150) TP Change]: AI’s Inflection Point Arrived, Will E-Commerce’s Also?
- Alibaba reported C4Q24 top line in-line with our estimate and consensus, but non-GAAP NI beat our estimate/consensus by 12%/11%, attributable to cost control and AntFin’s profitability improvement;
- But what drives the stock was the strong performance in AliCloud and an articulation of a clear investment logic on Generative AI (GAI),
- While the AI inflection point has arrived earlier than we expected, we remain eying for the domestic e-commerce turnaround with Jiang Fan at the helms.
MIXUE Group (2097 HK) IPO: Small Float to Keep Stock Out of Most Indices
- Mixue Group (MIX HK) has priced its IPO at HK$202.5/share and will raise up to HK$3.97bn (US$511m) if the oversubscription option is exercised, valuing the company at HK$76.35bn (US$9.8bn).
- Despite a US$10bn market cap, the stock will find it difficult to be added to global and local indices since 60% of the shares are unlisted.
- The stock is likely to remain in the shadows for one global index and could be added to the other in December. HSCI inclusion could take place in September.
FXI Rebalance Preview: Two Sets of Changes as ZTE Breaks Out, China Coal Dumps
- With the review cutoff done, there could be two changes for the iShares China Large-Cap (FXI) (FXI US) in March.
- Guotai Junan Securities (2611 HK) and ZTE Corp H (763 HK) are expected to replace China Tourism Group Duty Free (1880 HK) and China Coal Energy Co H (1898 HK).
- ZTE Corp H (763 HK) has broken out to new highs (possibly on short covering) while China Coal Energy Co H (1898 HK) continues to sell off.
China A50 ETFs Rebalance Preview: China Rally Takes Cambricon Up, Up & Away
- With the review cutoff done, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) ETFs in March.
- Cambricon Technologies, Guotai Junan Securities and China United Network could replace Inner Mongolia Yili Industrial Group, CGN Power and Luzhou Laojiao in the ETFs.
- Guotai Junan Securities (2611 HK) is expected to be added to the iShares China Large-Cap (FXI) (FXI US) in March, so there should be inflows for the A-shares and H-shares.
Mixue Group IPO Valuation Analysis
- Mixue Group plans to complete its IPO, selling 17.1 million shares at the IPO price of HK$202.50 per share. The IPO is expected to start trading on 3 March.
- Our base case valuation of Mixue Group is implied market cap of HKD 96 billion or target price of HKD 254, which is 26% higher than the initial IPO price.
- Our valuation sensitivity analysis suggests a range of HKD 206 to HKD 308 per share for Mixue Group.
Breaking New Ground: Xiaomi, Trip Com and CATL Hit Record Highs
- Trip Com, Contemporary Amperex Technology and Xiaomi all hit fresh highs in EM fund ownership.
- Rotation in all three was among the most positive across all China stocks, with all measures of fund ownership moving higher.
- Conviction opens from GIB, Putnam and Aubrey we among the funds driving ownership higher.
MIXUE Group (2097 HK) IPO: Valuation Insights
- Mixue Group (2097 HK), a world-leading manufacturer of freshly made drinks, is seeking to raise US$445 million through an HKEx IPO.
- We previously discussed the IPO in MIXUE Group (2097 HK) IPO: The Bull Case and MIXUE Group (2097 HK) IPO: The Bear Case.
- There are five cornerstone investors. Our valuation analysis suggests Mixue is attractively valued at the IPO price range. Therefore, we would participate in the IPO.
[Luckin (LKNCY US, BUY, TP US$40) Rating Change]: Optimum Cup Sales and Price Mix Hit the Sweet Spot
- Luckin reported C4Q24 revenue 6%/1% higher than our estimate/consensus, and non-GAAP operating profit 11%/38% higher than our estimate/consensus, driven by SSSG recovery and cost material savings;
- After turning around same-store-sales-growth (SSSG) via price hike in C3Q24, Luckin finetuned the cup sales to price ratio to reach an optimal point in C4Q24,
- We upgrade Luckin from UR into BUY rating and set new TP at US$40.
Pre-IPO Guangzhou Innogen Pharmaceutical Group- The Good Story of GLP-1 May Not Bring High Valuation
- Innogen’s business, financial condition, operation results and prospects for the next couple of years are substantially dependent on the successful approval and commercialization of Efsubaglutide Alfa, indicating single product risk.
- Due to slower R&D progress and fierce competition brought by first movers and generic drugs, commercialization prospects of Efsubaglutide Alfa is highly uncertain, leading to potential lower-than-expected sales performance.
- After Series B+ financing, the post-investment valuation of Innogen is already RMB4.65 billion. However, share price of peers has not done well, which makes us cautious about Innogen’s IPO prospects.
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