Daily Brief China: Tencent, IntelliCentrics Global Holding, Shenzhen International, CSPC Pharmaceutical Group, Tencent Music, Polestar Automotive Holding UK, Dongfang Electric, Wuxi Biologics, Rakuten and more

• There is a rumor in social media that Tencent will dismiss 10% – 30% of its employees.
• Alibaba withdrew the IPO application of its subsidiary Cainiao and all the other IPOs were halted as well.
• Xiaomi began to sell its first vehicle model SU7, but it is too late for the company to enter the market.

• The IntelliCentrics Global Holding (6819 HK) IFA considers the terms for the disposal of assets to symplr software as fair and reasonable. The EGM vote is on 18 April.
• The consideration will be distributed to shareholders as a special dividend with a minimum and maximum of US$0.52 (HK$4.07) and US$0.55 (HK$4.30), respectively. 
• Irrevocables ensure that the EGM vote will pass. At the last close and for a 7 May payment, the gross and annualised spread of the minimum dividend is 2.8%/33.6%.

• Shenzhen International (152 HK) saw its FY23 earnings reaccelerated, supported by gains from the logistics park transformation business. Earnings even surged 169.1% YoY in 2H23. 
• REIT issuance on two logistics assets, increase in areas of logistics projects, gains from South China Logistics Park transformation, and better Shenzhen Expressway (548 HK) will fuel FY24.
• A better debt structure will save finance costs. Its 0.45x P/B, or 1.5SD below the 5-year average, is cheap given its proven ability to realise underlying asset value.

• CSPC Pharmaceutical Group (1093 HK) reported steady growth in finished drugs in 2023. New products including Mingfule, Yilouda, and Anfulike achieved rapid sales ramp-up due to inclusion in the NRDL.
• The company expects to launch 50 innovative drugs in the next five years, which will provide continuous momentum. The company further aims for 17 common generic launches during 2024–2025.
• CSPC Pharmaceutical shares are trading at a P/E of 11.3x, lowest level seen in last five years, and cheaper than peers. Dividend yield remains attractive at 4%+.

• Tencent Music Entertainment Group (TME) posted robust results in its fourth quarter and full year 2023 earnings call.
• Increasing subscribers and expedited revenue growth were notable positives, taking the total number of subscribers to the 100 million milestone due to the company’s focus on content leadership, platform value, and offering a high-quality user experience.
• Yet, the company also faced some headwinds, particularly in the social entertainment business.

• This is our first report on Polestar.
• The company saw their highest-ever delivery volume for the Q3 2023 period.
• The said period witnessed record deliveries of 13,976 vehicles, representing a growth of 51% compared to the same period in the previous year.

• Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
• Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
• DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.

• WuXi Bio’s profit was disappointing.The 41 new orders added last December were small orders, which cannot contribute decent revenue/profits.The goal of gross margin to reach 45% by 2026 seems challenging.
• The management has become more cautious in its guidance for 2024. 2024H1’s performance could be disappointing. The key is to see whether the performance in 2024 full-year would meet expectations.
• Due to BIOSECURE Act, foreign CXOs are planning to seize WuXi Bio’s market share. We are not sure whether Europe (the US’s ally), will follow suit and enact similar legislation.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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