Daily Brief China: Trip.com, ZTO Express Cayman , Softbank Group, Xiaomi Corp, Greentown China, China Dongxiang, NetEase Inc, Butong Group, Manycore Tech and more

• Total revenue grew by 24% in 4Q24, higher than 19% we expected.
• The stock price plunged in Hong Kong as we expect in our preview note.
• However, we believe, any stock decline over 11% means overreacted.

• Net Revenue growth accelerated to +23% Y/Y in Q424, far stronger than in Q224 and Q324
• But costs and expenses grew even faster, leading to surprisingly sharp margin contraction
• We no longer view Trip.com as an attractive play on Chinese travel; airlines may outperform

• ZTO Express Cayman (2057 HK) will be added to the Hang Seng China Enterprises Index (HSCEI INDEX) next week and to a global index couple of weeks after that.
• Despite passives needing to buy more than 5% of float inside a month, the stock has barely budged in a rallying China market.
• The increase in cumulative excess volume has been very gradual, indicative of low positioning in the stock. With a lot to buy over the next few weeks, that could change.

• Global capital flowing into Australian logistics market as it reaches turning point, attracting investments.
• Japan REIT makes deals in Tokyo, buying Tokyo Tower for $120M and selling office block for $62M.
• CapitaLand India Trust acquires Bengaluru offices for $170M after project funding, expanding its portfolio.

• Xiaomi has had a remarkable rally, ranking at the 99th percentile for all previous 1-month price changes.
• Implied vols have surged along with price with 1M, 2M and 3M implied vols all ranking above the 95th over the past 4 years.  
• We recommend how to manage risk and positioning given the extreme price and implied vol dynamics.

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.

• China Vanke
• Greentown China
• UPL Ltd

• China Dongxiang (3818 HK)‘s share price change has not sufficiently reflected Alibaba Group (9988 HK)‘s movement. Their share price ratio is now at a historical low. 
• Its SOTP value increased by HK$927m with the surge in its PE, unlisted and fixed-income investment value, but its market capitalisation has gone up by just HK$258m.
• Holdings in unlisted assets like Ant Financial and JD Technology (JD Digital) will benefit from the AI bonanza and the better sentiment in the HK IPO market.

• NetEase reported C4Q24 rev., GAAP op. profit and GAAP net inc. in line/3.9%/27% vs. our est., and in line/9.3%/27% vs. cons. 
• We see NetEase entering a new phase of product-driven revenue growth, driven by rebounding mobile and accelerating PC game growth;
• We raise TP to US$122 and keep NTES as our TOP PICK in gaming sector.

• BUTONG’s growth momentum remained high, but customers are more focused on cost-effectiveness rather than premium products. We are unsure whether BUTONG’s  current high growth is sustainable in this low-growth industry. 
• The more revenue proportion from baby care products, the lower overall gross margin would be.BUTONG’s strategy of emphasizing sales over R&D isn’t conducive to establishing core competitiveness in fierce competition.
• After Series B financing, the post-investment valuation reached about RMB2 billion. However, the market value of peers is not high. BUTONG’s post-IPO valuation performance may be lower than expected.

• Manycore Tech (KOOL US) is looking to raise about US$300m in its upcoming Hong Kong IPO. The deal will be run by JPM and CCBI.
• Manycore Tech is an AI powered design and visualization platform with graphics processing unit clusters. Designs crafted can be translated into production-ready drawings, enabling an automated and accurate manufacturing process.
• According to F&S, it was world’s largest spatial design platform and largest software provider in China’s spatial design industry, based on average monthly active users and revenue, respectively, in 2023.