Daily Brief China: Ximalaya, China Resources Beverage, Yum China Holdings and more

In today’s briefing:

Pre-IPO Ximalaya – The Potential Risks and the Outlook
China Resources Beverage Pre-IPO – The Negatives – Remains a Minnow in Other Markets
Yum China (9987 HK/YUMC US): Earnings Risk Materialized As 1Q24 Earnings Were Weak

Pre-IPO Ximalaya – The Potential Risks and the Outlook

The key to Ximalaya turning losses into profits is not the outstanding performance in revenue side, but rather the effective cost control. The Company seems to have encountered growth bottleneck.
To achieve long-term stable profits, it’s necessary to continuously optimize content quality, improve user experience, and expand paying user scale, but Ximalaya has shown “signs of fatigue” in this regard.
AI technology brings big room for imagination, but the question here is how much would truly translate into a leap in financial performance? Ximalaya’s valuation could be lower than peers.

China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
In this note, we talk about the not-so-positive aspects of the deal.

Yum China Holdings (9987 HK)‘s 1Q24 earnings were weaker than the already lowered consensus expectations, as both sales and core operating profit only grew 1% yoy.
Same-Store-Sales declined by 3% yoy, and restaurant margin declined by 2.7ppt yoy, mainly due to more discounts offered.
China’s catering industry has changed compared to pre-COVID, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options.

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