In today’s briefing:
- MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover
- China Healthcare Weekly (Sep.8)- 9th VBP, Reliable Profit Model of Biotech, Medlive, China’s Outlook
- NetEase Inc.: New Gaming Studio Launch & Other Major Drivers
- Quiddity A/H Premium Weekly (Sep 8): ICBC, ABC, CCB, BOC, Vanke, NCL, Rails
- Nongfu Spring (9633 HK): Within Striking Distance
MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover
- There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
- One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
- The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.
China Healthcare Weekly (Sep.8)- 9th VBP, Reliable Profit Model of Biotech, Medlive, China’s Outlook
- The 9th national VBP has begun. We analyzed the major big varieties with sales over RMB1 billion included in this VBP and the impact on related domestic pharmaceutical companies.
- “Concept validation” of the business model of Chinese Biotech companies has been completed. Even under enormous pressure of medical insurance fee control policy, drug sales remain a reliable profit model.
- Medlive’s weak share price performance has a reason. The significant profitability increase in 23H1 wasn’t from the improvement of main business. Its business model needs time to be further validated.
NetEase Inc.: New Gaming Studio Launch & Other Major Drivers
- NetEase delivered a mixed set of results in the quarter, with revenues well below expectations, but managed an earnings beat.
- Revenues from the Fantasy Westward Journey Saga continued to increase year over year in the quarter, again impressing the industry with this IP’s enduring appeal.
- In the second quarter, Cloud Music’s GP margin increased significantly because of the growth of membership services and ongoing cost-cutting initiatives.
Quiddity A/H Premium Weekly (Sep 8): ICBC, ABC, CCB, BOC, Vanke, NCL, Rails
- The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
- New stimulus measures appear to be triggering FOMO on real estate stocks, but a foreshortened week, yet again, makes one wonder. There IS money being applied though.
- I expect more measures and more buying. I am not sure I would want to be short any Hs with a deep discount to the A the next few months.
Nongfu Spring (9633 HK): Within Striking Distance
- Nongfu Spring (9633 HK) has been trading flat since April 2021, even though earnings have grown 36% yoy in 2021, 19% yoy in 2022, and 25% yoy in 1H23.
- We believe a forward PE lower than 35x would be a great entry price for Nongfu (37x currently), with upside potential in earnings from explosive growth in unsweetened tea.
- A business that has a long run-way for growth, strong management, strengthening moat, great cash flow, and on top of that counter-cyclical, deserves a premium valuation anywhere in the world.
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