Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Sea Ltd, JD Health, Xiaomi Corp, MINISO Group Holdings, HDFC Bank and more

In today’s briefing:

  • Sea Ltd (SE US) – The Stickiness of Shopee Food
  • JD Health (6618 HK): 2H20, Faster Than 1H20 and Alibaba Health
  • Chinese App Weekly (Apr 5): Xiaomi Plans Electric Vehicle, Huya Gets Compensation from Douyu
  • MINISO’s Impending Lock-Up Expiry: A Chance to Accumulate More Shares
  • HDFC Bank – Update Does Little To Quell Fears

Sea Ltd (SE US) – The Stickiness of Shopee Food

By Angus Mackintosh

Shopee, the e-commerce arm of Sea Ltd (SE US) has quietly launched ShopeeFood in Indonesia. This could potentially pose a threat to both Gojek (1379371D IJ) and Grab (0967655D SP), which currently dominate the food delivery market between them. 

The two incumbent players do have a head start and an edge on logistics. ShopeePay’s success in digital payments shows the company’s ability to grab share quickly, suggesting that the firm’s new food delivery unit could be a force to be reckoned with.

There will also be synergies with ShopeePay, which could potentially provide discounts and cashback but overall it will help to increase the stickiness of the Shopee App.

The total gross merchandise value of the food delivery market in Indonesia reportedly amounted to US$3.7bn in 2020. If we were to assume that the market can grow by +15% in 2021 to US$4.2bn and Shopee could take 25% of the market then it could be worth US$1bn in GMV to Shopee.

Shopee certainly has the financial capacity to hire drivers, with the ShopeeFood Driver app, which is available on the google store already has over 100,000 downloads. Onboarding big and small will be key

Shopee’s biggest advantage over competitors remains its strength in terms of funding, given that it generates huge amounts of cash through its gaming business. Sea Ltd (SE US) could now decide to channel resources into Shopee Food to grow that business rapidly.

It is early days for Shopee Food but it has the potential to be another revenue driver for the company, which will underpin future growth and hence its premium valuations. Sea Ltd (SE US) trades on 13.3x FY21E EV/Sales and 9.5x FY22E EV/sales, with estimated sales growth of +78.8% and +38.4% for FY21E and FY22E respectively. 


JD Health (6618 HK): 2H20, Faster Than 1H20 and Alibaba Health

By Ming Lu

  • JD Health (JDH)’s revenue growth rate accelerated to 81% yoy in 2H20, compared to 76% yoy in 1H20.
  • JDH’s product revenue grew more rapidly than the two competitors, Alibaba Health (241 HK) and Ping An (1833 HK).
  • We conclude an upside of 25%.

Aequitas Research coverage on JD Health:

JD Health (京东健康) Quick Note – Index Inclusions, Weights, and Valuation Update 

JD Health (京东健康) IPO Trading – Looking to Be a Solid Debut 


Chinese App Weekly (Apr 5): Xiaomi Plans Electric Vehicle, Huya Gets Compensation from Douyu

By Ming Lu

  • Xiaomi plans to produce electric vehicle.
  • The court forces Douyu to compensate Huya for broadcaster poaching.
  • Tencent Music and Vipshop launch share repurchase programs.

Our coverage on Chinese equities:

E-commerce: Alibaba (9988 HK, BABA US), Meituan (3690 HK), JD.com (9618 HK, JD US), JD Health (6618 HK), KE (BEKE US).

Online Entertainment: Tencent (700 HK), Kuaishou (1024 HK), NetEase (9999 HK, NTES US), Bilibili (BILI US), Tencent Music (TME).

Others: Xiaomi (1810 HK).


MINISO’s Impending Lock-Up Expiry: A Chance to Accumulate More Shares

By Oshadhi Kumarasiri

MINISO Group Holdings (MNSO US)’s share price has been under pressure over the last two months with the lock-up period for the shares held by directors, executive officers and the pre-IPO investors scheduled to end on 13th April 2021. The dip in share price, leading up to the lock-up expiry has us quite interested on the long side and we would consider accumulating more shares at the current price levels.


HDFC Bank – Update Does Little To Quell Fears

By Thomas J. Monaco

*Positive Spin Still Off From Organizational Reality: HDFC Bank (HDFCB.IN) [HDFCB] released a FY 4Q21 balance sheet update, two weeks ahead of its scheduled financial results announcement on April 17, 2020. HDFCB tried to place a positive spin on its lending and deposit share gain update; and 

*Back to Reality: On an apples-to-apples basis, we find that HDFCB’s stated gross NPLs increased 18.1% linked quarter. Inclusive of NCOs of INR 34 bn, however, we calculate that net new NPLs actually increased INR 65 bn or 151% on an annualized basis. Provisions barely cover NCOs. By our calculation, reserves are currently short by nearly INR 328 bn or over a year of core operating results based on FY 3Q21 results. An update on credit would have been more helpful.    


Related tickers: Sea Ltd (SE.N), JD Health (6618.HK), Xiaomi Corp (1810.HK), HDFC Bank (HDBK.NS)

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