China Archives | Page 67 of 199 | Smartkarma

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows were net negative and NORTHBOUND flows a decent buy. AH premia on average fell, but liquid pairs saw AH premia rise. Chinese/HK shares shellacked.
• Watch the SOE stock price KPI space. Wouldn’t be short SOEs vs Privates on H/A basis. Low-hanging fruit with some SOEs having large cash balances.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 9.9bn of A-shares on very strong average activity after +12.1bn RMB the week before. Some National Team buying this week. 
• Renewables selling was tempered. Energy and Finance saw net selling. Industry and Tech saw large net buying. Relatively larger net Shenzhen buying later in the week as stocks fell hard.

• A bad week for HK and Chinese shares. National Team buying seems lighter into the waning days of the Year of the Rabbit. 
• Net SOUTHBOUND selling was HK$9.4bn on the week, with net selling every day as the market fell hard – both in HK and the mainland.
• Remarkable this past week was the tendency to net sell names which were down hard, and net buy names which have been performing well. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Amer Sports (AS US) was priced below its range, while Thai Credit Bank PCL, managed to get enough support to pull thru. 
• Given the earnings season, there weren’t many placement apart from Indus Towers (INDUSTOW IN) and Metals Acquisition (MTAL US)‘s CDR offering. 

• If there’s ultimately substantial negative policies in the field of biopharmaceuticals between China and US, APIs will be the segment with the highest risk. But CXO would also be affected.
• Now we have entered the harvest period after the previous peak of financing round in China’s biotech industry, which has become a concentrated “peach picking period” for foreign pharmaceutical enterprises.
• Considering the low market sentiment, we’re cautious on companies with high valuation elasticity before they come up with convincing products. So, we don’t recommend investors rush to bottom-fish CSPC Innovation.

• After announcing flattish results for both parent and subsidiary, Hang Lung (10 HK) announced Ronnie Chan is stepping down as chairman, with his son Adriel to assume the mantle. 
• Ronnie, 75-years of age, has been chairman since 1991. Adriel (42-years old) has been an ED since 2016 and vice-chairman since 2020. 
• Separately, HLG’s 66% discount to NAV is wide for a straightforward parent-sub structure. The P/Bs for both HLG and Hang Lung Properties (101 HK) are around the lowest-ever levels. 

Key points (machine generated)

• 111 Inc’s privatization process has been ongoing for 14 months, but no definitive agreement has been reached, leading to investor fatigue and a significant drop in stock price.
• Chinese companies listed in the US typically have long privatization timelines, with some taking over 2 years to finalize the process.
• The extended timeline in 111 Inc’s case may be causing concern among investors, resulting in a wider spread between the offer price and the stock price, but relisting the company in China could potentially lead to a higher valuation.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Battery giant Contemporary Amperex Technology Co. Ltd. (CATL) (300750.SZ -0.92%) has set up a battery swapping joint venture (JV) with ride-hailing company Didi Global Inc. to service Didi’s expanding fleet of electric vehicles (EVs).
• The tie-up is CATL’s latest foray into battery swapping — dominated by EV-maker Nio Inc. — as it aims to expand beyond production and into downstream businesses that make use of its products.
• It comes as the world’s No. 1 producer of EV batteries by installed capacity faces growing competition from rivals such as BYD Co. Ltd. (002594.SZ +0.69%), which produces both vehicles and their batteries.

• China’s embattled property developer Country Garden Holdings is ramping up overseas asset sales as the company struggles to raise cash to address its debt woes.
• The Guangdong-based developer has listed a residential development project in East London for sale, British media reported last week.
• The divestiture came after Country Garden offloaded two projects in Australia.

• The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
• The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.

• L’Occitane (973 HK) announced a strong 3QFY24 operational update last night.  Share price is up 7% today and up 36% since interim results announcement late November last year.
• Sol de Janeiro, the Brazilian-inspired premium body care brand, continued to shine in the quarter, growing 199% at reported sales and 214% at constant currency. 
• Recommend to take advantage of the current weak sentiment on such companies trading on the HK stock exchange but are actually not reliant on China in terms of business fundamentals.

• Li Ge has begun increasing his holdings, but we’re not sure whether this move is really confident about the prospects of WuXi Bio, or another buy low sell high/capital operation.
• The actual situation of WuXi Bio is not necessarily optimistic. Due to geopolitical risks, WuXi Bio has to start striving for more domestic orders. However, price reduction seems inevitable.
• Although WuXi Bio released optimistic expectations for 2024 project number/outlook, there may be another announcement of lower-than-expected performance in the future,which would be a devastating blow to investors’ confidence/management’s credibility.

• We expect Atour to report 4Q23 revenue 3.5% higher than consensus, and non-GAAP NI 15.1% higher than consensus, mainly due to (1) stable business travellers in tourism off-season;
• (2) raising retail sales drive up gross margin. We think hotel supply and demand will turn to equilibrium in 2024.
• Occupancy may stabilize but ADR will fall, especially economy hotels. Atour, however, will be immune to the price fall, in our view.

• Conglomerate Guoco Group (53 HK) has fielded three privatisation Offers from Guoline (the Quek family) over the past twenty years. 
• Elliott Advisors, then holding 9.72% of shares out, backed the most recent Offer of HK$135/share in November 2018; but it was voted down at a Scheme Meeting. 
• Elliott has now, surprisingly, exited. This may open the door for a fourth Offer. Shares popped 14% on the news.  

• Alibaba Changed its Tmall Taobao business unit from three centers to six departments.
• We believe the change means Alibaba is moving its focus from cost cut to revenue growth.
• We set the stock upside at 26% and the price target at HK$91. Buy.

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.

• Lippo Malls Indonesia Retail Trust
• Road King Infrastructure

• Pientzehuang’s 2023 results were well below expectations. The performance in 23Q4 was terrible. 2024 performance would continue to be under pressure, without any reversal signals to be seen.
• In the process of China’s de-financialization, growth potential of assets with strong financial attributes would weaken.Pientzehuang’s ability to raise prices won’t be as strong as rigid-demands such as telecommunications tariffs.
• Pientzehuang’s stock price performance doesn’t follow traditional TCM companies.It’s not surprising if Pientzehuang’s valuation drops to PE of 15x or even lower. We recommend investors not to rush to bottom-fish.

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.

• Sunny Optical Technology Group

• Back on the 20th January 2023, shares in Bank Of Jinzhou (416 HK) (BoJ) were suspended due to a delay in publishing its FY22 results. 
• BoJ was previously bailed out in March 2020 by the PBOC and Liaoning Financial Holdings, owned by the finance authority of Liaoning province, via the placement of new domestic shares. 
• Now Liaoning Financial is taking BoJ private at HK$1.38/share, or ~0.28x P/B.

• Temporary implications of Evergrande’s court ruling on property sector sentiment and other troubled property developers’ restructuring plans
• Evergrande’s situation is more complicated than that of other troubled developers, as its founder is still under arrest and the company is unable to issue new debts.
• Cross-Border bankruptcy cases for Chinese companies are still relatively rare, making the recognition and enforcement of Hong Kong bankruptcy judgments by the PRC court uncertain

• We believe Mixue’s low prices are fit for the current weak economy.
• Any “freshly made” price lower than Mixue’s will compete with bottled drinks.
• We also believe low rental is the key for Mixue’s low prices.

• Xiaocaiyuan International Holding (XCY HK) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by Huatai and UBS.
• Xiaocaiyuan is a Chinese home-style cuisine restaurant operator. It prices its menus’ items to achieve average spending per consumer between RMB50 and RMB70 for its dine-in customers at its restaurants. 
• According to the firm, a Xiaocaiyuan restaurant offers approximately 45 to 50 menu items in each season, including cold dishes, stews and braised dishes, amongst others. 

• December: strong volume growth, but worsening price declines for STO, Yunda
• Recent trends in X-border parcel volume growth & pricing moderated in December
• In 2024, look for SF to continue its outpeformance; STO, Yunda should still lag

• Mindray has encountered bottleneck in performance growth. So, it urgently hopes to bring “new growth stories”. APT Medical’s current growth momentum is commendable, and could also complement Mindray’s product line.
• We saw poor stock price performance of both after the announcement. High acquisition premium and the possibility that APT Medical’s future performance fall short of expectations are among the reasons. 
• In fact, both sides got what they wanted. We advise investors to be patient.Perhaps, Mindray would indeed make a breakthrough from this acquisition, which is also a blow to Microport.  

• China Beststudy Education Group (3978 HK) is a Chinese K12 tutoring company with the majority of the learning centers in the Greater Bay Area. 
• The company is trading at 5x forward PE (2024), and I expect earnings to grow >100% in 2024 off of a low base, and >30% in 2025. 
• I believe a forward PE of 10x is reasonable and conservative, which is at a discount to the market leader EDU’s current 20x.

• A better week for HK stocks as A-shares rebound on National Team buying, a PBOC RRR cut, and potentially other measures to boost the market. Foreigners stopped selling; that helped.
• Southbound saw decent net buying on ETFs late in the week, but otherwise the week was pretty flat in single-stock land – net buying of SOEs, selling of tech.
• Net SOUTHBOUND buying was HK$4.5bn on the week, mostly through Shanghai (interestingly, 90+% of the decent NORTHBOUND buy was also through Shanghai). 

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc. 
• SOUTHBOUND flows were small positive and NORTHBOUND flows a decent buy. AH premia stopped rising. Chinese shares bounced. SOEs being bought. Tech being sold. Tencent seeing SB outflows, still. 
• New article in China Securities Journal hints at new measures on SOEs. Watch this space. Wouldn’t be short SOEs vs Privates on H/A basis. 

• If a sustainable bottom was made in January, which sectors are best to invest?
• China State Owned Enterprises fit the current uncertain investment climate
• The Hang Seng China Affiliated Index (red chips) provides some good ideas

• Great Wall Motor’s revenue increased by 26%, but its profit increased by less than 5% in 2023.
• Huawei’s shipments increased 36% YoY in 4Q23 and was the only company to witness an increase among the top five sellers.
• Jack Ma, the founder, and Mr. Joe Tsai, the chairman, purchased Alibaba’s shares.

• The approval rate of Draft Bill is very low. So, it’s more of a “strangulation” of investment sentiment. But considering the 2024 US presidential election, similar negative proposals may resurface. 
• WuXi AppTec has little control over the entire situation.There’s “valuation discount” for China CXOs due to geopolitical conflicts. It’s difficult to completely rule out the possibility of “deliberate short selling”. 
• If look deeper, considering “sensitive situations” at present, to some extent, we may have already been in a financial war.The goal of short selling is to pick up cheap chips. 

• Shouhui Tech (SHOU HK) is looking to raise around US$200m in its upcoming Hong Kong IPO. The bookrunners on the deal are CICC, and Huatai International.
• Shouhui Tech (Shouhui) is an online life and health insurance intermediary service provider in China.
• According to F&S, Shouhui was the third largest online insurance intermediary in China in terms of GWPs of long-term life and health insurance in 2022, with a 7.1% market share. 

• China Communications Construction (1800 HK) saw its 4Q23 new contracts increased 14%, faster than the 13.5% growth in 9M23. Full-year new contracts are 3.5% ahead of its target.
• Our estimated backlog of Rmb4.26trn at end-FY23 is 25.6% higher than end-FY22. Such backlog covers 4.9x FY24F revenue, which is a 0.6pp improvement YoY.
• The inclusion of market cap management as a KPI for senior SOE officials will drive return, while CSRC’s encouragement to raise payout ratio may easily push yield to over 10%.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 12.1bn of A-shares on very strong average activity. National Team continued to buy this week. Foreigners bought banks
• Renewables were again a net sell by NORTHBOUND. It is not clear what stops persistent net selling. Capacity huge/growing and Pricing is a disaster in solar modules, batteries, etc. 

• Even good enterprises could be neglected by the market, leading to low valuation. Many people wonder when is the best buying point for pharmaceutical companies. We shared our views.
• If PD-1 sold in China can still achieve a certain scale, the situation of PD-L1 is not the same. In fact, we’re pessimistic about all companies selling PD-L1 in China.
• Beijing Tiantan Biological Products (600161 CH) is a good defensive target in unfriendly external environment. The reasonable market value is RMB45-50 billion. We think Tiantan will maintain stable growth ahead.

• European luxury goods maker enjoyed its best week in the past 52 weeks, spurred by better-than-expected results by LVMH, the industry leader and widely viewed as the bellwether  
• China’s market was cited as resilient and very strong in certain categories, defying the general market perception that Chinese demand is soft
• The key European luxury goods share price has risen by an average of 8.2% YTD, China Tourism Group share price performance has lagged. Good buying opportunity    

• China announced game approval for the Jan batch. The number of games approved has increased compared to recent months.
• The pace of China game approval appears to be accelerating, to the same level as pre-tightening.
• Tencent gets one game approved but we don’t see that the acceleration of game approval benefits big names proportionally.

• The Hang Seng Index this week reversed up and close the week up, after 3 weeks down. This may not be the usual opportunity to go SHORT.
• The index may rise for another 1 week and then pullback, but our seasonal matrix model says there is a good probability the HSI rallies in February.
• Based on this market reading we advise HSI Short Sellers to be particularly careful when setting up SHORT trades between here and the end of February.

• We believe RemeGen has bottom fishing value because its Systemic Lupus Erythematosus (SLE) drug Telitacicept (RC18) has already been approved for sale in China.
• Earliest data read in US clinical trial for IgA Nephropathy is already available, with SLE data read available in C3Q24 and MS in C4Q24;
• We don’t think a leading biotech from the wealthy city of Yantai will run out of cash. We assume RemeGen will be able to mitigate its liquidity problem.

• Investor confidence toward the Chinese tech sector remains fragile after the government crackdown, and Alibaba Group was particularly hard hit due to Jack Ma’s previous conflicts with Chinese regulators.
• Growth of its main eCommerce business is in question given the softening Chinese economy and intense competitions. Additionally, the growth of its cloud computing unit is also slowing down. 
• China’s stock market stabilization fund is not likely to benefit Alibaba directly as it will be used to buy onshore stocks only. 

• New Oriental Education & Techn (9901 HK) reported better than expected FY2Q24 results last night, with sales up 36% yoy and net profit up 183% yoy.
• The company further guided a 42-45% sales growth in FY3Q24, well above market consensus. 
• The visibility for the next 2-3 years is actually quite high post-“double reduction” policy.

• Huawei Technologies Co. Ltd. on Thursday launched the latest version of its own operating system — HarmonyOS NEXT, which will no longer support Android apps and can only accommodate apps specifically developed for it.
• The Chinese telecom equipment giant said the Beta version for developers will be released in the second quarter, and the general version for consumers in the fourth quarter.
• Insiders from Huawei expect the new Mate smartphones to be released in the second half with the HarmonyOS NEXT installed.

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.

• ENN Natural Gas

• Haier Smart Home (6690 HK)‘s management is confident about the FY24 outlook, with net profit growth of 12-13% can be sustained.  
• Casarte will continue to lead with 10-15% revenue increase. There is room for further margin expansion led by overseas markets and process optimisation in the domestic market.
• The plunge in real estate market does not have a material impact on sales and HSH is positive on replacement/upgrade demand. Its FY24F PER of 10.1x is undemanding.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK), Wuxi Biologics (2269 HK), Sichuan Kelun-Biotech Biopharm (6990 HK), and Wisdom Sports (1661 HK).

• With the Hang Seng Index dipping below the 15,000 mark earlier this week, it’s time to dust off some old school perspective.
• This insight looks at Benjamin Graham’s Net Nets, (current assets less current liabilities), then subtract any debt not included in current liabilities. More simply, current assets less total liabilities.
• Graham would conclude these stocks are priced for liquidation.  Stocks discussed include Brilliance China (1114 HK), Ming Yuan (909 HK), Yidu Tech (2158 HK), and A-Living Smart City (3319 HK).

• Short notional in Hong Kong is HK$335bn and has been falling over the last 12 months due to a drop in the market.
• In terms of short notional to marketcap, the Materials, Consumer Staples, Health Care, Utilities, Real Estate sectors are most shorted while the least shorted are Information Technology, Communication Services, Energy.
• The largest shorts have been built on BYD (1211), XPeng (9868), ICBC (1398), Xiaomi (1810), Link REIT (823), JD.com (9618), Wharf Holdings (4) and New World Development (17). 

• Nearly halfway through the review period, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in June.
• Some of the potential changes will also have passive flows from the CSI 500 Index trackers at the same time as the ChiNext Index rebalance.
• The potential inclusions and deletions have slipped over the last couple of months along with the ChiNext Index, but the potential inclusions have outperformed as the deletions have dropped more.

• US-Led tech chain may push for AI phone features, which itself is a great strategy to pull the tech industry out of doldrums. It will pressure Huawei, in our opinion;
• We believe there are other stories unfolding in the AI era, including availability of AI killer apps, the rivalry between super apps and OS vendors, and the growing China/Ex-China chasm.
• Our Top Pick is Tencent and Kuaishou. We maintain Xiaomi at SELL.

• We attended Miniso’s Investor Day on January 18-19 and came away positively. Management outlined growth strategy of fostering strong connection with Chinese supply chain to achieve fast turnaround of…
• We expect MNSO to report C4Q23 revenue and non-GAAP NI at 2.9% and 4.0% higher than consensus mainly due to new store openings;
• We maintain the stock as BUY and raise TP by US$2 to US$33/ADS to reflect our endorsement of the growth strategy.

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.

• Anton Oilfield
• Greentown China
• Reliance Industries

• Geopolitical risks have led to foreign companies planning to withdraw from China.It’s also difficult to allow foreign companies to control China’s core strategic assets.So, Grifols and RAAS’ “breakup” is inevitable.
• This acquisition is an important milestone in the development of Haier’s big health industry. RAAS’s valuation also has room to rise further after being acquire by Haier due to synergies.
• In the case of slowing growth in the home appliance market, this is a wise move for Haier.However, potential goodwill impairment in GDS is a risk for Haier/RAAS and investors.

• HEVI announced the addition of Amerit Fleet Solutions as an Authorized Service Provider to support the company’s electric powered heavy industrial equipment.
• Amerit Fleet Solutions, which has more than 800 locations nationwide, joins Mid-Atlantic-focused Quality Truck Center as the second multi- location service company that has partnered with HEVI to support customers with its equipment.
• The addition of another service provider should help boost the growth of HEVI’s products. In addition to expanding awareness of the brand, this should help alleviate any concerns that potential customers might have about supporting and servicing their equipment.