Blue Lotus Research Institute

Andy Fu

China growth and global non-US Internet equities

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

Meituan operates as a web based shopping platform for locally found consumer products and retail services. The Company offers deals of the day by selling vouchers on local services and entertainment, dining, delivery, and other services. Meituan provides its services throughout China.

<ul>
<li>O2O has made a huge impact on China's e-commerce scene in 2024. The Coupang-invented model suits mega cities with dense population and order volumes;</li>
<li>Online drug O2O, in particular, has gained momentum because drugs, prescription and non-prescription have robust storage and distribution needs on the ground for O2O use;</li>
<li>Meituan's drug sales has grown its overall market share from 3.6% in 2022 to 7.1% in 2024. We project it to grow to 12.3% by 2030. </li>
</ul>


O2O has made a huge impact on China's e-commerce scene in 2024. The Coupang-invented model suits mega cities with dense population and order volumes;
Online drug O2O, in particular, has gained momentum because drugs, prescription and non-prescription have robust storage and distribution needs on the ground for O2O use;
Meituan's drug sales has grown its overall market share from 3.6% in 2022 to 7.1% in 2024. We project it to grow to 12.3% by 2030. 


Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

Thematic (Sector/Industry)

<ul>
<li>After 40 months of consecutive MoM decline, China's real estate market is on the brink of a somewhat sustained recovery, with particularly, pricing improvement in November;</li>
<li>Pricing is important because it entices buyers back to the market. Before that, transaction volumes have already seen meaningful rebound and the rebound has spread from existing to new homes;</li>
<li>We maintain our view that China had a moderate property bubble in the tradable housing sector but not the overall housing sector. Long term growth potential is still bright.</li>
</ul>


After 40 months of consecutive MoM decline, China's real estate market is on the brink of a somewhat sustained recovery, with particularly, pricing improvement in November;
Pricing is important because it entices buyers back to the market. Before that, transaction volumes have already seen meaningful rebound and the rebound has spread from existing to new homes;
We maintain our view that China had a moderate property bubble in the tradable housing sector but not the overall housing sector. Long term growth potential is still bright.


China's Real Estate Market Showed Beyond-Record Rebound in Year End...Will It Carry to 2025?

Agora, Inc. provides communication software solutions. The Company offers video, voice, and live interactive streaming platform to interact and engage with others online. Agora serves customers worldwide.

<ul>
<li>Agora share price rallied 34% on C3Q24 earning call. During the call Agora outlined plans for large scale layoffs and committed to turn profitable for full year 2025;</li>
<li>With the business rationalization, cooperation with OpenAI now becomes the only growth driver for the future. We believe with Agora's operation-oriented business model, there is a fair chance for success;</li>
<li>Considering the price cut speed of 10x in one year from Chat GPT, the audio GAI price lower from US$9/hour to US$1/hour could happen within one year.</li>
</ul>


Agora share price rallied 34% on C3Q24 earning call. During the call Agora outlined plans for large scale layoffs and committed to turn profitable for full year 2025;
With the business rationalization, cooperation with OpenAI now becomes the only growth driver for the future. We believe with Agora's operation-oriented business model, there is a fair chance for success;
Considering the price cut speed of 10x in one year from Chat GPT, the audio GAI price lower from US$9/hour to US$1/hour could happen within one year.


Agora (API US): Rationalizing All Biz and Zero in on OpenAI

<ul>
<li>Chinese government launched a special regulation to address algorithm of major Internet platforms, outlining 21 rectification requirements, which impacted Meituan, TRIP.com, and social media companies;</li>
<li>However, The rectification measures focused mostly on user operation, algorithm registration, and compliance, with an aim to strengthen government control over public opinion, but not on monetization;</li>
<li>We maintain that Chinese government needs the Internet platforms to boost consumption and employment, as manifested by Premier Li Qiang's recent labeling  of Internet as New Quality Productivity Force.</li>
</ul>


Chinese government launched a special regulation to address algorithm of major Internet platforms, outlining 21 rectification requirements, which impacted Meituan, TRIP.com, and social media companies;
However, The rectification measures focused mostly on user operation, algorithm registration, and compliance, with an aim to strengthen government control over public opinion, but not on monetization;
We maintain that Chinese government needs the Internet platforms to boost consumption and employment, as manifested by Premier Li Qiang's recent labeling  of Internet as New Quality Productivity Force.


Algorithm Regulation on China Internet Is A Slap on the Wrist

<ul>
<li>Last week, China's RmbB12tn debt swap plan fall short of investors' expectations. The pattern of trying to control the release of stimulus and manage the expectations is obvious;</li>
<li>We notice that the government has injected more-than-required liquidity to the bank system. Such magnitude can only be explained by preparation for a long, drawn-out war; </li>
<li>MOF's injection to banks to beef up capital adequacy ratio likely indicates the amount of stimulus that is about to happen to reflate the balance sheets of the local governments.</li>
</ul>


Last week, China's RmbB12tn debt swap plan fall short of investors' expectations. The pattern of trying to control the release of stimulus and manage the expectations is obvious;
We notice that the government has injected more-than-required liquidity to the bank system. Such magnitude can only be explained by preparation for a long, drawn-out war; 
MOF's injection to banks to beef up capital adequacy ratio likely indicates the amount of stimulus that is about to happen to reflate the balance sheets of the local governments.


China Has Stockpiled Arsenals to Meet Trump's Tariff War

Independent Insight Provider, Blue Lotus Research Institute

Mr. Andy (Hongyao) Fu is responsible for Consumer, Travel, Social Service, SaaS coverages at Blue Lotus. Prior to joining Blue Lotus, Andy worked at Evalueserve as a research associate, covering the China Internet sector. He received his master's degree in University of New South Wales and bachelor's degree (with Honours) in Victoria University of Wellington. Andy is a CFA charterholder.

Andy Fu
Independent Insight Provider
• Blue Lotus Research Institute

Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...

Blue Lotus Research Institute

China's Real Estate Market Showed Beyond-Record Rebound in Year End...Will It Carry to 2025?

China's real estate market shows signs of rebound with narrowing decline in home prices, potential stabilization post Chinese New Year 2025. KE...

Blue Lotus Research Institute

Agora (API US): Rationalizing All Biz and Zero in on OpenAI

Agora's share price surged after announcing layoffs and commitment to profitability by 2025, with cooperation with OpenAI as key growth driver....

Blue Lotus Research Institute

Algorithm Regulation on China Internet Is A Slap on the Wrist

China implements new regulations targeting online platform algorithms, impacting companies like Meituan. But we see the small penalty as a de...

Blue Lotus Research Institute

China Has Stockpiled Arsenals to Meet Trump's Tariff War

China's government debt swap plan disappoints investors, but more stimulus is likely as we read from the more-than-adequate capital adequacy...

Blue Lotus Research Institute

Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

​O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...

Blue Lotus Research Institute

China's Real Estate Market Showed Beyond-Record Rebound in Year End...Will It Carry to 2025?

​China's real estate market shows signs of rebound with narrowing decline in home prices, potential stabilization post Chinese New Year 2025. KE...

Blue Lotus Research Institute

Agora (API US): Rationalizing All Biz and Zero in on OpenAI

​Agora's share price surged after announcing layoffs and commitment to profitability by 2025, with cooperation with OpenAI as key growth driver....

Blue Lotus Research Institute

Algorithm Regulation on China Internet Is A Slap on the Wrist

​China implements new regulations targeting online platform algorithms, impacting companies like Meituan. But we see the small penalty as a de...

Blue Lotus Research Institute

China Has Stockpiled Arsenals to Meet Trump's Tariff War

​China's government debt swap plan disappoints investors, but more stimulus is likely as we read from the more-than-adequate capital adequacy...

Blue Lotus Research Institute

O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...

China's real estate market shows signs of rebound with narrowing decline in home prices, potential stabilization post Chinese New Year 2025. KE...

Agora's share price surged after announcing layoffs and commitment to profitability by 2025, with cooperation with OpenAI as key growth driver....

China implements new regulations targeting online platform algorithms, impacting companies like Meituan. But we see the small penalty as a de...

China's government debt swap plan disappoints investors, but more stimulus is likely as we read from the more-than-adequate capital adequacy...