Blue Lotus Capital Group focuses on Chinese New Economy and Non-US Internet companies through its secondary and primary business lines. Since the founding of the company in April 2015, Blue Lotus has formed Blue Lotus Research Institute (BLRI), Creekwood Investment and QC Capital to tackle equity research, financial advisory and direct investment fields, respectively and maintained offices in Hong Kong, Shenzhen, Shanghai and New York. Blue Lotus Research Institute (BLRI) covers more than 60 high tech companies in Hong Kong, US ADR and Chinese domestic bourses. It has received Type 4 research license from Hong Kong Security and Futures Commission (SFC) since founding. Since inception, Creekwood Investment has helped more than 35 companies in raising more than US$650mn of capital.
Presidents Xi and Biden will meet in tomorrow’s APEC Summit, cumulating over 9 months of official and grass roots interactions since the balloon incident. We see intention to be real but impact to be small; We look at two issues to judge if there will be real progress made to benefit China’s economy: (1) will key import tariffs be lifted; (2) will US dollar liquidity return. The answers to both are no. We notice pickup in regional tension in South China Sea and Taiwan Strait. We expect exchange of interests to be limited and tension to rise soon.
With sharp export downturns and downward earning revisions of US competitors, solar PV’s price war and overcapacity issues is fully digested; Sungrow’s C3Q23 and C1H23 results showed it has managed the industry headwinds. It also increasingly participates in China’s electricity reform; We believe solar PV invertor’s superior strategic position in renewable energy’s supply chain is intact. Further, defending against Huawei’s intrusion is not an outstanding risk.
BABA reported C3Q23 revenue, non-GAAP operating profit and GAAP net income in-line, 6% and (7%) vs. our est., and in-line, in-line and (14%); Instead of appointing capable management to oversee key subsidiaries, BABA backpedalled to call off its spin-off plans; We cut TP from US$ 127 to US$ 72, and downgrade to SELL.
We expect Kuaishou to report C3Q23 revenue, IFRS operating profit and non-IFRS net income in-line, 12.4% and 15.3% above vs consensus; We upgrade Kuaishou from SELL to BUY and raise TP from HK$47 to HK$62 based on expectation of consumption downgrade resulting in merchants focusing on population of low tier cities where Kuaishou holds influence. We would like to see Kuaishou making inroads in overseas.
Trading at only 30% the market cap of PDD and 20% of BABA, JD.com is undervalued, in our opinion. Logistics, brand reputation and supply chain knowhow in several key industries are JD.com’s salient strength;
We acknowledge JD’s premium pricing in today’s weak consumption environment to be a mismatch. We also do not endorse JD’s strategy to compete in the low-priced segment in China;
We cut TP from US$ 32 to US$ 29 and upgrade JD to BUY.
Mr. Eric (Tianli) Wen is responsible for IOT and Intelligent Hardware research at Blue Lotus. Eric is one of the most renowned TMT analysts in China. Since he started covering China Internet under Mary Meeker in Morgan Stanley in 2002, Mr. Wen has studied the industry for more than 18 years.
Mr. Wayne T. Chang is a specialist of the Chinese concept share (CCS having worked at BOCI (Bank of China Oppenheimer and Mirae Asset Securities in sales positions covering North Asia across 13 sectors with a focus on US listed ADRs, H-shares, and A-share names.
Mr. Shawn (Zixiao) Yang is responsible for Internet & Media and Advertising coverages at Blue Lotus. Mr. Yang has extensive experience in the financial and internet industry.
On March 12, 2024, Blue Lotus Head of Research Eric Wen hosted a webinar together with the CFO of Hua Hong Semiconductor, Mr. Daniel Wang. The webinar covered a wide range of topics, including the current stage of the semiconductor demand cycle, semiconductor localization opportunities, AI demand for mature semiconductors, power semiconductors for renewables and electric vehicles, and more.
JD is very different from PDD and Alibaba, which are 3P companies. Since they just provide a platform and revenue is basically from advertising. All the merchandise is provided by merchandise partners, which makes them respond very quickly to new trends entering the market, while JD follows the Amazon model.
Blue Lotus Research Institute’s Managing Director Shawn Yang discussed the recent performance disclosure of relevant companies, including the operational performance of JD.com and Tencent August 17th. He talked about JD.com's merchant subsidies, Tencent's future game reserves, and the challenges these companies will face in the second half of the year.
Blue Lotus Research Institute's Managing Director, Mr. Shawn Yang, recently had an interview with Bloomberg regarding Alibaba on June 21st. He discussed Alibaba's new organizational changes, future IPO plans for its subsidiary business groups, and the market competition landscape and unique features of LLM products.
Shawn Yang, managing director at Blue Lotus Capital Advisors, discusses Alibaba business split up and Tencent’s recent quarterly earnings with BBG on Mar 23th and Mar29th, respectively. Shawn also discussed his 2023 outlook for eCommerce, gaming, and ads sectors. We maintain a BUY rating for Alibaba and Tencent.
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