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3 Feb, 2021 (Wednesday)

            
CMS(867)
Analysis¡G
Adhering to the development strategy with innovative products as the core, China Medical System Holdings (867) constantly expands the innovative pipeline, while accelerating the registration progress of innovative products in China, so as to fulfill the unmet medical needs in China pharmaceutical market. The Group recently announced that through a wholly-owned subsidiary, it has acquired all the issued and outstanding shares of Luqa Ventures Co., Limited (the "Target Company"), a dermatology specialty company. The Target Company has an extensive product portfolio of prescription medicines, medical devices, medical aesthetic solutions and skin care products, that meets the diversified needs of consumers. The acquisition will strengthen and bolster the Group`s position in the field of medical aesthetic solutions and skin care. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $12.80, Target Price: $15.00, Cut Loss Price: $11.60


SF HOLDING(002352.SZ)
Analysis¡G
The company is a leading domestic express logistics integrated service provider. As of the end of 2019, SF Holdings has successfully deployed industrial park projects in 45 cities across the country, with first-mover advantages. Among them, the layout logistics site area is 7089 mu, the total planned construction area is about 4.18 million square meters, and the completed construction area is about 1.51 million square meters. The new crown epidemic has had a far-reaching impact on the global macro economy and logistics industry. After the RCEP is signed, China will promote the accelerated development of new business models and models such as cross-border e-commerce, and cultivate new momentum for foreign trade. With the high growth of cross-border e-commerce, SF Express, the logistics leader, will enter a stage of rapid growth.
Strategy¡G
Buy-in Price: RMB104.00, Target Price: RMB125.00, Cut Loss Price: RMB87.60



China Youzan (8083.HK) - GMV of 2020 meets expectations, Price increase drives ARPU upward

Investment Summary

The GMV of 2020 reached RMB 103.7 billion, with target to reach Trillion by 2025On January 8, 2020, the company announced that its total merchandise transactions (GMV) for 2020 is RMB 103.7 billion, which is in line with our previous forecast of RMB 103.2 billion. The company's management aims to reach RMB 1 trillion in GMV by 2025, with a CAGR of 57.5%.

Price increase in the company's mid-to-high end SaaS products, from 2021 onward

The company announced on its official website at the beginning of the year that starting from 2021, the annual price of the Youzan Weimall professional and flagship versions will increase. The annual price of the professional version will increase from RMB 12,800 per year to RMB 14,800 per year, while the annual price of the flagship version will increase from RMB 26,800 per year to RMB 28,800 per year. The price of the basic version Youzan Weimall will remain unchanged. On the other hand, the price of Youzan Retail professional version will increase from RMB 12,800/year to RMB 14,800/year, and the price of the basic version will remain unchanged.

The main reason for this price increase is that the company has added "new store setup service" (·s©±¤W½uªA°È) to its professional and flagship products. The "new store setup service" (·s©±¤W½uªA°È) used to be a service package that required additional charge. However, the company has realized that merchants tend to be less active and have low SaaS product renewal rate if they have encountered problems in the stage of store initiation and set-up. Therefore, the company has included the "new store setup service" (·s©±¤W½uªA°È) to the professional and flagship version with the aim to assist merchants in completing store decoration and online store opening. We believe that this product upgrade and price increase are logical. The product upgrade is expected to enhance the product experience of merchants and is expected to increase the merchant renewal rate. On the other hand, the price increase of the product is carried out on the basis of the improvement of function. Considering the price increase of its peer Weimob almost at the same time period and the higher paying ability of mid-to-high-end merchants, we believe that the price increase of products will not have a great impact on the company's ability to acquire merchants in the future, and it is expected to accelerate the company's ARPU growth.

Youzan AllValue has reached strategic cooperation with Chukou1 to create a comprehensive cross-border independent e-commerce system in China

Chukou1 is a professional international warehousing and distribution logistics service operator and the first logistics service provider in China focusing on overseas warehousing and distribution services. According to public information, Chukou1 currently has a leading position in China's cross-border logistics field, and currently has 16 storage centers in the United States, Europe, Canada and other global regions. In addition, the direct delivery logistics service developed by Chukou1 has the characteristics of high timeliness and high delivery rate, which greatly improves the consumption experience of overseas online shoppers. Chukou1 is highly recognized by cross-border e-commerce platforms. According to the official website of Chukou1, Chukou1 has become the official recommended strategic partner of Amazon, Alibaba, JD.com, Shopee and other well-known platforms.

Recently, Youzan AllValue has reached a strategic cooperation with Chukou1, and they are committed to building a comprehensive cross-border independent e-commerce system in China and optimizing the online shopping experience of overseas consumers, Youzan and E-export perform their respective duties. Youzan provides Chinese merchants with a powerful e-commerce transaction and operation system, while E-export provides efficient China direct-line logistics services, which greatly reduces the threshold for Chinese merchants to go abroad. We believe that cross-border logistics is one of the most important pieces in the cross-border e-commerce system, so we are very optimistic about the strategic cooperation between the two parties.

Valuation

We continue to favor e-commerce SaaS and store SaaS businesses. Based on the company's price increase for mid-to-high-end SaaS products in early 2021 and the fact that the company's 2020 GMV slightly beat our previous expectations, we have raised the company's 2020/2021/2022 revenue to RMB 1.82/3.00/4.35 billion (+0.2%/+3.1%/+3.2%). We maintain the previous 2022 target PS and raise the company's Dec-22 target price to HKD 4.23, with corresponding 2020/2021/2022 PS of 65.6x/39.9x/27.5x (51.9% of revenue). We maintain BUY rating. (Market closing price as of 1 Feb) (exchange rate: RMB 0.85/HKD)

Risk

1) The company is listed on HKEX GEM board, which may have higher risk and volatility comparing to stocks on HKEX main board 2) The expansion of SaaS customers is worse than expected 3) The increased industry competition 4) GMV increase less than expected 5) Merchants renewal rate less than expected

Financial Statements

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Recommendation on 3-2-2021
RecommendationBuy
Price on Recommendation Date$ 3.450
Suggested purchase priceN/A
Target Price$ 4.230
Writer Info
Kevin Chiu
(Research Analyst)
Tel: +852 2277 6514
Email:
kevinchiu@phillip.com.hk

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