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Archives: CreditSights Issuer List
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Fundamental View
AS OF 06 May 2025Shinhan FG was the best-managed of the large Korean financial groups over many years. During the Asian Financial Crisis, it took advantage of the opportunity to acquire competitors and other businesses, increasing its scale and expanding its business lines.
Its performance has been more variable in the past few years. After a bumpy 2020, it had a better FY21 and FY22, thanks to rising interest rates. However, operating performance turned weak again in FY23, and its FY24 profit growth was softer than peers, impacted by non-bank performance.
In addition to owning a Big 4 bank in Korea, Shinhan FG also has a diversified non-banking business portfolio, including a leading credit card company and a top 10 securities firm.
Business Description
AS OF 06 May 2025- Shinhan Financial Group (Shinhan FG) is one of Korea's most diversified financial groups and the holding company of the second largest Korean bank - Shinhan Bank. It also has credit cards, securities, asset management and insurance subsidiaries.
- Shinhan Bank was set up in 1982 with seed capital from Korean residents in Japan. It was more professionally managed than the heavily politicised older banks and came through the 1997 Asian Financial Crisis in relatively good shape, taking the opportunity to acquire the larger and much longer-established Chohung Bank in 2003.
- In 2007, it made another timely acquisition, buying LG Card from its creditors after it failed during the 2003 Korean consumer lending crisis. Shinhan Card is the largest card issuer in Korea.
- Shinhan is also looking for overseas opportunities where growth is strong and Korean businesses have a presence, with a focus on Vietnam (where Shinhan Card also bought a consumer finance business in 2019) and Indonesia.
Risk & Catalysts
AS OF 06 May 2025As one of Korea’s “Big Four” financial groups, we believe Shinhan FG would likely receive governmental support if needed.
Asset quality pressure has been rising from domestic real estate project financing at non-bank subsidiaries, with credit costs rising from very low levels. Management expects FY25 credit costs to normalize to the mid-30 bp from 47 bp in FY24, though we remain cautious about this outlook.
Loan growth is expected to slow down this year due to both weaker demand and the need to defend its 13% CET 1 ratio target.
Profit growth may encounter challenges if there is volatility in the KRW, which could lead to significant FX losses, or if the high-rate environment in the US persists, causing further overseas CRE valuation losses.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.11% | 1.10% | 3.89% | 3.89% | 1.28% |
| ROA | 0.66% | 0.72% | 0.66% | 0.63% | 0.83% |
| ROE | 9.2% | 10.0% | 8.6% | 8.4% | 11.4% |
| Provisions/Average Loans | 0.28% | 0.34% | 0.78% | 0.66% | 0.41% |
| NPL Ratio | 0.39% | 0.41% | 0.56% | 0.71% | 0.81% |
| CET1 Ratio | 13.10% | 12.79% | 13.17% | 13.06% | 13.27% |
| Equity/Assets | 7.3% | 7.6% | 7.8% | 7.6% | 7.6% |
| Net Interest Margin | 1.81% | 1.96% | 5.91% | 5.85% | 1.91% |
CreditSight View Comment
AS OF 06 May 2025Shinhan FG is one of the four nation-wide commercial banking groups in Korea, with a leading credit card arm. It had over many years the best operating track record, but have shown more consistent performance with peers in recent years. Its topline performance lagged behind its peers in 1Q25, but its ROE was high and just behind KBFG. Shinhan showed commitment to enhancing its NPL coverage ratio, which provides some reassurance, compared to its peers. The group has set an ambitious ROE target of a 50+ bp improvement for FY25, while we maintain a more cautious outlook. We have a Market perform recommendation at both group and bank levels.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: September 22, 2020
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Fundamental View
AS OF 06 May 2025KB Financial Group has grown steadily through the acquisitions of non-bank companies in Korea and small banks in Indonesia and Cambodia. Its banking subsidiary, Kookmin Bank, operates the largest branch network in Korea, with a particularly strong presence in the retail market. This makes it a systemically important bank, with strong potential government support if needed.
The group has a good track record, and its large mass-market franchise gives it a strong customer base. It has a well-diversified business and the highest CET1 ratio among the four major financial groups.
Business Description
AS OF 06 May 2025- KB Financial Group (KBFG) is a well-diversified and well-run group. Its main subsidiaries, in addition to Kookmin Bank (KB), are Kookmin Card, KB Insurance, KB Securities, KB Capital (leasing), and KB Asset Management.
- KB was the result of several mergers after the Asian economic crisis of the late 1990s. Its main predecessors were Citizen's National Bank and Housing & Commercial Bank, both retail-focused banks that have given it the leading position in Korean retail banking.
- For the near term, the group doesn't expect further M&A. It has looked for growth overseas, focusing on Indonesia (where it has taken a 67% stake in Bank Bukopin) and Cambodia (it took a 100% shareholding in Prasac, a micro-finance lender, over 2020-21). It also bought Prudential Financial's Korean insurance business in 2020, which was subsequently merged with KB Insurance.
Risk & Catalysts
AS OF 06 May 2025As one of Korea’s “Big Four” financial groups, we believe that KBFG would likely receive governmental support if needed.
Credit costs normalised to 45 bp in FY24 (from a spike to 73 bp in FY23) – a level more consistent with peers, but 1Q25 credit costs at 54 bp were higher than peers again.
KBFG has the highest NIM among the four FGs, largely thanks to the highest NIM at Kookmin bank among the Big 4 banks.
KBFG is expanding by business line and overseas with a focus on Indonesia and Cambodia—markets with more favourable demographics, growth potential, and profit margins than Korea but also more risk. The profit plan for the Indonesian investment has been slower than expected, and significant provisions have been set aside since 4Q22 for non-viable assets.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.14% | 1.05% | 1.36% | 1.37% | 1.54% |
| ROA | 0.69% | 0.57% | 0.65% | 0.68% | 0.90% |
| ROE | 10.2% | 8.8% | 9.1% | 9.7% | 13.0% |
| Provisions/Loans | 0.31% | 0.45% | 0.73% | 0.45% | 0.56% |
| NPL ratio | 0.33% | 0.34% | 0.57% | 0.65% | 0.76% |
| CET1 Ratio | 13.5% | 13.2% | 13.6% | 13.5% | 13.7% |
| Equity/Assets | 7.3% | 7.9% | 8.2% | 7.9% | 7.8% |
| Net Interest Margin | 1.83% | 1.96% | 2.08% | 2.03% | 2.01% |
CreditSight View Comment
AS OF 28 Apr 2025KBFG is one of the “Big 4” finanical groups in South Korea, and its banking subsidiary, Kookmin Bank, enjoys the strongest franchise with a particularly strong presence in the retail market. This makes it a systemically important bank, with strong potential government support if needed. KBFG has a good track record and a well-diversified business. Capital standing is the key strength, with the current highest group CET1 ratio. Credit costs are relatively high compared to peers in recent years, but its NPL coverage ratio is also the highest. More recently, KBFG delivered a relatively better set of 1Q25 results among the Big 4, and it was the only FG to still witness modest profit growth when excluding the impact of ELS compensation costs from 1Q24.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: September 22, 2020
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Fundamental View
AS OF 06 May 2025Hana Financial Group (Hana FG) struggled for several years to make its acquisition of the former Korea Exchange Bank a success, but results improved dramatically in 2015 as revenues grew and cost efficiencies improved. It has produced strong results since 2020.
The group is looking for inorganic growth in its non-bank businesses as it has fallen behind Shinhan FG and KBFG in this area, but has so far shied away from a large acquisition.
Hana Bank has the highest CET 1 ratio among the Korean Big 4 banks.
Business Description
AS OF 06 May 2025- Hana FG is the third-largest financial group in South Korea. From small origins as a finance company in the 1970s, after the 1997 Asian crisis, Hana grew by acquiring three other banks, including the much older Seoul Bank, which had a banking and trust management business.
- Hana FG bought Korea Exchange Bank (KEB) from Lone Star in 2012 after overcoming many hurdles, but due to staff union opposition, it could not merge with Hana Bank until 2015.
- Hana FG's overseas business is smaller than its peers, and is complemented by KEB's extensive international operations. KEB was started in 1967 as a government-owned bank specializing in foreign exchange. It had a leading share in FX transactions and trade finance among Korean banks.
- Hana FG has shown good growth in its credit card and securities non-bank businesses, but is less diversified than its larger peers KB and Shinhan, which have also acquired insurance companies. Its latest acquisition (in 2019) was a 15% stake in Vietnam's state-owned Bank for Investment & Development (BIDV). In 2023, Hana FG decided not to proceed with the acquisition of KDB Life Insurance after two months of due diligence.
Risk & Catalysts
AS OF 06 May 2025Hana FG’s credit costs at 29 bp in FY24 and 1Q25 were lower than peers (mostly in the range of 40-50 bp). However, the group’s NPL coverage ratio was also ~14-18 ppt behind peers.
NIMs are lower than those of KB and Shinhan at both the group and bank levels. The profit contribution from non-bank entities to group profits is also lagging behind these two peers. Both metrics are comparable to Woori’s.
Loan growth was softer than peers in FY24 and 1Q25 as the bank is putting more focus on RWA management and capital enhancement.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.07% | 1.10% | 1.11% | 1.00% | 1.12% |
| ROA | 0.74% | 0.66% | 0.59% | 0.61% | 0.72% |
| ROE | 10.9% | 10.1% | 9.0% | 9.1% | 10.6% |
| Provisions/Loans | 0.16% | 0.34% | 0.46% | 0.32% | 0.29% |
| NPL Ratio | 0.32% | 0.34% | 0.50% | 0.62% | 0.70% |
| CET1 Ratio | 13.8% | 13.2% | 13.2% | 13.2% | 13.2% |
| Equity/Assets | 6.8% | 6.4% | 6.6% | 6.7% | 6.7% |
| Net Interest Margin | 1.66% | 1.83% | 1.82% | 1.69% | 1.69% |
CreditSight View Comment
AS OF 28 Apr 2025Hana FG grew through acquisitions but only in 2015 was it able to merge its two main bank units to form KEB-Hana Bank. Hana’s management has a good record but for some years struggled to extract value from its acquisitions. Its performance for the past few years has generally been strong. More focus has been put on RWA management and capital enhancement since 2H24. There is potential for further improvements in the non-bank segment. Hana’s credit costs were lower than those of its peers, but this has also resulted in the lowest NPL coverage ratio among the four FGs. The group aims to maintain a CET1 ratio of 13-13.5%. We have a Market perform recommendation at both group and bank levels.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: April 24, 2017
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Search topics about wealth insights and investments.Republic of the Philippines
- Country: Philippines
- Bond: PHILIP 0.7 29 PHILIP 1.648 31
- Indicative Yield-to-Maturity (YTM): 3.023% 4.779%
- Credit Rating : Baa2/BBB/BBB
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Country Overview
AS OF 02 May 2025- The Philippines is one of the fastest-growing emerging market economies, though GDP per capita remains relatively low at USD 3,870 per year, comparable to Egypt.
- Key economic drivers include business process outsourcing (BPO) and tourism, alongside a manufacturing sector specializing in electronics, automotive production, and food processing.
- While the country has limited natural resources, it is a significant global supplier of nickel ore.
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Search topics about wealth insights and investments.Tencent
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain O/P on Tencent post its decent 4Q24 results, with accelerating topline growth and higher EBITDA margin; FOCF contracted due to a one-off surge in capex for GPUs, but debt metrics remained stable and modest. We expect Tencent’s topline growth to remain steady at a high single percentage in FY25, thanks to its advertising, domestic/international gaming, fintech and cloud segments; we expect EBITDA margin to edge higher to 43% on a favorable revenue mix; we expect FOCF to expand and debt metrics to further improve. We continue viewing Tencent as a core holding in China and Asia IG credits, and we like its 2030/2031/2041 in particular.
Business Description
AS OF 29 Apr 2025- Founded in November 1998, Tencent is a leading provider of Internet value added services in China. Since its establishment, Tencent has ventured into instant messaging, social networking, online payments, digital entertainment, and PC and smartphone gaming. Most recently, it has also forayed into high-tech areas such as artificial intelligence, and cloud computing.
- Tencent's leading Internet platforms in China include Weixin/WeChat (online messaging), QQ Instant Messenger (online messaging), Tencent Games (gaming), Tencent Video/Weixin Video Accounts (video platforms), WeChat Pay (payments), and Tencent Cloud. The combined monthly average users (MAU) of Weixin and Wechat reached 1.38 bn as of 30 Sep 2024.
- In 4Q24, 46% of revenues came from Value Added Services (which consist of Domestic Games, International Games, and Social Networks), 33% came from FinTech and Business Services (e.g. commercial payments and cloud), 19% from Online Advertising and 2% from Others.
- Tencent is currently primarily listed on the Hong Kong Stock Exchange, with a market capitalization of HKD 4.4 tn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025While Chinese regulators have adopted a more friendly stance towards tech companies, any regulatory clampdowns abroad and domestically (e.g. antitrust rules, data security, personal information protection laws) may affect Tencent’s business. Tencent’s gaming, music streaming, and online payment units are among those that have come under regulatory scrutiny in the past.
Tencent uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers, which poses regulatory risks. Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 29 Apr 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 25.2% | 27.0% | 31.4% | 29.8% | 25.4% |
| Net Debt to Book Cap | 4.0% | 6.0% | 8.5% | 1.0% | 2.3% |
| Debt/Total Equity | 33.7% | 36.9% | 45.9% | 42.5% | 34.0% |
| Debt/Total Assets | 19.7% | 20.1% | 22.8% | 23.5% | 20.1% |
| Gross Leverage | 1.4x | 1.7x | 1.9x | 1.6x | 1.3x |
| Net Leverage | 0.2x | 0.4x | 0.5x | 0.1x | 0.1x |
| Interest Coverage | 24.8x | 24.7x | 19.0x | 19.9x | 22.5x |
| EBITDA Margin | 38.3% | 34.9% | 34.3% | 38.9% | 42.4% |
CreditSight View Comment
AS OF 15 May 2025We maintain our Outperform recommendation on Tencent post its decent 1Q25 results; topline accelerated, EBITDA margin expanded, free operating cash flow remained robust, and debt metrics remained modest. We expect Tencent’s topline growth to marginally accelerate in FY25, supported by its advertising, domestic/international gaming, fintech and cloud segments; we expect EBITDA margin to marginally improve as its better revenue mix offset the increased R&D spending for AI development; we expect FOCF to expand, and debt metrics to improve from 1Q25. We continue viewing Tencent as a core holding in China and Asia IG credits. We prefer its 2030/2031/2041 notes for spread pick up against Chinese SOEs. We think Tencent is more attractive compared to BIDU/JD and more defensive that BBB China tech.
Recommendation Reviewed: May 15, 2025
Recommendation Changed: August 18, 2022
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Search topics about wealth insights and investments.SK Hynix
- Bond: HYUELE 5.5 29
- Indicative Yield-to-Maturity (YTM): 4.897%
- Credit Rating : Baa2/BBB/BBB
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Fundamental View
AS OF 29 Apr 2025- We maintain our Market perform on SK Hynix. 1Q25 topline growth and EBITDA margin were ahead of expectations, FOCF expanded and net debt metrics were stable to 4Q24. We expect SK Hynix’s debt metrics to marginally improve over the next 12 months, on resilient topline growth, higher YoY EBITDA margins, strong FOCF and lower net/total debt. SK Hynix remains 5 bp tighter than Asia BBB corporate, which has likely priced in its improving credit outlook, but we see limited room for further spread compression given the increased headline risk relating to US tariffs/sanctions, and potential downside risk from AI overcapacity. For investors looking for exposure into SK Hynix, we prefer its 6.5% 2033 bond for duration extension, high coupon carry and a spread pick up against Asia BBB corporate.
Business Description
AS OF 29 Apr 2025- SK Hynix is one of the world’s largest memory semiconductor companies. As an Integrated Device Manufacturer (IDM), it engages in the design, manufacturing and sale of advanced memory semiconductors. It derives 68% of FY24 revenues from the sale of DRAM (dynamic random-access memory), 29% from NAND Flash, and the remaining 3% from CMOS Image Sensors and foundry services. The company's products are essential to a wide range of electronic devices, including PCs, servers, graphic cards, and mobile devices.
- SK Hynix holds the largest global market share (1Q25: 36%) in DRAM and second largest in NAND Flash (4Q24: 20.5%).
- SK Hynix is a member of SK Group, South Korea's second largest conglomerate by asset, and is 20.1%-owned by SK Square.
- The company has manufacturing facilities located in (1) South Korea — Icheon (DRAM, NAND), and Cheongju (NAND); and (2) China — Wuxi (DRAM), Dalian (NAND); and packaging & testing facilities in Chongqing, China.
- SK Hynix had a market capitalization of KRW 131.6 tn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025- The memory sector is subjected to significant boom/bust cycles, leading to volatility in its revenue and EBITDA margin. During an upcycle, memory vendors typically expand capacity to meet strong end-demand from PC, smartphones, and servers; however, the long-lead time for new plants could result in an oversupply when end-demand is tapering off.
- Capex intensity (as % of revenues) and R&D costs are elevated even in downcycles for SK Hynix, as it needs to maintain technological leadership and fast evolving product requirements from customers.
- SK Hynix has large production and revenue exposure to China; rising US-China tension and restrictive US chip exports to China could destabilize the long-term prospect of its China production and weigh on its $ bonds. Though, in Oct-23 SK Hynix was designated as a “Validated End User” by the US government, which gave it an indefinite waiver for importing US chip gears to their Chinese plants.
- SK Hynix may be vulnerable to US tariff risk; the company derived 63% of FY24 revenues from the US.
Key Metric
AS OF 29 Apr 2025| KRW bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 19.9% | 23.5% | 28.1% | 37.8% | 25.6% |
| Net Debt to Book Cap | 12.8% | 13.3% | 21.2% | 27.7% | 11.6% |
| Debt/Total Equity | 24.8% | 30.8% | 39.2% | 60.7% | 34.4% |
| Debt/Total Assets | 18.1% | 19.9% | 23.9% | 32.4% | 21.2% |
| Gross Leverage | 0.9x | 0.8x | 1.2x | 5.8x | 0.7x |
| Net Leverage | 0.6x | 0.5x | 0.9x | 4.3x | 0.3x |
| Interest Coverage | 57.3x | 87.3x | 38.7x | 3.8x | n/m |
| EBITDA Margin | 45.5% | 52.8% | 46.2% | 17.1% | 53.8% |
CreditSight View Comment
AS OF 24 Apr 2025Considering SK Hynix’s strong position in the growing semiconductor industry and the HYUELE 5.5 29 bond’s potentially attractive yield-to-maturity for its January 2029 maturity, coupled with investment-grade ratings, it could be a worthwhile purchase now for investors seeking stable income from a major technology player, assuming SK Hynix maintains its financial health.
Recommendation Reviewed: April 24, 2025
Recommendation Changed: February 20, 2025
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Search topics about wealth insights and investments.Reliance Industries
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: India
- Region: India
- Bond: RILIN 4.125 25
- Indicative Yield-to-Maturity (YTM): 5.531% (Indicative as of March 2)
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Fundamental View
AS OF 29 Apr 2025We are comfortable with Reliance’s large diversified scale of operations and dominant presence in various key sectors (refining, petrochemicals, retail and telecom), which allows for earnings resilience.
We believe a lackluster oils-to-chemicals outlook is well mitigated by strong outlooks for telecom and retail.
Plans to ramp up its renewable energy business could provide the next leg of growth and improve ESG perception.
Reliance incurs significant capex that has weighed on free cash flow generation, though we acknowledge its historically prudent financial management and robust credit metrics that provide ample elbowroom for some credit profile deterioration.
Business Description
AS OF 29 Apr 2025- RIL is an Indian diversified conglomerate engaged in oil & gas refining, marketing, petrochemicals, organized retail, telecom and digital services, amongst others. It is the largest company in India by revenue, profits, exports and market capitalization (INR 20 tn).
- It is the second largest refiner in India and produces petroleum products such as petrol, high-speed diesel (HSD), aviation turbine fuel (ATF), LPG and lubricants.
- It is the largest petrochemicals producer in India, boasting production of ~38 mn tons in FY20. Through its integrated Jamnagar refinery complex, it produces Polymers/Plastics, Elastomers (synthetic rubber) and Polyester products.
- It is the largest retailer in India in terms of revenue. It operates 18.8k stores (as of March 2024) to sell products ranging from consumer electronics, fashion and lifestyle, grocery, petrol retail and telecom and digital services. It launched its online retail channel, 'JioMart', in December 2019.
- Reliance Jio is the largest mobile telecom operator by subscriber base (482 mn as of March 2024) in India and boasts the widest 4G wireless network in the country.
- In 2021, RIL announced investments to the tune of INR 750 bn/ $10 bn (for next 3 years) to build a renewable energy ecosystem which will include 4 giga factories. Set to be located in Gujarat, the factories will produce solar modules, hydrogen, fuel cells and battery grid to store electricity. Long-term goals also include building 100 GW of PV solar plants by 2030.
Risk & Catalysts
AS OF 29 Apr 2025Reliance’s O2C (oil-to chemicals) margins remain under pressure from global tariff-led growth slowdown concerns and persisting oversupply conditions in China.
Reliance incurs significant capex at historically high levels, particularly from continued investments into its O2C, retail, and nascent renewables businesses. This has weighed on its free cash flow generation, though we take comfort in Reliance’s historically prudent financial management and robust credit metrics.
Reliance faces key-person risk; 65-year old Chairman Mukesh Ambani has begun to hand over the reins of the company’s different business divisions to his children.
Key Metric
AS OF 29 Apr 2025| INR bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 25.9% | 26.4% | 35.3% | 33.1% | 31.9% |
| Net Debt to Book Cap | 24.3% | 23.4% | 29.9% | 26.1% | 24.8% |
| Debt/Total Equity | 34.9% | 35.9% | 54.5% | 49.6% | 46.9% |
| Debt/Total Assets | 21.1% | 21.3% | 28.1% | 26.1% | 24.3% |
| Gross Leverage | 3.5x | 2.9x | 3.2x | 2.8x | 2.9x |
| Net Leverage | 3.2x | 2.6x | 2.7x | 2.2x | 2.2x |
| Interest Coverage | 3.1x | 5.7x | 5.0x | 7.0x | 6.8x |
| EBITDA Margin | 16.6% | 15.3% | 15.9% | 17.7% | 16.9% |
CreditSight View Comment
AS OF 29 Apr 2025We have a Market perform recommendation on Reliance (RIL); we prefer its 2032 and would avoid its 2045 and 2052. We see room for RIL 2032 to tighten 10-15 bp versus Bharti 2031 and PTTGC 2032. We like RIL’s large diversified operations and dominant market shares in key sectors (refining, retail and telecom) that boosts earnings resilience. Its growing renewable business could aid ESG investor sentiment too. While we acknowledge persisting weakness in the O2C segment and RIL’s elevated capex needs, we think the impact is mitigated by RIL’s prudent financial management and healthy credit metrics that provide ample elbowroom for some credit profile deterioration. While key man risk remains a concern, we take comfort in gradually progressing succession plans.
Recommendation Reviewed: April 29, 2025
Recommendation Changed: June 30, 2021
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Search topics about wealth insights and investments.JD.com
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain our Market perform recommendation on JD post its 4Q24 results, where it reported a pick up in topline growth, better EBITDA margin, higher FOCF and improving debt metrics; We expect JD’s debt metrics to improve over the next 12 months as the JD Home Appliance Trade-In Alliance program and expanding supermarket category supports topline growth and a continued expansion of the higher-margin 3P sales and better product mix result in better EBITDA margin; we expect JD to cover its increased shareholder rewards with free operating cash flow. We think its positive credit outlook over the next 12 months has been largely priced in given that JD’s $ bond trades largely in-line with Asia A- corporates; we see better value in BABA and TENCNT.
Business Description
AS OF 29 Apr 2025- JD is one of China's leading e-commerce and retail infrastructure service providers.
- JD has a large fulfillment infrastructure which includes over 1,600 warehouses operated by the company, and 2,000 cloud warehouses operated by third-party warehouse owner-operators under JD Logistics Open Warehouse Platform. Its warehouse network had an aggregate gross floor area of approximately over 32 mn square meters, as of 31 December 2023.
- JD has 3 operating segments, namely (1) JD Retail (84% of 4Q24 revenues), which includes JD Health and JD Industrials, and the segment mainly engages in online retail, online marketplace and marketing services in China; (2) JD Logistics (14%) which includes both internal and external logistic businesses; and (3) New businesses (1%) which consist of Dada, JD Property, Jingxi and overseas businesses.
- JD had a market capitalization of RMB 345.5 bn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025While Chinese regulators have adopted a friendlier stance towards tech companies, any regulatory clampdowns may still adversely affect the business of JD (e.g. antitrust rules, data security & personal data protection laws).
Intensifying competition amongst Chinese eCommerce platforms with the entrance of new live-streaming/short-form video platforms and group buying discount platforms may result in slower topline growth and weaker EBITDA margin for JD as its increase its user/merchant incentives and promotional activities to defend its market share.
There are regulatory risks involving the use of variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs). Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
Key Metric
AS OF 29 Apr 2025| RMB mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.5% | 12.2% | 19.2% | 18.8% | 22.3% |
| Debt/Total Equity | 14.2% | 13.8% | 23.7% | 23.1% | 28.7% |
| Debt/Total Assets | 7.5% | 6.9% | 10.9% | 10.9% | 12.9% |
| Gross Leverage | 1.4x | 1.8x | 1.9x | 1.5x | 1.7x |
| Interest Coverage | 20.1x | 16.1x | 16.3x | 15.5x | 18.5x |
| EBITDA Margin | 3.0% | 2.0% | 3.3% | 4.1% | 4.6% |
CreditSight View Comment
AS OF 14 May 2025We maintain our Market perform on JD post its decent 1Q25 results; topline growth accelerated, EBITDA margin expanded and gross debt metrics improved, but free operating cash flow turned more negative on increased working capital investments which led to a contraction in net cash. We expect JD’s debt metrics to marginally improve over the next 12 months, with topline growth supported by the domestic stimulus policies, lower EBITDA margin on wider losses for its food delivery expansion, healthy FOCF which should cover its shareholder rewards, flat net cash to YE24, and steady gross leverage. We think its $ bonds trades fair compared to its Asia A/A- corporate and China tech peers, and has likely priced in its stable credit outlook and potential rating upgrade by S&P.
Recommendation Reviewed: May 14, 2025
Recommendation Changed: November 21, 2022
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Search topics about wealth insights and investments.Baidu
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain M/P on Baidu post its in-line 4Q24 results; the contraction in Baidu’s revenues were less than feared thanks to its AI-cloud business, which partially offset the weaknesses in the online marketing and iQiyi segments. EBITDA margin fell and FOCF contracted YoY; debt metrics marginally weakened and net cash contracted. We expect Baidu’s revenue to turnaround in FY25 and EBITDA margin to improve on recovering advertising revenues and the continued strength in its AI cloud business; we forecast its FOCF to expand, but we do not expect the company to significantly reduce its gross debt as the bulk of FOCF would be used for share buybacks. We continue to prefer Alibaba and Tencent over Baidu among A-rated China Tech. For investors looking for exposure in Baidu, we prefer its 2028s.
Business Description
AS OF 29 Apr 2025- Founded in 2000, Baidu started out as a search engine business and began its development into artificial intelligent (AI) since 2010.
- Baidu Core is the main revenue driver of the company (79% of 3Q24 revenues) which provides search-based, feed-based and other online marketing services (total: 56% of 3Q24 revenues), as well as products and services from new AI initiatives (23% of revenues); Baidu's AI initiatives include AI cloud (enterprise & public sector cloud, and personal cloud), Intelligent Group Driving (Apollo Go, Apollo auto solutions, and intelligent EVs under Jidu Auto), Mobile Ecosystem (Baidu App, ERNIE Bot, Haokan and Baidu Post), and other growth initiatives (ie. Xiaodu smart devices powered by DuerOS smart assistant and AI chips).
- iQiyi accounts for the remaining revenues of Baidu; iQIYI is an online video platform with a content library that includes licensed movies, television series, cartoons, and other programs.
- Baidu launched ERNIE bot in Mar-23, a generative AI chatbot powered by ERNIE, Baidu's in-house foundation model.
- Baidu has a market capitalization of RMB 226.5 bn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025Any regulatory clampdowns abroad and domestically (e.g. potential US investment ban, antitrust rules, data security and personal information protection laws) may adversely affect the business of Baidu. The interpretation of Chinese laws and regulations involves some degree of uncertainty.
There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Baidu has made significant investments into long-term AI-related projects, which may take time to turn profitable. A potential escalation of the US chip restriction could have a material negative impact its AI related business (ie. cloud, ernie bot, autonomous driving).
Key Metric
AS OF 29 Apr 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 30.4% | 29.7% | 28.5% | 25.0% | 22.5% |
| Debt/Total Equity | 43.8% | 42.2% | 39.8% | 33.4% | 29.0% |
| Debt/Total Assets | 24.8% | 24.1% | 23.4% | 20.8% | 18.5% |
| Gross Leverage | 2.7x | 3.3x | 2.8x | 2.2x | 2.0x |
| Interest Coverage | 9.8x | 8.2x | 11.4x | 12.1x | 13.7x |
| EBITDA Margin | 28.5% | 22.6% | 26.8% | 29.2% | 29.1% |
CreditSight View Comment
AS OF 22 May 2025We maintain our M/P on Baidu post its uninspiring 1Q25 results; topline growth was ahead of expectation on strong AI cloud demand, but EBITDA margin fell on a weaker revenue mix, FOCF turned negative on higher AI investments, debt metrics weakened, and net cash contracted. We expect a modest deterioration in Baidu’s debt metrics compared to YE24. We continue preferring Alibaba and Tencent over Baidu among A-rated China tech credits. We like the stronger balance sheet, larger scale, stronger business positions, and better credit outlook of Alibaba and Tencent. Baidu trades only 3-8 bp wider than Alibaba and Tencent which we view as rich given the limited improvement in its debt metrics over the next 12 months. For investors looking for exposure in Baidu, we prefer its Apr-2030.
Recommendation Reviewed: May 22, 2025
Recommendation Changed: August 31, 2022
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Search topics about wealth insights and investments.Alibaba
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain our Outperform recommendation on Alibaba post its decent F3Q25 results; topline growth were ahead of expectations thanks to improving monetization of domestic eCommerce and cloud demand accelerated; though, wider losses for international eCommerce weighed on EBITDA margin, and higher capex for cloud/AI led to a fall in FOCF; debt metrics remained modest and net cash expanded. We expect Alibaba’s topline growth (excl. Sun Art and Intime) to accelerate over F4Q25 and FY26; we expect EBITDA margin to stay flat, but FOCF to trend lower on a material increase in capex for cloud; we expect Total debt/EBITDA to remain stable, and Alibaba to maintain its healthy net cash position. We view the credit as a core holding in China and Asia IG; we like its 2030/2031/2035/2041 in particular.
Business Description
AS OF 29 Apr 2025- Founded in 1999, Alibaba is the largest retail commerce company in the world based on gross merchandise volume (GMV) as of 31 March 2023.
- The company's business segments comprise Taobao & Tmall Group (44% of F3Q25 revenue; China e-commerce incl. Taobao, Tmall, Taobao Deals, Taocaicai, 1688.com), International Digital Commerce (12%; incl. Lazada, AliExpress, Trendyol and Daraz), Cloud Intelligence Group (11%; incl. AliCloud, AI), logistic provider Cainiao (9%), Local Consumer Services (5%; incl. Ele.me, Amap), and Digital Media and Entertainment (2%, incl. Youku & Alibaba Pictures) and Others (17%; incl. Freshippo, Fliggy, Alibaba Health, Intelligent Information Platform, SunArt, DingTalk).
- Taobao/Tmall is Alibaba's core business and the main EBITA & cash generation unit of the group. Alibaba's annual active consumer exceeded 1 bn in June-2022.
- Alibaba had a market capitalization of RMB 2.1 tn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025While Chinese policymakers have adopted an increasingly friendly stance towards tech platforms, regulatory clampdown (e.g. anti-monopoly guidelines, data security laws, personal information protection laws) may still affect Alibaba as it increases compliance cost. There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Intensifying competition amongst eCommerce platforms may result in slower topline growth and weaker EBITDA margins.
Alibaba does not control Alipay but relies on Alipay to conduct substantially all the payment processing and escrow services on its marketplaces.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 29 Apr 2025| CNY BN | FY21 | FY22 | FY23 | FY24 | LTM F3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.1% | 11.6% | 12.6% | 13.3% | 17.5% |
| Debt/Total Equity | 13.8% | 13.1% | 14.4% | 15.3% | 21.1% |
| Debt/Total Assets | 8.8% | 8.3% | 9.2% | 9.7% | 12.5% |
| Gross Leverage | 0.8x | 0.9x | 0.9x | 0.9x | 1.2x |
| Interest Coverage | 39.9x | 32.2x | 29.6x | 24.0x | 20.2x |
| EBITDA Margin | 24.9% | 18.5% | 20.2% | 20.3% | 19.1% |
CreditSight View Comment
AS OF 16 May 2025We maintain our Outperform recommendation on Alibaba post its decent 1Q25 results; topline growth marginally slowed, EBITDA margin improved,FOCF fell on higher capex, net cash remained robust and debt metrics were stable. We expect Alibaba’s topline growth to accelerate over FY26, driven by better domestic eCommerce monetization, resilient international eCommerce, and robust cloud demand; we expect EBITDA margin to remain flat at 20%, but FOCF to trend lower on a material increase in capex for cloud; that said, we expect Alibaba’s Total debt/EBITDA to improve over the next 12 months, and maintain its healthy net cash position. We continue to view Alibaba as a core holding in Asia IG credits. We prefer its 30/31/35/41 bonds for spread pick up against Chinese SOEs.
Recommendation Reviewed: May 16, 2025
Recommendation Changed: August 05, 2022