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Summary of Industrial Securities Co., Ltd. Report

Core Content

The document provides an overview of the Chinese stock market performance, sector analysis, and company-specific insights, particularly focusing on Beijing Easpring Material Technology Co., Ltd. (300073.SZ). It includes market indices, daily headlines, company earnings, and investment research.

Market Indices

• SSE Composite: Closed at 3070.31, up 0.06%.
• SZSE Component: Closed at 10693.75, up 0.14%.
• ChiNext: Closed at 2189.75, up 0.42%.
• HSI: Closed at 22909.54, up 0.41%.
• HSCEI: Closed at 9550.04, up 0.48%.
• Total Market Volume: CNY 475.25 billion, down 7.01% from the previous day.
• Market Sentiment: Winners outnumbered losers by 1551-to-1000.

Sector Review

Winners

• Construction sector led the market, with notable performers:
  • Longjian Road&Bridge Co., Ltd. (600853 SH): +10.07%
  • Zhejiang Huatie Construction Safety Science and Technology Co., Ltd. (603300 SH): +10.02%
• Pharmaceutical sector also performed well:
  • Qianjiang Yongan Pharmaceutical Co., Ltd. (002365 SZ): +10.01%
  • Shanghai Kehua Bio-Engineering Co., Ltd. (002022 SZ): +9.99%

Losers

• Real Estate sector dragged the market:
  • Hunan Tianrun Digital Entertainment & Cultural Media Co., Ltd. (002113 SZ): -10.00%
  • Yinyi Real Estate Co., Ltd. (000981 SZ): -9.29%
• Securities Broker sector ranked second in losses:
  • The Pacific Securities Co., Ltd. (601099 SH): -1.79%
  • Guoyuan Securities Company Limited (000728 SZ): -1.42%

Daily Headlines

• Consumer Goods Policy: China aims to improve the quality of consumer goods and introduce a negative list system for producers and sellers.
• Bank Earnings: China Construction Bank and Bank of Communications reported stable bad-loan ratios after a period of increase.
• Insurance Profit: China Life Insurance saw a significant drop in first-half profit due to stock market declines.
• Container Shipping Loss: China Cosco Holdings posted a first-half loss due to excess capacity.
• Digital Wallet Approval: Ant Financial and Tencent received approval to operate digital wallets in Hong Kong.
• Hong Kong IPO Regulation: Tightening of IPO approval processes is underway.
• China-Japan Relations: Premier Li Keqiang emphasized the need for positive development in bilateral relations.

Latest Company News

• Bank of Communications: 1H net income of 37.7 billion yuan, slightly above estimates.
• Chalco: 1H net income of 57.4 million yuan, up 1.54 million yuan YoY.
• China Construction Bank: 1H net income of 133.4 billion yuan, slightly above estimates.
• China Cosco: 1H net loss of 7.21 billion yuan.
• China Life: 1H net income of 10.4 billion yuan, down from 31.5 billion yuan YoY.
• China Railway: Plans to invest at least 80 billion yuan in Guiyang over five years.
• Citic Bank: 1H net income of 23.6 billion yuan, up 22.6 billion yuan YoY.
• Daqin Railway: 1H net income of 3.68 billion yuan, down from 7.34 billion yuan YoY.
• Hundsun Tech: 1H net income of 164.1 million yuan, down from 211.1 million yuan YoY.
• Shanghai Electric: 1H net income of 596.1 million yuan, down from 714.5 million yuan YoY.
• ZTE: 1H net income of 1.77 billion yuan, up from 1.62 billion yuan YoY.

Research and Investment Insights

Beijing Easpring Material Technology Co., Ltd. (300073.SZ)

• Key Financial Indicators:

  • Revenue (Mn/CNY): 860 (2015A), 1305 (2016E), 1524 (2017E), 1729 (2018E)
  • Net Profit (Mn/CNY): 13 (2015A), 106 (2016E), 174 (2017E), 219 (2018E)
  • Gross Margin (%): 8.3%, 17.4%, 19.6%, 20.9%
  • Net Profit Margin (%): 1.5%, 8.1%, 11.4%, 12.7%
  • ROE (%): 1.1%, 7.8%, 11.4%, 12.6%
  • EPS (CNY): 0.07, 0.58, 0.95, 1.20
  • OCFPS (CNY): 0.06, 0.35, 0.70, 0.90

• Performance Highlights:

  • H116 Revenue Growth: 62.14% YoY to CNY 553 Mn.
  • H116 Net Profit Growth: 3715.8% YoY to CNY 0.37.
  • Q216 Revenue Growth: 74.94% YoY to CNY 324 Mn.
  • Q216 Net Profit Growth: 330.92% YoY to CNY 21 Mn.
  • EPS Q216: CNY 0.11.
  • Operating Cash Flow: CNY -0.29/share.

• Investment Outlook:

  • Rating: Buy (Initiation).
  • EPS Forecast: CNY 0.58 (2016), CNY 0.95 (2017), CNY 1.20 (2018).
  • Potential Risks: Underperformance in the new energy vehicle industry, unexpected fluctuations in raw material prices.

• Company Profile:

  • Engages in research, development, production, and distribution of energy materials.
  • Offers lithium battery positive electrode materials, including lithium cobalt oxide, multivariant materials, and lithium manganate.
  • Founded in 2001 and based in Beijing, China.

• Key Events:

  • Acquired 100% of Beijing Zodngoc Automatic Technology Co., Ltd. in 2015.
  • Consolidated financial reports with Zodngoc in August 2015.
  • Gross Margin Improvement: Jumped 11.2 percentage points to 14.36%.
  • Cost Ratio: Edged up slightly to 8.73%.
  • Net Profit Rate: Increased by 3.81 percentage points to 6.41%.

• Growth Drivers:

  • Strong demand from the new energy vehicle industry.
  • High gross margins of nickelic ternary material.
  • Consolidated financial reports from Zodngoc.
  • Expansion of production capacity in Jiangsu Dangsheng.

• Cost Stabilization:

  • Lithium carbonate prices fell from CNY 0.18Mn/metric ton to CNY 0.14Mn/metric ton.
  • Stable costs help maintain profit margins.
  • Long-term agreements with international suppliers further stabilize costs.

PPP Projects Overview

• Total Scale: Reached CNY 12 trillion in Q3, up from CNY 10.6 trillion in Q2.
• Implementation Rate: 11.7% of all PPP projects started in Q3.
• Investment: Amounted to CNY 1.4 trillion in Q3.
• Sector Focus:
  • Transportation & Civil Engineering: Over 50% of PPP projects.
  • Highways: Rapid growth in new projects.
  • Rail Projects: Less attractive compared to other sectors.
• Regional Trends: New PPP projects are shifting to provinces with fewer projects before.
• Government Spending: Indicates higher supervision risk of debt.
• PPP Investment in 2016: Estimated to be CNY 90 million, taking up 5% of total infrastructure investment.

Analysts and Contact

• Analysts:
  • Han Wang, PhD (wanghan@xyzq.com.cn)
  • Xu Liuming (xuliuming@xyzq.com.cn)
  • Zheng Fangbiao (zhengfb@xyzq.com.cn)
• Assistant Analysts:
  • Zhuang Weibin (zhuangwb@xyzq.com.cn)
  • Lu Yang (luyang@xyzq.com.cn)

Investment Recommendations

• Beijing Easpring: Buy rating, with strong growth expectations.
• Jointown Pharmaceutical Group: Buy (Maintained) rating, due to strong growth momentum and new business expansion.
• Shenzhen O-Film Tech: Buy (Maintained) rating, due to strong growth in AMOLED and fingerprint recognition businesses.