Summary of Document Content
Core Content
The document provides a detailed market review and analysis of China's A-share market on February 19, 2016, including key indices, sector performance, daily headlines, company news, and financial data for two listed companies: China United Travel (600358: SH) and China Railway Group (601390: SH).
Market Indices Overview
- SSE Composite Index: Closed at 2860.02, down 0.10% from the previous day, but up 3.49% for the week.
- SZSE Component Index: Closed at 10162.32, up 0.45%, with a 5.05% weekly increase.
- CSI 300 Index: Closed at 3051.59, down 0.07%.
- ChiNext Index: Closed at 2211.01, up 0.92%.
- HSI (Hang Seng Index): Closed at 19285.50, down 0.40%.
- HSCEI (Hang Seng China Enterprises Index): Closed at 8112.57, down 0.66%.
- Total Market Volume: CNY 481.40 billion, down 18% from Thursday.
Main Market Trends
- The A-share market ended mixed on Friday, with investors showing caution due to approaching previous resistance levels.
- Global equity markets faced correction pressure after a rally, and China's A-share market is expected to stabilize and recover after profit-taking selloffs.
- Winners outnumbered losers by around 1.42-to-1.
Sector Performance
Positive Performers
- Small-cap tech names outperformed the market.
- Bluedon Information Security Technologies (300297): +6.93%
- Beijing Trs Information Technology (300229): +8.01%
- Mobile payment-related names surged after Apple and UnionPay announced Apple Pay in China.
- Newcapec Electronics (300248): +10.01%
- Ylz Information Technology (300096): +9.89%
- VR-related names remained popular.
- Beijing Honggao Creative Architectural Design (002504): +10.00%
- Daheng New Epoch Technology (600288): +10.03%
- Textile sector also showed positive momentum.
- Jiangsu Sanfangxiang Industry (600370): +10.02%
- Fujian Fynex Textile Science & Technology (600493): +8.08%
Negative Performers
- Banks were weak.
- Bank Of Beijing (601169): -2.21%
- Bank Of Nanjing (601009): -1.25%
- Airline names felt pressure.
- Spring Airlines (601021): -1.72%
- Air China (601111): -1.43%
- Steel makers declined.
- Sansteel Minguang (002110): -3.13%
- Zhejiang Jiuli Hi-Tech Metals (002318): -1.96%
Daily Headlines
- The PBOC began conducting daily open-market operations starting January 29, 2016, to manage liquidity during the Lunar New Year holiday.
- The end-Jan. yuan positions at the PBOC balance sheet stood at 24.2t yuan, with a net decrease of 644.5b yuan from December.
- Yuan volatility against the U.S. dollar is considered reasonable if the yuan remains stable against a basket of currencies.
- Environment Minister Chen Jining warned that economic downturn may challenge environmental protection efforts.
- Apple Pay in China saw at least 30 million bank cards added, indicating strong performance.
Latest Company News
- China State Construction (601688.SH): Signed construction contracts worth CNY 87.2 billion in January.
- China Shipbuilding (601989.SH): Planned to sell assets for CNY 589 million.
- Haitong Securities (600837.SH): Expanded equity research with four new hires.
- ICBC (601398.SH): Resumed operations at its Madrid branch.
China United Travel (600358: SH)
Investment Recommendation
- Rating: BUY (Maintained)
- Sector: Leisure Service
- Key Financial Indicators
- 2016E Revenue: CNY 223 million
- 2016E Net Profit: CNY 68 million
- 2016E Gross Margin: 88.4%
- 2016E Net Profit Margin: 27.9%
- 2016E ROE: 5.74%
- 2016E EPS: CNY 0.13
Key Event
- Acquired a 5% stake in Rong Zhi Xun Da, a VR live broadcasting equipment manufacturer and online content sharing platform operator, for CNY 9 million.
- Promised to sell no less than 10,000 VR cameras and generate CNY 22.85 million sales revenue in the next 12 months.
Outlook
- The company is optimistic about its strategy in the VR industry.
- The VR market is expected to grow significantly, reaching CNY 5.66 billion in 2016 and potentially CNY 55 billion by 2020.
- VR content business is forecasted to grow at a CAGR of 130%, reaching USD 150 billion in 2020.
Potential Risks
- Slower-than-expected progress of projects.
China Railway Group (601390: SH)
Investment Recommendation
- Rating: OUTPERFORM (Maintained)
- Sector: Rail Construction
Key Financial Indicators
- 2016E Revenue: CNY 667,137 million
- 2016E Net Profit: CNY 121.44 million
- 2016E Gross Margin: 10.9%
- 2016E Net Profit Margin: 1.8%
- 2016E ROE: 10.3%
- 2016E EPS: CNY 0.57
Key Event
- Signed a strategic agreement with Hangzhou government and Everbright Securities (601788) to cooperate on city infrastructure construction and public services using a CNY 10 million city development fund.
- Projects will be implemented via BOT, EPC, and PPP models.
Outlook
- The strategic agreement is expected to bring valuable opportunities and long-term benefits.
- The 2022 Asian Olympic Games in Hangzhou will likely increase demand for city infrastructure.
- The company is expected to benefit from the PPP model and improved demand in the construction industry.
Potential Risks
- New order volume may not meet expectations.
- New programs may progress at a slower-than-expected pace.
Peer Review
| Ticker |
Name |
Mkt Cap (USD 1 Bn) |
15E PE |
16E PE |
PB |
EV/EBITDA |
| 601390:SH |
China Railway Group |
15.85 |
46.93 |
29.60 |
20.33 |
-6,566.42 |
| 600528:SH |
China Railway Erju |
25.20 |
12.88 |
11.72 |
3.02 |
11.61 |
Financial Statements Highlights
Balance Sheet (Mn/CNY)
| Item |
2014 |
2015E |
2016E |
2017E |
| Total Assets |
68,304 |
710,948 |
767,607 |
816,548 |
| Total Liabilities |
57,398 |
591,701 |
637,757 |
675,395 |
| Total Shareholders' Equity |
10,906 |
119,247 |
129,850 |
141,153 |
Cash Flow Statement (Mn/CNY)
| Item |
2014 |
2015E |
2016E |
2017E |
| Net Change in Cash |
-1,563 |
-46 |
6,275 |
2,520 |
| Cash Flows from Operating Activities |
22,645 |
14,303 |
12,691 |
11,630 |
| Cash Flows from Investment Activities |
-1,452 |
-10,774 |
-14,369 |
-16,057 |
| Cash Flows from Financing Activities |
-9,687 |
-3,574 |
7,953 |
6,947 |
Income Statement (Mn/CNY)
| Item |
2014 |
2015E |
2016E |
2017E |
| Operating Income |
612,559 |
625,173 |
667,137 |
705,904 |
| Net Profit |
10,676 |
12,027 |
13,011 |
13,917 |
| EPS (CNY) |
0.49 |
0.53 |
0.57 |
0.61 |
Key Financial Ratios
| Ratio |
2014 |
2015E |
2016E |
2017E |
| Increase Rate of Business Revenue |
9.2% |
2.1% |
6.7% |
5.8% |
| Increase Rate of Business Profit |
19.8% |
3.4% |
9.0% |
7.5% |
| Net Profit Growth Rate |
10.5% |
8.4% |
8.2% |
7.0% |
| Gross Margin Rate |
11.2% |
10.9% |
10.9% |
10.9% |
| Net Profit Margin |
1.7% |
1.8% |
1.8% |
1.8% |
| ROE |
10.5% |
10.4% |
10.3% |
10.1% |
| Asset-liability Ratio |
84.0% |
83.2% |
83.1% |
82.7% |
| Current Ratio |
1.16 |
1.16 |
1.18 |
1.19 |
| Quick Ratio |
0.64 |
0.63 |
0.63 |
0.62 |
Analysts and Translators
- ZHANG Xiaoyun: S0190514070002
- GONG Li: S0190515020003
- LI Xing: Translator
Conclusion
The A-share market in China showed mixed performance on February 19, 2016, with investors cautious due to approaching resistance levels. Key sectors such as small-cap tech, VR, and textiles outperformed, while banks and airlines faced downward pressure. The document highlights the strategic moves and financial performance of China United Travel and China Railway Group, emphasizing their growth potential and opportunities in the VR and infrastructure sectors, respectively.
