Strong Growth Trend: Geely Auto is expected to achieve 2016 sales of 760,000 units, exceeding the previous target of 700,000 units. The company anticipates a 70% increase in revenue and a 90% increase in net profit YoY for 2016.
2017E Sales Target: Management is expected to announce a 2017E sales target in January, which is projected to exceed 900,000 units.
Product Strategy: In 2017, Geely will focus on releasing its full production capacity, with a higher proportion of SUV models. It will also adjust variant models, engine upgrades, and introduce new LYNK&CO models in 2018-19.
LYNK&CO: The brand will launch three models in 2018-19 based on Volvo technology, with an innovative business model that includes online sales, customization, and car sharing via apps.
Market Outlook: The auto market is expected to grow by 3%+ in 2017. Demand in minor cities will be released, and the impact of government subsidies cuts on NEVs will be less than in 2011 due to improved buyer consumption power.
Valuation: The stock is trading at 25% discount to its historical average, with a target price (TP) of HK$13.0, implying a 13.6x FY17E P/E. The estimated earnings CAGR from 2015 to 2018 is 60%, justifying a 20% valuation premium over the 11x historical average forward P/E.
Cogobuy (400 HK, HK$12, Non-rated)
Market Position: Cogobuy is China's leading IC components e-commerce platform, with a 1% share in big enterprises and potential to grow to 3-5% in the long run.
GMV Growth: In 3Q16, SME GMV grew by 89% YoY, and SME contribution to GMV increased from 55% in 3Q15 to 67% in 3Q16.
Ingdan Platform: Ingdan, Cogobuy's IoT platform, contributed 29% of total GMV in 3Q16 and has over 18,000 innovation projects and 14,000 supply chain players.
Valuation: Cogobuy is trading at 23x FY17E P/E and a PEG of 0.7x, significantly below its global peers (51x P/E and 1.0 PEG).
Research Coverage Summary
Auto & Auto Parts
Company
Ticker
Rating
Price (Dec 7)
TP (12m)
% Upside
Mkt Cap (US$mn)
EPS 2015
EPS 2016E
EPS 2017E
P/E 2015
P/E 2016E
P/E 2017E
Brilliance China
1114 HK
BUY
HK$10.96
HK$13.0
19
7,134
0.69
0.72
0.89
12.7
12.3
9.1
China ZhengTong Auto
1728 HK
BUY
HK$2.36
HK$3.5
48
673
0.29
0.39
0.46
6.5
4.9
5.1
Geely Automobile
175 HK
BUY
HK$8.3
HK$13.0
57
9,459
0.26
0.53
0.83
25.6
12.6
7.7
BAIC Motor
1958 HK
NEUTRAL
HK$7.1
HK$7.3
3
6,877
0.44
0.71
0.86
12.9
8.1
7.6
Great Wall Motor
2333 HK
BUY
HK$7.59
HK$11.0
45
8,937
0.88
1.06
1.19
6.9
5.8
6.6
Fuyao Glass
3606 HK
BUY
HK$22.15
HK$26.0
17
7,168
1.09
1.22
1.42
16.3
14.7
11.0
Oil and Gas
Company
Ticker
Rating
Price (Dec 7)
TP (12m)
% Upside
Mkt Cap (US$mn)
EPS 2015
EPS 2016E
EPS 2017E
P/E 2015
P/E 2016E
P/E 2017E
Sinopec Oilfield Service
1033 HK
BUY
HK$1.61
HK$1.9
18
2,864
0.00
-0.61
0.03
N.A.
N.A.
41.9
SPT Energy
1251 HK
BUY
HK$0.71
HK$6.2
773
140
0.32
0.40
-
5.7
5.2
N.A.
Petro-king Oilfield Services
2178 HK
NEUTRAL
HK$0.5
HK$1.0
100
129
0.10
0.10
0.10
5.0
5.0
0.0
China Oilfield Services
2883 HK
SELL
HK$7.63
HK$6.2
-19
4,697
0.23
-2.11
-0.07
26.6
N.A.
N.A.
Property
Company
Ticker
Rating
Price (Dec 7)
TP (12m)
% Upside
Mkt Cap (US$mn)
EPS 2015
EPS 2016E
EPS 2017E
P/E 2015
P/E 2016E
P/E 2017E
Yuexiu Property
123 HK
BUY
HK$1.13
HK$1.36
20
1,808
0.11
0.11
0.15
10.3
10.3
7.5
Times Property
1233 HK
BUY
HK$3.53
HK$4.8
36
785
1.03
1.13
1.25
3.4
3.1
2.8
Yuzhou Property
1628 HK
BUY
HK$2.84
HK$3.3
16
1,398
0.48
0.54
0.29
5.9
3.8
4.2
New World Dev
17 HK
BUY
HK$8.67
HK$12.2
45
10,364
0.37
0.30
0.28
14.7
18.3
18.2
Country Garden
2007 HK
NEUTRAL
HK$4.46
HK$5.0
10
12,996
0.37
0.29
0.28
14.7
18.3
18.2
Technology, Media & Telecom
Company
Ticker
Rating
Price (Dec 7)
TP (12m)
% Upside
Mkt Cap (US$mn)
EPS 2015
EPS 2016E
EPS 2017E
P/E 2015
P/E 2016E
P/E 2017E
China Telecom
728 HK
NEUTRAL
HK$3.7
HK$4.13
12
6,624
0.25
0.23
0.27
11.9
20.4
21.2
China Unicom
762 HK
BUY
HK$9.36
HK$11.86
27
28,915
0.44
0.30
0.42
17.0
25.2
22.3
China Mobile
941 HK
BUY
HK$84.05
HK$112.0
33
220,964
1.03
1.08
1.21
10.2
9.8
10.9
Alternative Energy
Company
Ticker
Rating
Price (Dec 7)
TP (12m)
% Upside
Mkt Cap (US$mn)
EPS 2015
EPS 2016E
EPS 2017E
P/E 2015
P/E 2016E
P/E 2017E
Datang Renewable Power
1798 HK
NEUTRAL
HK$0.7
HK$0.83
19
226
0.00
0.03
0.11
N.A.
18.8
6.4
Xinjiang Goldwind
2208 HK
BUY
HK$11.96
HK$13.0
9
4,152
1.13
1.20
1.30
8.5
8.1
8.7
GCL-Poly Energy
3800 HK
BUY
HK$1.02
HK$1.59
56
2,038
0.12
0.14
0.15
8.5
7.3
6.8
Huadian Fuxin Energy
816 HK
BUY
HK$1.83
HK$2.1
15
506
0.22
0.28
0.30
6.7
5.3
4.5
Huaneng Renewables
958 HK
BUY
HK$2.53
HK$3.1
23
3,175
0.19
0.26
0.34
10.7
7.9
7.4
Xinyi Solar
968 HK
BUY
HK$2.55
HK$4.3
69
17,210
0.19
0.27
0.38
13.4
9.4
7.9
What to Watch
Economic Data
US: Consumer Credit on Dec 8, 2016, reported at 19.29bn (Prior: 18bn)
Japan: GDP Rev QQ Annualised forecast at 2.40% (Prior: 0.70%)
China: Exports and Imports data not forecasted, Trade Balance at 48.76bn
Euro zone: ECB Deposit Rate forecast at -0.40%
US: Initial Jobless Claims on Dec 8, 2016, at 268k
China: PPI YY on Dec 9, 2016, at 1.20% (Prior: 2.10%)
Company Events
2016/12/08: Emperor Capital Group Ltd. announced results and dividend
Summary
Geely Auto is expected to maintain strong growth, with 2016 sales surpassing the target and 2017E sales projected to exceed 900,000 units.
LYNK&CO is set to launch three models in 2018-19 with an innovative business model.
Cogobuy is growing rapidly, with SMEs driving GMV growth and Ingdan serving as a key platform for IoT innovation.
The stock is trading at a discount to its historical average, suggesting potential for growth.
The auto and alternative energy sectors are highlighted for positive market outlooks and growth potential.
Valuation metrics for various companies show a range of potential upside and P/E ratios, with some companies upgraded to strong buy.
