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Dim Sum Express Summary (Sept 14, 2018)

Core Content Overview

The Dim Sum Express report from GF Securities provides an analysis of the A-share and H-share markets, along with key sectors and individual companies, highlighting market trends, performance metrics, and investment outlooks.

Key Index Performance

Key Observations:

• MXCN and CCMP showed the highest EPS growth, with MXCN at 45.4% and CCMP at 84.7%.
• UKX and NKY were the only indices with positive 1D changes, though they had negative YTD performance.
• SHCOMP and SZCOMP experienced the largest YTD declines, with SZCOMP at -25.6%.
• INDU and SPX had relatively stable performance, with positive YTD growth.

A-Share Market Highlights

Oil & Gas Equipment and Services

• Oil prices have risen sharply due to supply tightening, US sanctions on Iran, and reduced US oil inventory.
• Capex recovery is expected to continue, with PetroChina, Sinopec, and CNOOC showing strong growth in capital expenditure.
• Order growth for domestic oilfield services companies is healthy, indicating potential for continued benefits from increased capex.

Infrastructure

• Revenue and orders for central government-owned construction companies were steady or improved.
• China National Chemical Engineering and China Railway Construction saw significant net profit growth (over 20%).
• Gezhouba Group and China State Construction Engineering had notable improvements in net profit margins.
• SOE reform is ongoing, with Lao Feng Xiang receiving a 21.99% stake from the central enterprise fund, aiming to improve shareholding structure and marketization.

Banking

• Private financing growth in August was the lowest in recent years, at Rmb1.52trn, with a slight YoY decline.
• M2 growth was 8.2% YoY, but M1 growth slowed significantly.
• Credit expansion remains soft, and monetary easing is not enough to offset shadow bank contraction and lower risk appetite.
• Low valuations and high dividend yields make the banking sector an attractive watch.

Yinghe Technology (300457 CH)

• Signed a contract with LG Chemicals to supply 19 winders, indicating strategic international expansion.
• Orders and revenue grew significantly, with a 58.6% increase in advance receipts.
• Profit margins improved, and net operating cash flow turned positive.
• Buy rating is maintained due to strong client strategy and growth prospects.

Huadian Power International (600027 CH)

• A leading thermal power player in China with a 4% share of national capacity.
• High earnings elasticity due to fluctuating coal procurement costs, which could significantly boost profits if fuel costs decrease.
• Low valuation and high dividend yield (around 40%) make it a potential rebound candidate.
• Buy rating is maintained due to expected earnings recovery and valuation benefits.

Sector Ratings

Rating Definitions

• Buy: Expected to outperform benchmark by more than 15%
• Accumulate: Expected to outperform benchmark by more than 5% but not more than 15%
• Hold: Expected relative performance between -5% and 5%
• Underperform: Expected to underperform benchmark by more than 5%

Analyst Certification & Disclosure

• The analysts certifying the report have no direct financial interests in the securities discussed.
• GF Securities (Hong Kong) and its affiliates do not hold any shares of the mentioned securities.
• No investment banking relationships with the companies in the past 12 months.
• The report is for informational purposes only and does not constitute an offer or solicitation to buy/sell securities.

Disclaimer

• The report is prepared by GF Securities (Hong Kong) and is not a recommendation for investment.
• It is intended solely for use by clients of GF Securities (Hong Kong).
• Recipients are advised to consult professional advice before making investment decisions.
• The report may contain views that are subject to change without notice.