20171018-大华继显-Regional_Morning_Notes_23页_1mb

报告摘要

Regional Morning Notes Summary - 18 October 2017

Core Content

This document provides a detailed market analysis of the Consumer and Healthcare sectors in China, along with highlights from Indonesia and Thailand, and updates on key indices and corporate events.

Main Points

China - Consumer Sector

F&B Sales: Better-than-expected 3Q17 F&B sales due to strong beverage sales linked to favorable weather. However, the sector's positives have largely been priced in.
Tingyi: Downgraded to SELL due to stretched valuations. The stock has risen over 35% in three months and now trades at a premium to historical averages.
UPC and Want Want: Maintained HOLD ratings with revised target prices. The sector is rated UNDERWEIGHT.
Sales Trends: F&B sales continued to recover in 3Q17, with a notable stabilization in the instant noodles segment due to a low base in 2H16. The Golden Week holiday is expected to provide a short-term sales boost.
Cost Pressure: Input costs for sugar, PET, and palm oil have remained high in 2017, with average increases over 20%. This has affected gross profit margins.
Premiumisation: Companies are accelerating product upgrades and focusing on premium products to improve profitability.

China - Healthcare Sector

Re-rating Opportunities: Small-cap pharmas are expected to benefit from policy changes and are currently undervalued compared to large-cap names.
Policy Impact: The implementation of the National Reimbursement Drug List (NRDL) and CFDA guidelines have boosted the valuation of large-cap pharmas.
Key Players:
- CSPC Pharmaceutical (1093 HK): Leading beneficiary of policy changes, with a strong product pipeline.
- Consun Pharma (1681 HK): Leading in the chronic kidney disease drug market, with growth driven by Yulin Pharma acquisition and drug price hikes.
- Dawnrays Pharma (2348 HK): Sales recovery after discontinuing national agents, with growth in Entecavir sales and EBIT turnaround.
- BBI Life Sciences (1035 HK): Positioned upstream in the DNA value chain, with growth in DNA synthesis and overseas expansion.
Valuation: Small-cap pharmas are significantly undervalued, with an average 12.9x 2018F PE, compared to large-cap names at 21.1x 2018F PE.
Sector Rating: Maintained OVERWEIGHT for the healthcare sector.

Key Indices

Index	Previous Close	1D %	1W %	1M %	YTD %
DJIA	22997.4	0.2	0.7	3.0	16.4
S&P 500	2559.4	0.1	0.3	2.2	14.3
FTSE 100	7516.2	-0.1	-0.3	3.6	5.2
AS30	5958.1	0.7	2.6	3.1	4.2
CSI 300	3913.1	-0.0	0.6	1.8	18.2
FSSTI	3329.0	0.2	1.2	2.7	15.6
HSCEI	11568.3	-0.3	1.3	3.3	23.1
HSI	28697.5	-0.0	0.7	1.9	30.4
JCI	5947.3	-0.0	0.7	1.1	12.3
KLCI	1749.0	-0.3	-0.7	-1.9	6.5
KOSPI	2484.4	0.2	2.1	2.7	22.6
Nikkei 225	21336.1	0.4	2.5	7.2	11.6
SET	1724.5	-0.1	1.9	3.2	11.8
TWSE	10723.2	-0.5	1.8	0.9	15.9
BDI	1552	1.9	9.4	12.1	61.5
CPO (RM/ml)	2745	0.5	0.1	-4.2	-14.2
Brent Crude (US$/bbl)	58	0.1	2.2	4.1	1.9

Top Picks

BUY

CSPC Pharmaceutical (1093 HK): Target price HK$15.24, potential upside of 17.4%
Waskita Karya (WSKT LJ): Target price HK$3,000, potential upside of 49.3%
Ekovest (EKO MK): Target price HK$1.45, potential upside of 27.2%
Gabungan AQRS (AQRS MK): Target price HK$2.22, potential upside of 24.7%
OCBC (OCBC SP): Target price HK$13.38, potential upside of 16.3%
Siam Cement (SCC TB): Target price HK$600, potential upside of 20.5%

SELL

Great Wall Motor (2333 HK): Target price HK$5.50, potential downside of 50.0%
UMW Holdings (UMWH MK): Target price HK$4.80, potential downside of 13.7%

Corporate Highlights

China

China Yongda Auto Services Holdings (3669 HK): Auto finance is emerging as a new growth driver.
China Zhongwang Holding (1333 HK): Venturing into high-end flat rolling aluminium business.

Indonesia

Wijaya Karya Beton (WTON IJ): 2017 revenue and new contract targets remain intact.

Thailand

The Erawan Group (ERW TB): Earnings growth is expected to continue gaining momentum.
TMB Bank (TMB TB): 3Q17 earnings up 9% yoy, but missed forecasts by 14% due to higher-than-expected provisions.

Analysts

China F&B Sector: Becky Han and Mark Chen
China Healthcare Sector: Alex Jiang

Market Impact

Consun Pharma (1681 HK): Expected to record net income of Rmb320m in 2017 and Rmb370m in 2018, with a target price of HK$6.34 (11.3x 2018F PE).
BBI Life Sciences (1035 HK): Expected to record net income of Rmb64m in 2017 and Rmb86m in 2018, with a target price of HK$3.65 (13.6x 2018F PE).
Dawnrays Pharma (2348 HK): Expected to record net income of Rmb320m in 2017 and Rmb370m in 2018, with a target price of HK$5.60 (19x 2018F PE).

Key Assumptions

Country/Region	2016	2017F	2018F
US	1.6	2.5	2.5
Euro Zone	1.7	1.8	1.6
Japan	1.0	0.9	1.2
Singapore	2.0	2.4	2.5
Malaysia	4.2	5.0	4.9
Thailand	3.2	3.3	3.3
Indonesia	5.0	5.2	5.5
Hong Kong	1.9	2.0	2.0
China	6.7	6.6	6.3
Brent (Average)	45	52	55
CPO	2,653	2,600	2,400

Corporate Events

Event	Venue	Start	End
Analyst Presentation on Indonesia	Hong Kong	17 Oct	18 Oct
Fintech Seminar 2017	Kuala Lumpur	19 Oct	19 Oct
Roadshow with PT Bumi Serpong Damai	Taipei	24 Oct	25 Oct
Analyst Presentation on Indonesian Construction Sector	Taipei	25 Oct	27 Oct
Roadshow with Hong Leong Bank	Hong Kong	26 Oct	27 Oct
Roadshow with Gabungan AQRS	Singapore	31 Oct	1 Nov
Luncheon with Globetronics Technology	Malaysia	1 Nov	1 Nov
UOB Kay Hian Annual Regional Strategy Conference	Kuala Lumpur	13 Nov	13 Nov

Conclusion

The report outlines a cautiously optimistic outlook for China's F&B sector, with a focus on the impact of favorable weather and the need for cost control. In the healthcare sector, small-cap pharmas are seen as undervalued and present re-rating opportunities. The document also highlights key corporate developments and market trends across Indonesia and Thailand, along with valuation data and investment recommendations.

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