20160928-兴业证券-A-Share_Daily_Express_13页_1mb

Summary of Industrial Securities Co., Ltd. Document

Core Content

The document provides a comprehensive market review and analysis for the Chinese stock market, focusing on the performance of major indices and sectors, along with detailed company news and research insights. It also highlights global macroeconomic risks, particularly the potential impact of the Italian constitutional referendum on international markets.

Market Indices Overview

• SSE Composite Index: Closed at 2987.86, down 0.34%.
• SZSE Component Index: Closed at 10467.16, down 0.09%.
• CSI 300 Index: Closed at 3230.89, down 0.30%.
• ChiNext Index: Closed at 2139.63, down 0.05%.
• HSI (Hang Seng Index): Closed at 23619.65, up 0.20%.
• HSCEI (Hang Seng China Enterprises Index): Closed at 9719.84, down 0.27%.
• Total Market Volume: CNY 305.28 billion, down 12.9% compared to the previous session.
• Market Performance: Losers outnumbered winners by 1695-to-907.

Sector Review

Winners:

• Chemical Sector: Wanhua Chemical Group (600309) +3.15%; Guangzhou Tinci Materials Technology (002709) +0.53%.
• Electronic Components: Jiangsu Changjiang Electronics Technology (600584) +2.40%; Leyard Optoelectronic Co. (300296) +1.84%.

Losers:

• Precious Metals: Shandong Gold Mining (600547) -2.86%; Zhongjin Gold Corp. (600489) -1.80%.
• Construction Firms: China State Construction Engineering Corporation (601668) -0.98%; China Railway Group (601390) -0.99%.
• Tourism Firms: China International Travel Service (601888) -1.52%; Shanghai Jin Jiang International Hotels (600754) -2.13%.

Daily Headlines

• China's 3Q Growth: Expected to be 6.7%, with inflation at ~1.6% and PPI falling ~1%.
• Regulatory Focus: China's securities regulator will intensify oversight of restructuring activities.
• Real Estate Policy: Down payment for second home purchases will be raised to 50% in Hangzhou.
• Airport Investment: Civil Aviation Administration plans to boost private investment in civil airports.
• NEV Subsidies: Possible release of NEV subsidy rules in October due to fraud concerns.
• PBOC Policy: Maintains accommodative stance with reverse repos and mid-term loans instead of rate cuts.
• Company News:
  • China Postal Savings Bank shares start trading in Hong Kong.
  • Sinosteel debt restructuring plan approved.
  • Shandong Gold Mining leads bid for Glencore's gold mine in Kazakhstan.
  • Hangzhou Liaison plans to acquire 56% of Newegg for $264.2m.
  • Wuliangye is rated as a new buy by Haitong.

Global Macro Insights

• Italian Constitutional Referendum: Expected to be held in late November or early December, 2016.
• Political Risks: If the referendum fails, populist parties may push for EU exit.
• Banking Crisis in Italy: High NPL ratio (18%), largest bad loan scale in Eurozone, and 9 banks face capital shortages.
• Negative Interest Rates: A key factor in the deterioration of Italy's banking system.
• Potential Domino Effect: Risks of political instability in Italy could affect the broader European market.
• EU Reaction: EU is expected to be more affected by Brexit than the UK itself.
• Bond Yields: 10-year Italian treasury bond yields have risen, reflecting market concerns.

Company Analysis

Shenzhen Expressway Company Limited (600548.SH)

• ESOP Plan: The company is implementing an Employee Stock Ownership Plan (ESOP), unlocking shares to 74 key personnel at CNY 5.35/share.
• Unlock Conditions:
  • 40% of ESOP unlocked in 2 years if ROE ≥9.8%, revenue growth ≥11%, and dividend yield ≥43%.
  • 30% of ESOP unlocked in 3 years if ROE ≥10.3%, revenue growth ≥12%, and dividend yield ≥43%.
  • 30% of ESOP unlocked in 4 years if ROE ≥10.8%, revenue growth ≥13%, and dividend yield ≥43%.
• DCF Valuation: Market value is estimated at CNY 30.8 Bn, with a price per share of CNY 14.11. Current price is at 60% of fair value.
• Earnings Forecast:
  • EPS for 2016: CNY 0.73
  • EPS for 2017: CNY 0.74
  • EPS for 2018: CNY 0.78
• P/E Ratios:
  • 2016: 11.3x
  • 2017: 11.2x
  • 2018: 10.6x
• Dividend Yield:
  • 2016: 3.8%
  • 2017: 3.8%
  • 2018: 4.1%
• Meilinguan Project: Expected to contribute CNY 4 Bn in revenue from asset appreciation. The project has a square footage of 96,000 sqm and is located at a low cost with high potential.

Nanjing Yunhai Special Metals (002182.SZ)

• Magnesium Industry Leader: The company benefits from a rebound in magnesium prices, leading to a 14.29 percentage point increase in gross margin to 20.95%.
• Product Performance:
  • Magnesium Alloy: 26.8% of revenue, up in gross margin.
  • Aluminum Alloy: 55.6% of revenue, also up in gross margin.
  • Strontium Metal and Master Alloy: Both show increased gross margins.
• Cost Reduction: Unit operating cost has dropped.
• Production Expansion: All capacity expansion projects are progressing.
• Earnings Forecast:
  • Net Profit for 2016: CNY 171 million
  • Net Profit for 2017: CNY 251 million
  • Net Profit for 2018: CNY 325 million
• EPS Forecast:
  • 2016: CNY 0.53
  • 2017: CNY 0.78
  • 2018: CNY 1.00
• P/E Ratios:
  • 2016: 37x
  • 2017: 25x
  • 2018: 20x
• Investment Grade: "Buy" (Maintained)
• Potential Risks: Magnesium and aluminum price slumps, slower project progress, and underperformance in downstream demand.

Key Analysts

• Han Wang, PhD (S0190512020001): Focus on global macroeconomic insights, particularly the Italian constitutional referendum.
• Ren Zhiqiang (S0190514030002): Analysis of Nanjing Yunhai Special Metals.
• Wang Chunhuan: Analysis of Shenzhen Expressway Company Limited.
• Other Analysts: Xiaojun Jia, Yanjin Lu, Lianqing Wang, Yijun Wang, Chao Duan, Kun Yu.

Investment Recommendations

• Shenzhen Expressway Company Limited: Maintained "Strong Buy" rating.
• Nanjing Yunhai Special Metals: Reiterated "Buy" rating.

Conclusion

The document highlights the mixed performance of Chinese equities, with most indices and sectors showing declines. It emphasizes the potential for growth in the chemical and electronic components sectors. The Italian constitutional referendum and its implications on European financial stability are significant global macroeconomic risks. Additionally, it provides detailed analysis and investment recommendations for two key companies: Shenzhen Expressway and Nanjing Yunhai Special Metals, both showing strong fundamentals and growth potential.