20180629-中泰国际证券-A-Share_Market_6页_487kb

A-Share Market Summary (29 June 2018)

Core Content

The document provides an analysis of the A-share market, focusing on the banking sector, the oil and gas equipment and services sector, and specific company performance updates. It includes market index performance, sector performance, and company earnings forecasts. The report is authored by May Zhao from Zhongtai International Securities Limited.

Banking Sector

Key Points

• RRR Cut: On 24 June 2018, the Central Bank reduced the deposit reserve ratio by 0.5 percentage points for various banks, including national banks, joint-stock banks, and foreign investment banks.
• Liquidity Impact: The reduction released around 700 billion RMB in liquidity, with five national banks and twelve joint-stock banks expected to release 500 billion RMB, while others would release 200 billion RMB.
• Purpose: The cut was intended to support the micro and small enterprises (SEMs) and to ease credit constraints rather than to loosen regulation.
• Debt-to-Equity Swap: Banks used the released capital to support debt-to-equity swaps, aiming to improve the social financing situation for SEMs.
• MPA Oversight: The use of funds was assessed by the Macro Prudential Authority (MPA).
• Market Impact: The RRR cut was expected to lead to a short-term rebound in the market, as it had a similar effect to across-the-board cuts.

Company Data

Oil and Gas Equipment and Services Sector

Key Points

• US Sanctions on Iran: The US required all countries to stop importing Iranian oil by 4 November 2018, or face sanctions. This is expected to lead to a sharp decline in Iranian oil exports, estimated at 2 million barrels per day.
• OPEC Production Increase: OPEC increased production by 1 million barrels per day, but the US shale oil production rose by 1.5-1.8 million barrels per day, contributing to a supply-demand gap of 1.15-1.45 million barrels per day.
• Impact on Oil Prices: The growing supply-demand gap is expected to press oil prices upward.
• Main Importers of Iranian Oil: China (24%), India (18%), Korea (14%), Turkey (9%), Italy (7%), France (5%), Japan (5%), UAE (5%), and others (13%).

Company Data

Jiangsu Yanghe Brewery (002304 SZ)

Key Points

• Price Increase: Effective from 1 July 2018, Yanghe raised factory-gate and terminal gate prices for its Blue Classic product line.
• Product Line Adjustments:
  • Ocean Blue: +4 RMB/bottle (factory-gate), +60 RMB/box (terminal-gate)
  • Sky Blue: +6 RMB/bottle, +100 RMB/box
  • Dream Blue M3, M6, M9: +5, +5, +10 RMB/bottle (factory-gate); +110, +140, +600 RMB/box (terminal-gate)
• Reason for Price Increase: Quality upgrades and market demand for consumption upgrade.
• Expected Outcomes:
  • Sales Fluidity: Improved for mature products like Ocean Blue and Sky Blue.
  • Profit Margins: Expected to rise due to higher terminal gate prices.
  • Growth Projections: Revenue growth over 20% in 2H2018, with Dream Blue growth over 50% in Q2.
  • Long-Term Outlook: Compound growth rate is expected to exceed 20% over the next three years.
  • Market Expansion: Revenue from outside Jiangsu Province is growing at 25%, and the number of new markets has expanded to 495, contributing over 70% of total revenue.

Tong Oil Tools (300164 SH)

Key Points

• Interim Results (1H2018): Expected net profit of 62.5-67.5 million RMB, a 1432%-1555% increase compared to the same period in 2017.
• Main Drivers:
  • North America Subsidiary (TWG): Strong performance and growth.
  • Domestic Market: Robust performance despite slow sales.
• Non-Recurring Gains/Losses: Expected to be 26.5 million RMB, affecting net profit.
• Strategic Moves: Acquired API and Gutters in the US, and developed integrated oilfield technology.
• Market Share: 15% in North America, with 55.26% ownership in TWG.
• Growth Projections: Significant growth in operating income and net profit, with EPS rising from 0.05 to 0.59 RMB over 2016-2020E.

Market Index Performance (Updated to 29 June 2018)

Sector Performance (Updated to 29 June 2018)

Disclaimer and Disclosure

• Disclaimer: The report is not an advertisement or a solicitation to buy/sell securities. It is for informational purposes only.
• No Personal Recommendation: The report does not constitute a personal recommendation.
• Investment Risk: Investments involve risks, and past performance is not a guide to future results.
• Interests Disclosure:
  1. Zhongtai International and its affiliates have no investment banking relationships with the mentioned companies in the past 12 months.
  2. The analyst(s) have no financial interests in the mentioned companies.
  3. Zhongtai International may hold more than 1% of shares in the mentioned securities.