20160126-兴业证券-A-Share_Daily_Express_11页_843kb

Summary of Industrial Securities Co., Ltd. Report

Core Content

This report provides a detailed overview of the performance of the Chinese stock market and bond market as of January 26, 2016. It also includes specific analysis on the company Shenzhen Jinjia Color Printing Group (002191 SZ), its financials, and future strategies.

Main Market Performance

• Stock Market: The Chinese stock market performed poorly, influenced by global market downturns and domestic economic concerns.

  • SSE Composite Index: Closed at 2749.79, down 6.42%.
  • SZSE Component Index: Closed at 9483.55, down 6.96%.
  • ChiNext Index: Closed at 1994.05, down 7.63%.
  • Market Volume: Total market volume reached CNY 523 billion.
  • Stock Performance: Only 54 tickers increased, while 2505 tickers decreased, indicating a significant imbalance in market sentiment.

• Sector Performance:

  • Sectors such as Computer, Communication, and Electronic Components saw the most declines, largely due to the presence of many small to mid-sized stocks.
  • Home Appliance and Food & Beverage sectors performed better, with some blue-chip companies showing positive growth.

Key Economic and Market Headlines

• Capital Outflows: China experienced significant capital outflows in December 2015, reaching $158.7 billion, the second-highest monthly outflow of the year.
• Tax Reforms: Premier Li Keqiang urged tax reforms to support entrepreneurs and stabilize economic growth.
• Hong Kong Dollar Selling Pressure: Increased due to widened interest rate differentials with USD and a weak Asian currency environment.
• Foreign Trade Earnings Retention: China plans measures to retain foreign-trade earnings by allowing funds in non-resident accounts to be converted into fixed deposits.
• Steel Production Cuts: Estimated to cost 400,000 jobs.
• State-Owned Enterprises: Revenue and profit for SOEs in 2015 fell by 5.4% and 6.7% respectively.

Bond Market Review

• Market Liquidity: The PBOC injected 1.3075 trillion RMB into the banking system to alleviate liquidity pressure.
• Interest Rates: Money rates increased, with various repo and shibor rates showing upward trends.
• Bond Yields:
  • Treasury Bonds: Yields increased slightly across all terms.
  • CDB Bonds: Yields also increased, with a flattening yield curve.
• Government Bond Futures: Prices declined slightly, with increased volatility and reduced trading volume.

Bond Market Investment Strategy

• Rates Product:
  • The bond market remains positive, with a potential for further yield curve flattening.
  • Long-term interest rates are expected to trend downward even without monetary easing.
  • However, increasing transaction volume and liquidity premiums may put downward pressure on the bond market.
  • Analysts suggest that bond traders should consider a temporary retreat and wait for better opportunities.

Credit Bond Investment Strategy

• Goodwill Impairment Risk:
  • Decrease in purchased goodwill could negatively impact net profit.
  • Companies such as Beijing Bewinner Communications and Bluefocus Communication Group were affected by goodwill impairments in 2015.
  • Industrial bond issuers, especially those in cyclical industries like mining and construction, face rising goodwill impairment risks.

Shenzhen Jinjia Color Printing Group (002191 SZ)

Financial Highlights

• Revenue and Profit:
  • 2015 Revenue: CNY 2.74 billion, up 17.8% YoY.
  • 2015 Net Profit: CNY 720 million, up 24.5% YoY.
  • Q4 2015 Revenue: CNY 846 million, up 35.6% YoY.
  • Q4 2015 Net Profit: CNY 210 million, up 43.3% YoY.
• EPS: CNY 0.55 in 2015, with forecasts raised to CNY 0.67 (2016) and CNY 0.80 (2017).
• PE Ratio: Implied 17x/14x for 2016/2017.
• Growth Rate:
  • Revenue growth: 17.8% (2015), 15.2% (2016), 13.5% (2017).
  • Net Profit Growth: 25.1% (2016), 20.6% (2017).
  • Gross Margin: Increased from 41.5% (2014) to 45.9% (2017).
  • Net Profit Margin: Increased from 24.9% (2014) to 29.5% (2017).
  • ROE: Slightly fluctuating, from 16.7% (2014) to 17.5% (2017).

Company Profile

• The company primarily designs and manufactures standard cigarette boxes and other packaging materials for cigarette companies.
• It is expanding into the Big Health Industry, focusing on anti-aging and cancer treatment sub-sectors.

Strategic Developments

• Intelligent Packaging: The company is investing in new high-end packaging products for clients in the consumer electronics, cosmetics, and FMCG industries.
• M&A Strategy: Plans to acquire new businesses, particularly in the medical industry, to support its transformation into a top player in the Big Health sector.
• Asset-Liability Ratio: Only 18%, indicating strong financial stability.
• Operating Cash Flow: Sales of printing products contributed CNY 720 million to operating cash flow in 2015.

Potential Risks

• Cooperation Risks: Potential breakdown of collaboration with Sun Yat-sen University.
• Investment Risks: Uncertainty around the success of investment activities in the medical field.

Analysts and Translators

• Analysts:
  • TANG Yue
  • LUO Yamei
  • HUANG Weiping
  • WANG Han
  • LU Yanjin
  • JIA Xiaojun
  • WANG Yijun
  • ZUO Dayong
  • LI Huiquan
  • CHI Guangsheng
• Translators:
  • LI Xing

Investment Recommendation

• Outperform (Maintained): The company is expected to continue its growth trajectory with improved profitability and expansion into the Big Health sector.
• Earnings Forecast: Raised EPS forecasts for 2016 and 2017, indicating positive outlook for future performance.