20150708-交银国际证券-Focus_of_the_Day_12页_892kb

Summary of Document Content

Shanghai Pharma (2607.HK)

• Last Closing Price: HK$16.62
• Upside: +44.6%
• Target Price: HK$24.04

Core Content

• Shanghai Pharma is a leading player in the China pharmaceutical industry and is expected to benefit from long-term industry growth.
• The company operates in three main segments: manufacturing, distribution, and pharmaceutical retail.

Key Points

• Manufacturing Segment: The company has a wide range of star products with a sales focus on core products.
• Distribution Segment: As an industry leader, it benefits from the long-term growth of the pharmaceutical distribution sector.
• Pharmaceutical Retail Segment: The DTP (Designated Taxpayer Pharmacy) business provides a unique opportunity to enter the Internet healthcare market.

DTP Business Advantages

• Avoids Medicare payment issues.
• Aligns with the interests of hospitals and government guidance.
• Targets high-cost diseases such as cancer and transplant rejection, which require long-term drug use.
• High unit price and gross profit margin (GPM) for special-effect drugs.
• Concentrated demand in tier-one hospitals.

Other Factors

• The company is a key enterprise under Shanghai SASAC's share incentive scheme, which may benefit from a more market-based incentive mechanism and SOE (State-Owned Enterprise) reform.
• Recommendation: Initiate at BUY with a target price of HK$24.04, implying a 44.6% upside.

Sinotrans (598.HK)

• Last Closing Price: HK$4.39
• Upside: +59.5%
• Target Price: HK$7.00

Core Content

• Sinotrans is expanding its logistics network overseas, leveraging the "One Belt One Road" initiative.
• The company is expected to maintain strong operating performance despite a challenging freight forwarding environment.

Key Points

• Freight Forwarding: The gross margin declined slightly to 6.9% in 1Q15 from 7.4% in 1Q14 due to reduced unit revenue, but volume increased.
• Logistics Operations: Handling volume increased by 9.0% YoY in 1Q15 and is expected to remain robust in 2Q15.
• International Expansion: New warehouses/logistics centers are being built in Thailand, Pakistan, and Iraq.
• Capex Budget: Sinotrans maintains its capex budget of RMB1.5bn.
• Recommendation: Maintain BUY recommendation. The stock is oversold according to technical indicators.

Intime (1833.HK)

• Last Closing Price: HK$7.97
• Upside: 0%
• Target Price: HK$8.00

Core Content

• Intime reported stable 2Q15 performance, with SSS (Same Store Sales) growth improving slightly.
• The company is developing its O2O (Online-to-Offline) business through strategic cooperation with Alibaba.

Key Points

• SSS Growth: Improved to +3% in 2Q15 from +1% in 1Q15, attributed to promotional efforts and sales recovery from renovated stores.
• Future Outlook: SSS growth is expected to be moderate at 2%/3% in FY15/16E, vs. -3% in FY14.
• Store Expansion: Plans to open 2 stores in 2H15E and 4 stores in FY16E, following 9 new stores in FY14.
• Operating Margin: Expected to remain subdued due to new store losses and rising operating costs.
• Recommendation: Maintain Neutral, as there are no near-term catalysts for the stock.

Energy Sector

Bocom Energy Weekly

• Brent Crude Price: Dropped from around US$62/bbl to US$59/bbl last week and further to US$56/bbl after Greece rejected the bailout terms.
• Potential Iran Nuclear Deal: May add over 1mn bbl/d supply to the market if sanctions are lifted.
• Jereh (002353 SZ): Entered the offshore wellhead business by signing a license agreement with Plexus and acquiring a 5% stake.
• NDRC Price Adjustment: Adjusted oil product prices down on July 7, 2015.

Key Points

• Oil Prices: Fell due to supply concerns and the Greek vote.
• Commodities Performance: Brent crude price dropped to US$56/bbl, WTI to US$52/bbl.
• Sector Valuation: Lowered sector valuation benchmarks have led to adjusted target prices.

Geely (175.HK)

• Last Closing Price: HK$3.88
• Upside: +28.9%
• Target Price: HK$5.00

Core Content

• Geely's June sales showed a decline on both MoM and YoY bases, but the company is expected to exceed its annual sales target.

Key Points

• Sales Performance: Sold 33,069 cars in June, down 13.9% MoM and up 5.6% YoY.
• Cumulative Sales: Jan-Jun sales grew 34.7% YoY to 252,000 units.
• New Models: Expected to drive growth, with the GC9 model launching in April 2015.
• Recommendation: Maintain BUY, with focus on peak season sales and new product launches.

Market Review

Hong Kong

• Hang Seng Index dropped 1% to 24,975.
• HKEx (388.HK) fell 5.5%, the worst blue-chip performer.
• Insurers and brokers experienced sharp declines.
• Software stocks retreated, while staples like Mengniu (2319.HK) and Tingyi (322.HK) rose.

US

• S&P 500 gained 0.6% to 2,081.34.
• DJIA rose 0.5% to 17,776.

Europe

• Stoxx Europe 600 fell 1.6% to 372.74.

News Reaction

• MOFCOM: Stock market fluctuations will not significantly impact external investment.
• NDRC Infrastructure Projects: Approved over RMB884bn of projects, including urban rail transit construction.
• Renewable Energy Cars: 25,000 units produced in June, triple the previous year's figure.
• PBoC Reverse Repurchase: Conducted a RMB50bn operation with a rate of 2.5%.

Latest Reports by BOCOM Research

Summary of Key Themes

• Shanghai Pharma: DTP business offers potential to enter Internet healthcare, with a BUY recommendation.
• Sinotrans: Expanding logistics operations globally, leveraging the "One Belt One Road" initiative, with a BUY recommendation.
• Intime: Moderate SSS growth expected, with no near-term catalyst, recommendation remains Neutral.
• Geely: June sales weak, but full-year performance is expected to meet or exceed targets, with a BUY recommendation.
• Energy Sector: Oil prices fell due to supply concerns and geopolitical issues, with Iran potentially increasing supply.
• Market Trends: Hong Kong and U.S. markets showed mixed performance, with European markets declining.
• Sector Valuation: Lowered sector benchmarks impact target prices for some stocks.
• Infrastructure and Energy: NDRC approved major projects, and renewable energy car production surged.