20171110-兴业证券-A-Share_Daily_Express_7页_468kb

Summary of Industrial Securities Co., Ltd. Report

Core Content

This report provides an overview of the Chinese stock market performance on November 9, 2017, and highlights the financial performance and investment outlook of Yunnan Baiyao Group (000538.SZ), a leading Traditional Chinese Medicine (TCM) manufacturer. It includes market indices, sector performance, company news, financial data, and investment ratings.

Main Market Indices

• SSE Composite Index: Closed at 3427.79, up 0.36%.
• SZSE Component Index: Closed at 11553.24, up 0.92%.
• ChiNext Index: Closed at 1884.11, up 0.96%.
• HSI: Closed at 29136.57, up 0.79%.
• HSCEI: Closed at 11744.54, up 1.45%.
• Aggregate Market Volume: CNY 482.12 billion, down 13.6% from the previous session.
• Market Performance: Winners outnumbered losers by 2014-to-1108.

Sector Review

Winners

• Coal sector: Expected to benefit from the approaching heating season.
  • China Shenhua Energy Co. (601088): +7.40%
  • Shanxi Xishan Coal and Electricity Power Co. (000983): +3.15%
• Telecommunication sector: Driven by speculation on 5G communications.
  • ZTE Corporation (000063): +6.49%
  • Shenzhen Sunway Communication Co. (300136): +5.27%
• Insurance sector: Contributed to market rally.
  • Ping An Insurance (Group) Co. (601318): +2.66%
  • China Life Insurance Co. (601628): +1.23%

Losers

• Banks: Underperformed amid corrections.
  • Industrial and Commercial Bank of China Limited (601398): -1.66%
  • Bank of Communications Co. (601328): -0.80%
• Media sector: Experienced profit-taking.
  • Focus Media Information Technology Co. (002027): -1.47%
  • Chinese Universe Publishing and Media Co. (600373): -1.18%

Daily Headlines

• U.S.-China Business Deals: The White House expected to announce over $250 billion in deals.
• Ford and Zotye Automobile: Ford finalized an alliance with Zotye to manufacture electric vehicles in China.
• HSI and HSCEI: Both indices rose, with HSCEI showing the strongest increase.
• Hong Kong Dollar: Rose to a five-month high.
• China’s New Energy Vehicle Policy: Allows higher loan ratios for new-energy vehicles.
• Sunac Share Purchase: CEO Wang Mengde bought 398,000 shares at HK$36.8369.
• Alibaba and Singles' Day: Preparing for record-breaking sales.
• Tencent and Snap: Tencent acquired a 12% stake in Snap.
• Iron Ore Imports: Slumped to the lowest in over a year.

Company News

• Yunnan Baiyao Group: Released its 2017Q3 financial report showing strong revenue and net profit growth.
• Yuyue Scientific and Technological Development: Increased stake in Yunnan Baiyao Holdings, enhancing synergy and financial support.
• Other Companies:
  • BAIC Motor (1958 HK) to cooperate with Ifytek.
  • China Life (601628 CH) sold shares.
  • China Overseas Land (688 HK) reported HK$17B in property contract sales.
  • KWG Property (1813 HK) issued additional $100m in notes.
  • HSBC (HSBA LN) repurchased shares.
  • ICBC (601398 CH) issued bonds.
  • WH Group (288 HK) secured $2b in U.S. goods purchases from JD.com.

Financial Performance of Yunnan Baiyao Group

Key Financial Indicators

• Revenue: CNY 22,411 Mn in 2016, expected to grow to CNY 25,698 Mn in 2017, CNY 29,871 Mn in 2018, and CNY 35,025 Mn in 2019.
• Net Profit: CNY 2,920 Mn in 2016, expected to grow to CNY 3,254 Mn in 2017, CNY 3,814 Mn in 2018, and CNY 4,498 Mn in 2019.
• EPS: CNY 2.80 in 2016, expected to rise to CNY 3.12 in 2017, CNY 3.66 in 2018, and CNY 4.32 in 2019.
• Growth Rates:
  • Revenue growth: 8.1% (2016), 14.7% (2017E), 16.2% (2018E), 17.3% (2019E).
  • Net profit growth: 5.4% (2016), 11.4% (2017E), 17.2% (2018E), 17.9% (2019E).
• Profitability:
  • Gross margin: 29.9% (2016), 29.9% (2017E), 30.1% (2018E), 30.2% (2019E).
  • Net profit margin: 13.0% (2016), 12.7% (2017E), 12.8% (2018E), 12.8% (2019E).
  • ROE: 18.6% (2016), 17.9% (2017E), 17.4% (2018E), 17.0% (2019E).

Financial Ratios

• PE (Price-to-Earnings): 37.33 (2016), 33.49 (2017E), 28.58 (2018E), 24.23 (2019E).
• PB (Price-to-Book): 6.93 (2016), 6.01 (2017E), 4.96 (2018E), 4.12 (2019E).
• Current Ratio: 3.28 (2016), 3.81 (2017E), 3.95 (2018E), 4.02 (2019E).
• Quick Ratio: 2.24 (2016), 2.53 (2017E), 2.67 (2018E), 2.78 (2019E).
• Asset-liability Ratio: 35.6% (2016), 27.9% (2017E), 27.9% (2018E), 27.4% (2019E).

Investment Rating

• Industry Investment Rating:
  • Overweight: Industry outperforms the market.
  • Neutral: Industry performs similarly to the market.
  • Underweight: Industry underperforms the market.
• Company Investment Rating:
  • Buy: Company's stock outperforms the market by more than 15%.
  • Outperform: Company's stock outperforms the market by 5% to 15%.
  • Neutral: Company's stock outperforms or underperforms the market by less than 5%.
  • Underperform: Company's stock underperforms the market by more than 5%.

Key Risks

• Slower-than-expected growth in personal care products.
• Slower-than-expected recovery in drug business unit (BU) growth.
• Slower-than-expected progress in incentive scheme improvement.

Conclusion

The report highlights a positive market sentiment in China, with several indices reaching record highs. Yunnan Baiyao Group is noted for its steady growth and strong financial indicators, supported by strategic investments and ongoing reforms. Analysts recommend a Buy rating due to its expected performance and potential for long-term growth, while acknowledging potential risks.