20150907-大华银行_中国_-Regional_Morning_Notes_19页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive analysis of financial and economic developments across several Asian markets, with a focus on China, Indonesia, Malaysia, Singapore, and Thailand. It includes key market indices, corporate updates, policy highlights, liquidity conditions, and analyst views for the week of 7 September 2015.

Key Indices

Source: Bloomberg

Key Assumptions

Source: Bloomberg, UOB ETR, UOB Kay Hian

Top Picks

Corporate Events

Sector Update: Power Equipment

• 1H15 Results Recap: Earnings plummeted due to price competition, which reduced margins and economies of scale.
• Key Companies:
  • Dongfang Electric: Net profit dropped 80% yoy to Rmb168m; gross margin declined by 6.2ppt to 10.9%.
  • Harbin Power: Net profit fell 31.4% yoy to Rmb96m; EBIT margin dropped to 1.4%.
  • Shanghai Electric: Net profit rose 1.7% yoy to Rmb1,319m, but power equipment EBIT plummeted 77.9% yoy to Rmb136m.
• Outlook: Margins may stabilise in 2016 due to reduced competition and product price stabilisation. However, the industry is still in a downcycle, and economic weakness continues to pressure demand.
• Analyst View: Maintain UNDERWEIGHT for the sector, upgrade Harbin Power to HOLD due to cheap valuation.

Company Update: Semen Indonesia (SMGR IJ)

• Market Position: Largest cement producer in Indonesia with a 44% market share.
• Key Takeaways:
  • 2015 sales volume is expected to be flat.
  • 2015 ASP may grow 1-2% yoy, while 2016 ASP is expected to grow 2-3% yoy.
  • Market share may decline to 42% in the coming years due to rising competition.
  • EBITDA margin is expected to remain at 25-30% due to improved production efficiency.
• Target Price: Rp12,250, based on DCF valuation.
• Capacity Expansion: Plans to reach 40.8mt by 2017, with new mills and plants in Dumai, Gresik, and Tonasa.
• Legal Challenges: Environmental concerns may delay expansion, but SMGR is optimistic of resolution.
• Share Buyback: Not yet confirmed; under consideration.
• Recent Performance: SMGR exported 346,000 tonnes in 8M15 and expects 500,000 tonnes in 2015.

Analysts

• China Power Equipment: Yan Shi & Ying Ying Tang
• Semen Indonesia: Marwan Halim

Summary of Key Points

• China: Policy measures to stabilise the market and currency, but the A-share market and renminbi depreciation pressure remain.
• Indonesia: SMGR faces declining market share but expects growth in 2016 due to improved economic conditions and infrastructure projects.
• Malaysia: MRCB clinched a major contract, significantly boosting its orderbook.
• Singapore: UOB's corporate day highlights key insights into its Greater China operations.
• Thailand: Pruksa Real Estate faces margin concerns for 2015 but has revenue growth potential for 2016-17.
• Economic Outlook: Weak GDP growth and economic data may further pressure the market.

Conclusion

The report outlines the economic and sectoral challenges in various Asian markets, with a focus on China's power equipment sector and Indonesia's cement industry. While some companies like SMGR and MRCB show growth potential, others face significant headwinds due to weak demand, margin compression, and regulatory pressures. Analysts suggest maintaining caution in the short term and focusing on fundamentals for long-term investment decisions.