20170209-招商证券_香港_-Morning_Express_13页_1mb_1mb

Morning Express Summary

CMS(HK) Research Highlights

Tencent (700 HK, HK$204, BUY, TP HK$230)

• Market Growth Deceleration: China's mobile game market growth is expected to slow from 82% CAGR (FY14-16) to 29% CAGR (FY16-18E).
• Market Position: Tencent is expected to remain the #1 game publisher in China due to its extensive channel resources, with 9 new titles in the pipeline.
• Revenue Share: The top 2 mobile games, Honour of Kings (Tencent) and Onmyoji (NetEase), account for 25% of each publisher's total mobile game revenue in 4Q16E.
• Valuation: Tencent is trading at 21.4x FY17E EV/EBITDA, lower than its peers' average of 25.0x.
• Key Points: Despite profit-sharing under less favorable terms, leading content providers will continue to leverage Tencent's distribution power. NetEase is highlighted for its superior in-house R&D and longer game life cycle, supported by strong IP and gameplay.

NetEase (NTES US)

• In-House R&D: NetEase's games have a longer product life cycle and less volatile rankings due to its superior IP and gameplay.
• Growth Outlook: The success of Onmyoji has driven a positive growth outlook for NetEase.

China/HK Insurance Sector

• Sector Rally: The recent rally in the insurance sector is attributed to tightening liquidity and declining assumed interest rates.
• New Premium Growth: Expected strong but diverse growth in new premiums for January, with Ping An, CPIC, and China Taiping growing 30%+ YoY, NCI mildly up, and China Life down.
• Total Premium Growth: Total premium growth is expected to be over 30% YoY, driven by renewals, except for NCI which may decline due to structural adjustments.
• Re-rating Trend: Life insurers' re-rating is expected to continue, with NCI and Ping An as top picks.
• Trading Opportunities: China Life is noted as a potential trading opportunity due to its larger A/H share discount and better liquidity.
• Pension Funds: Inflow of pension funds is not directly positive for insurers, as their impact on earnings is limited in the short run.

A-share Research Highlights

Hengtong Optic-electric (600487.SH)

• Contract Win: Hengtong won a significant contract for China Telecom's centralized procurement of G.652D optical fibers and cables, totaling 7.02mn core km.
• Tender Price: The unit price increased by over 15% compared to 2014, with a processing fee of RMB5 per core km.
• Growth Outlook: Net profit is expected to jump between 120% and 170% due to continued growth in its three main businesses.
• Market Share: Hengtong's contracts account for 20% of China Telecom's tender and 11.45% of China Mobile's centralized procurement.
• Investment Rating: STRONGLY OVERWEIGHT-A with a TP range of RMB23.76-29.04 for the next 6 months.
• Financial Projections: Net profit for 2016/17E/18E is expected to be RMB1.393bn/2.106bn/2.860bn, with EPS increasing from RMB1.12 to RMB2.30.

What to Watch

Economic Data

• Japan: Machinery Orders MM expected to rise by 3.10% on 2017/02/09.
• Germany: Exports MM SA and Imports MM SA are forecasted to decline.
• US: Initial Jobless Claims and EIA- Nat Gas, Change Bcf are upcoming events.
• China: Exports YY and Imports YY are due on 2017/02/10.
• US: Import and Export Prices MM and U Mich Sentiment Prelim are upcoming.

Company Events

• Multiple companies reported results or dividends on 2017/02/09, including Manulife Financial Corporation, Kwong Man Kee Group Limited, and others.

Research Coverage List

Auto & Auto Parts

• Brilliance China: BUY with a TP of HK$13.0.
• China ZhengTong Auto: BUY with a TP of HK$3.5.
• Geely Automobile: BUY with a TP of HK$4.7.
• BAIC Motor: NEUTRAL with a TP of HK$2.0.
• Great Wall Motor: BUY with a TP of HK$11.0.
• Fuyao Glass: BUY with a TP of HK$2.0.
• China Harmony Auto: BUY with a TP of HK$6.2.
• Zhongsheng Group: NEUTRAL with a TP of HK$0.95.

Oil and Gas

• Sinopec Oilfield Service: BUY with a TP of HK$1.6.
• SPT Energy: BUY with a TP of HK$6.2.
• Petro-king Oilfield Services: NEUTRAL with a TP of HK$1.0.
• China Oilfield Services: SELL with a TP of HK$6.5.
• Anton Oilfield Services: NEUTRAL with a TP of HK$0.5.
• Datang Renewable Power: NEUTRAL with a TP of HK$0.83.
• Xinjiang Goldwind: BUY with a TP of HK$13.0.
• GCL-Poly Energy: BUY with a TP of HK$1.59.
• Huadian Fuxin Energy: BUY with a TP of HK$2.1.
• Huaneng Renewables: BUY with a TP of HK$3.1.
• Xinyi Solar: BUY with a TP of HK$4.3.

Machinery & Equipment

• Zoomlion Heavy: BUY with a TP of HK$4.67.
• CRRC: NEUTRAL with a TP of HK$6.14.
• Lonking: NEUTRAL with a TP of HK$1.16.
• CRRC Times Electric: NEUTRAL with a TP of HK$44.2.
• CRSC: BUY with a TP of HK$7.58.
• CEEC: BUY with a TP of HK$1.42.
• Sany Heavy: NEUTRAL with a TP of HK$1.19.
• CRCCE: BUY with a TP of HK$3.9.

Pharmaceutical & Healthcare

• Sinopharm Group: BUY with a TP of HK$40.0.
• 3SBio: BUY with a TP of HK$12.0.
• HEC Pharm: BUY with a TP of HK$20.0.
• Shanghai Pharma: NEUTRAL with a TP of HK$20.0.
• CR Pharm: BUY with a TP of HK$9.7.
• Trad Chi Med: BUY with a TP of HK$4.0.
• China Medical System: BUY with a TP of HK$14.0.
• China Biologic Products: BUY with a TP of US$149.0.

Insurance

• AIA: NEUTRAL with a TP of HK$40.6.