20180829-广发证券_香港_-Dim_Sum_Express_4页_458kb

Dim Sum Express Summary

Core Content

This document is an equity research report dated August 29, 2018, from GF Securities (Hong Kong), focusing on the performance of key financial indices and the Chinese auto and steel sectors. It also includes investment recommendations and risk assessments for these sectors.

Key Index Performance

The report outlines the performance of several major indices over different time periods:

The report notes that the HSI and HSCEI indices have declined year-to-date, while the CCMP index has shown strong growth.

Hong Kong ADRs Performance

The ADRs for major Hong Kong companies show mixed performance, with some experiencing declines and others showing modest gains.

Auto Sector Analysis

Market Overview

• Auto sales in China declined 4.2% YoY in July, with passenger vehicle (PV) sales down 5.3% YoY and commercial vehicle (CV) sales up 2.3% YoY.
• Sedan sales decreased by 1.3% YoY, while minibuses increased by 29.7% YoY.
• SUV and MPV sales also saw declines of 8.2% and 21.9% YoY, respectively.
• Heavy-duty truck sales slumped 21.1% YoY, and public transport bus sales declined by 0.9% YoY.

Sector Performance

• The Wind Auto and Auto Component Index declined 2.9% in July, underperforming the CSI 300 by 3.1pp.
• The SW OEM Index dropped 8.2%, the SW bus Index down 9.9%, the SW PV Index down 8.4%, and the SW truck Index down 2.0%.
• The SW Auto Component Index dropped 1.8%, while the SW Auto Sales Index edged up 0.4%.

Investment Highlights

• Recommend blue-chip PV companies with strong earnings growth, low valuations, and high dividend payouts.
• Highlight Huayu Automotive Systems (600741 CH) and SAIC Motor (600104 CH).
• The heavy-duty truck sector is viewed as internationally competitive, with leading companies showing strong sales stability and profitability.
• Recommend CNHTC Jinan Truck (000951 CH) for potential market share expansion.
• Also highlight Weichai Power (000338 CH) and Weifu High-Technology (000581 CH) due to their competitive positioning and potential for dividend growth.

Steel Sector Analysis

New National Standard for Steel Bars

• A new national standard for hot-rolled ribbed steel bars will take effect in November 2018, which will exclude the use of the "water-through" process and boost vanadium demand.
• The standard includes stricter inspection methods for metallographic structure, Vickers hardness, and microstructure, leading to increased vanadium usage in steel production.

Vanadium Demand and Supply

• China accounts for over 50% of global vanadium consumption and production.
• The ban on vanadium steel slag imports from the end of 2018 is expected to reduce vanadium supply by 20%.
• Assuming vanadium accounts for 0.03% of hot-rolled ribbed steel production, demand for vanadium (V2O5) could reach 107,100 tonnes, higher than 2016 levels.
• However, some vanadium can be substituted with cheaper alternatives like vanadium-nitrogen and strontium-iron alloys.

Investment Suggestion

• Recommend focusing on listed companies with vanadium raw material resources due to the expected improvement in vanadium supply and demand dynamics.

Risk Assessment

• Auto Sector: Economic growth missing expectations, deterioration in auto sector business conditions, and weak policy enforcement.
• Steel Sector: Sharp decline in steel output, use of new technologies reducing vanadium demand, significant increase in global vanadium production, and large fluctuations in ferrovanadium, vanadium-nitrogen, and antimony-iron alloy prices.

Rating Definitions

• Company Ratings:

  • Buy: Expected to outperform benchmark by more than 15%
  • Accumulate: Expected to outperform benchmark by more than 5% but not more than 15%
  • Hold: Expected relative performance between -5% and 5%
  • Underperform: Expected to underperform benchmark by more than 5%

• Sector Ratings:

  • Positive: Expected to outperform benchmark by more than 10%
  • Neutral: Expected relative performance between -10% and 10%
  • Cautious: Expected to underperform benchmark by more than 10%

Disclaimer

• The report is for informational purposes only and does not constitute an offer to buy or sell securities.
• GF Securities (Hong Kong) accepts no liability for losses arising from the use of the report.
• The report may include different views from the proprietary trading division and may be inconsistent with other communications from the firm.