Dim Sum Express Summary (June 11, 2018)
Core Content Overview
This report provides an analysis of the equity research landscape, focusing on the Hong Kong ADRs, A-Share Market, and the Steel Sector in China. It includes market performance data, company-specific insights, and sector outlooks, along with risk factors and rating definitions.
Key Market Performance (June 11, 2018)
| Market |
1D (%) |
1M (%) |
YTD (%) |
EPS 18E (%) |
EPS 19E (%) |
P/E 18E |
P/E 19E |
| HSI |
-1.8 |
-0.5 |
3.5 |
42.2 |
10.4 |
12.1 |
11.0 |
| HSCEI |
-2.0 |
-1.5 |
3.9 |
24.2 |
10.3 |
8.2 |
7.4 |
| MXCN |
-1.3 |
1.4 |
6.6 |
57.1 |
15.8 |
13.4 |
11.6 |
| SHSZ300 |
-1.3 |
-2.4 |
-6.2 |
35.5 |
15.1 |
12.6 |
11.0 |
| SHCOMP |
-1.4 |
-3.0 |
-7.3 |
40.0 |
13.6 |
12.0 |
10.6 |
| SZCOMP |
-0.9 |
-4.0 |
-7.8 |
76.2 |
23.0 |
19.1 |
15.5 |
| INDU |
0.3 |
2.0 |
2.4 |
40.4 |
8.7 |
16.6 |
15.3 |
| SPX |
0.3 |
1.9 |
3.9 |
46.2 |
10.0 |
17.5 |
15.9 |
| CCMP |
0.1 |
3.3 |
10.8 |
82.3 |
15.3 |
23.0 |
20.0 |
| UKX |
-0.3 |
-0.6 |
-0.1 |
168.1 |
6.1 |
14.0 |
13.2 |
| NKY |
0.1 |
-0.2 |
-0.2 |
61.6 |
14.7 |
16.5 |
14.4 |
- HSI and HSCEI show mixed performance, with declines in short-term periods but positive YTD growth.
- MXCN and CCMP have positive monthly and yearly growth, indicating strong performance.
- SHSZ300, SHCOMP, and SZCOMP have seen declines in both monthly and yearly metrics.
- INDU, SPX, and NKY have shown moderate to positive growth, suggesting a bullish trend in these indices.
Hong Kong ADRs Performance
| Company |
Local (HK$) |
Daily (%) |
ADR (US$) |
Daily (%) |
| TENCENT (700) |
415.0 |
-3.31 |
53.6 |
-0.65 |
| ICBC (1398) |
6.6 |
-1.79 |
16.8 |
-0.97 |
| CCB (939) |
8.1 |
-2.06 |
20.7 |
-1.03 |
| PETROCHINA (857) |
6.6 |
-0.61 |
84.2 |
-0.37 |
| HSBC (5) |
76.6 |
-0.91 |
49.4 |
0.12 |
| CHINA MOBILE (941) |
71.5 |
-2.32 |
45.8 |
-1.23 |
| PING AN (2318) |
78.5 |
-1.32 |
- |
- |
| BANK OF CHINA (3988) |
4.2 |
-1.65 |
6.6 |
-0.38 |
| SINOPEC (386) |
7.5 |
-1.97 |
33.3 |
-0.74 |
- Most ADRs showed negative daily changes, indicating a bearish trend in the market.
- HSBC ADR showed a slight positive change, while others, such as PING AN, had no data.
A-Share Market Insights
Steel Sector Analysis
Demand Trends
- Steel demand is expected to weaken month-over-month (MoM) due to the rainy season extending northward.
- The construction period is delayed by one month, which may provide additional demand in the traditional low season.
- Property sector indicators have weakened, leading to downward pressure on demand.
Supply Constraints
- Environmental protection measures are intensifying, with inspections in key provinces like Hebei, Henan, Inner Mongolia, etc.
- Steel production has been restricted in several regions, with some plants suspended entirely.
- Coke capacity is under pressure due to environmental regulations, and steel plant inventory has decreased MoM.
Inventory Levels
- Dealers' inventory of key steel products was at 10.75m tonnes as of May 31, 2018, down 5.11% MoM.
- Steel plant inventory for May 1–10 was 13.92m tonnes, up 2.29% MoM and 3.03% YoY.
Raw Materials
- Coke prices are expected to rise due to reduced capacity and lower inventory.
- Iron ore prices are likely to decline in June due to high port inventory and weak restocking demand.
Earnings Outlook
- Steel sector earnings improved in May, with rebar and hot-rolled steel showing higher gross profits.
- Cold-rolled steel saw a decline in gross profit MoM.
Top Picks for June
- Baoshan Iron & Steel (600019 CH)
- Nanjing Iron & Steel (600282 CH)
- Xinyu Iron & Steel (600782 CH)
- SGIS Songshan (000717 CH)
- Fangda Special Steel Technology (600507 CH)
Chow Tai Fook (1929 HK) - Downgrade to Hold
FY18 Results
- Net profit rose 34% YoY to HK$4,095m, 2% below consensus and 10% below estimate.
- GPM fell to 27.4%, due to inventory provisions and lower-than-expected performance in the jewelry trading segment.
FY19 Guidance
- Management expects 5% SSSG in HK & Macau and low single-digit SSSG in China.
- Rental reversion is expected to be flat to low single-digit in FY19, compared to a -29% decline in FY18.
Earnings Estimates
- FY19/20 net profit growth is revised to 17% /7%, down from previous estimates.
- The stock is trading at 23.2x FY19E P/E, considered fully valued.
Target Price
- Target price is lowered from HK$10.50 to HK$10.00, based on a 21x FY19E P/E.
Dividend
- Full-year regular dividend of HK$0.27/share (payout ratio: 66%).
- Special final dividend of HK$0.3/share to optimize net gearing ratio and ROE.
Rating Definitions
| Rating |
Description |
| Buy |
Outperform benchmark by >15% |
| Accumulate |
Outperform benchmark by 5%–15% |
| Hold |
Relative performance between -5% and 5% |
| Underperform |
Underperform benchmark by >5% |
Sector Ratings
| Rating |
Description |
| Positive |
Outperform benchmark by >10% |
| Neutral |
Relative performance between -10% and 10% |
| Cautious |
Underperform benchmark by >10% |
Risks
- Significant economic downturn
- Steel exports missing expectations
- Production cuts enforcement weaker than expected
- Coordinated price cuts by major iron ore producers
Disclaimer
- This report is not an offer to buy or sell securities.
- No liability is accepted for any loss resulting from the use of the report.
- Investments involve risks, and past performance does not guarantee future results.
- Recommendations are based on current views and may change.
