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Weekly A-share Market Recommendations Summary

Core Content Overview

This document provides a comprehensive overview of weekly stock recommendations by the Industrial Securities Research Institute as of September 19, 2016. It includes detailed EPS forecasts, investment highlights, and potential risks for several listed companies across different sectors.

Top Stock Recommendations

Main Points and Key Information

ARTS Group (603017: SH)

• Sector: Construction
• Rating: BUY
• Investment Highlights:
  • Expanding businesses to more regions, including acquisitions to enhance presence in the southwestern region.
  • Exploring new businesses combining VR technology with architectural construction.
  • Strong growth potential through M&A and business integration.
• EPS Forecast: CNY 0.50 (2016), CNY 0.61 (2017), CNY 0.67 (2018)
• Potential Risks: Sharp government investment slump, slow increase in new contracts.

Jiangling Motors Corp (000550: SZ)

• Sector: Automobile
• Rating: STRONG BUY
• Investment Highlights:
  • Clear business development strategy, entering niche markets like light trucks and buses.
  • Expected sales rebound and profitability improvement from new products.
  • Strong optimism about future growth.
• EPS Forecast: CNY 2.23 (2016), CNY 3.06 (2017), CNY 3.37 (2018)
• Potential Risks: Sales of Everest may fail to meet expectations.

Shandong Pharmaceutical Glass (600529: SH)

• Sector: Medical Equipment
• Rating: BUY
• Investment Highlights:
  • Leading pharmaceutical glass manufacturer with improved profitability.
  • Strong growth prospects from new projects and government support.
• EPS Forecast: CNY 0.68 (2016), CNY 0.86 (2017), CNY 1.07 (2018)
• Potential Risks: None explicitly mentioned.

Shenzhen Expressway (600548: SH)

• Sector: Expressway
• Rating: STRONG BUY
• Investment Highlights:
  • Favorable conditions in the expressway sector with stable earnings.
  • Government repurchase of road assets, indicating strong valuation potential.
  • High cash reserves and government subsidies.
• EPS Forecast: CNY 0.92 (2016), CNY 1.06 (2017), CNY 1.13 (2018)
• Potential Risks: Reduction in traffic flow, lower returns on newly-built expressways.

Beijing Oriental Yuhong Waterproof Technology (002271: SZ)

• Sector: Construction
• Rating: BUY
• Investment Highlights:
  • Revenue and profit growth following implementation of business strategies.
  • Strong growth prospects despite signs of balance sheet and cash flow deterioration.
  • Second-phase stock incentive plan with high performance requirements.
• EPS Forecast: CNY 1.07 (2016), CNY 1.36 (2017), CNY 1.70 (2018)
• Potential Risks: Demand slump in property market, price rebound of asphalt.

Guangdong Haid Group Company (002311: SZ)

• Sector: Fodder
• Rating: STRONG BUY
• Investment Highlights:
  • Fast revenue and earnings growth despite industry slowdown.
  • Strong purchasing, formula development, and marketing capabilities.
  • Strategic M&A and overseas expansion as key growth drivers.
• EPS Forecast: CNY 0.77 (2016), CNY 1.01 (2017), CNY 1.12 (2018)
• Potential Risks: Natural disasters, overseas political risks.

Jiangsu Changjiang Electronics Technology (600584: SH)

• Sector: IC
• Rating: STRONG BUY (Revised Up)
• Investment Highlights:
  • Rapid recovery in profitability, expected earnings over CNY 500 million.
  • Strategic partnership with SMIC and expansion into SiP products.
  • Strong growth prospects in the Chinese semiconductor industry.
• EPS Forecast: CNY 0.05 (2016), CNY 0.23 (2017), CNY 0.73 (2018)
• Potential Risks: Semiconductor industry downturn, integration with STATs ChipPAC failing expectations.

Xinjiang Western Animal Husbandry (300106: SZ)

• Sector: Agriculture
• Rating: BUY
• Investment Highlights:
  • Leading cow farmer with resilient earnings.
  • Expected recovery in milk production and rising raw milk prices.
• EPS Forecast: -CNY 0.22 (2016), CNY 0.47 (2017), CNY 1.54 (2018)
• Potential Risks: Major epidemics, lower-than-expected milk production.

Shenzhen Laibao Hi-tech (002106: SZ)

• Sector: Hardware
• Rating: BUY
• Investment Highlights:
  • Strong growth in OGS touch panels and AIO PCs.
  • Expected revenue growth and net profit turnaround.
• EPS Forecast: CNY 0.28 (2016), CNY 0.42 (2017), CNY 0.62 (2018)
• Potential Risks: Demand for two-in-one laptops failing expectations, revised touch technology roadmap.

Bank of Nanjing (601009: SH)

• Sector: Banking
• Rating: BUY
• Investment Highlights:
  • Benefiting from the downward interest rate cycle.
  • Strong creditworthiness of clients (local government and SOEs).
• EPS Forecast: CNY 2.58 (2015), CNY 3.04 (2016), / (2017)
• Potential Risks: Systematic risk in the banking industry.

Summary of Investment Strategy

The report highlights companies with strong growth potential and positive EPS forecasts, particularly in sectors such as Construction, Automobile, Medical Equipment, Fodder, IC, Agriculture, and Banking. Most companies are rated BUY or STRONG BUY, indicating strong confidence in their future performance. The investment recommendations are supported by strategic initiatives, industry trends, and financial performance. However, potential risks such as government investment slumps, demand slumps in key markets, and industry downturns are also noted.

Key Themes

• Growth through M&A and strategic expansion is a common theme among several companies.
• Technological innovation, especially in VR, touch devices, and semiconductor manufacturing, is seen as a major growth driver.
• Government support and subsidies play a significant role in enhancing the value and growth prospects of some companies.
• Sector-specific trends such as rising demand for touch panels, growth in the pharmaceutical glass industry, and the recovery of the semiconductor industry are emphasized.
• Valuation potential is a key factor in recommending some stocks, particularly in the expressway and banking sectors.