20140124-招商证券_香港_-The_Month_Ahead_–_January_13页_542kb

2014 Market Outlook Summary

Core Content Overview

This document outlines the key macroeconomic forecasts and market outlook for various sectors in January 2014, focusing on both domestic (China) and international (U.S., Europe) economic trends, as well as specific investment recommendations for the Hong Kong stock market. The analysis highlights inflation trends, monetary policy, sector performance, and valuation opportunities.

Main Points

China Macro Forecast

• Inflation: Expected to trend upward in the first half of 2014, peaking in May or June. The carryover effect from previous months is expected to be minimal due to a sharp CPI decline.
• Monetary Policy: Tight monetary policy is expected to continue into Q1 2014, limiting policy maneuverability.
• Reform Impact: Short-term growth may be constrained by economic reforms and higher financing costs.

Overseas Macro Forecast

• U.S. Economy: Expected to grow at 2.5% in 2014, slightly below market expectations. Economic recovery is expected to continue, supported by consumption and investment.
• Eurozone: Slight economic rebound in 4Q13, with a forecast of 0.9% YoY growth in 2014. Inflation remains low, and the ECB is unlikely to cut rates to negative levels in the near term.

Hong Kong Market Outlook

• Market Tone: Cautious for 2014 due to slowing Chinese economy and rising inflation.
• Liquidity: Tight before the Spring Festival, with potential rebounds after the "Two Sessions".
• Sector Allocation: Favor new industries with high earnings visibility and policy support (TMT, pharmaceuticals, gaming, alternative energy, etc.), and traditional industries showing signs of bottoming out.

Key Sectors and Investment Recommendations

TMT (Technology, Media, Telecommunications)

• Trend: Mobile Internet remains the key investment theme.
• Recommendations:
  • Wisdom (1661 HK): Buy with a target price of HK$6.40. The company's partnership with CCTV Sports enhances visibility and predictability.
  • Kingsoft (3888 HK): Buy with a target price of HK$27.00. The company has a competitive edge in the mobile internet market with Clean Master and overseas expansion.

Hardware Technology

• Trend: China's 4G-LTE license release and smartphone shipment targets indicate growth.
• Recommendations:
  • TCL Comm (2618 HK): Buy with a target price of HK$8.52. Strong shipment momentum and product pipeline.
  • Lenovo (992 HK): Buy with a target price of HK$9.2. Global PC and smartphone leader with strong growth potential.
  • Truly (732 HK): Buy with a target price of HK$7.15. Benefiting from increased demand for touch panels and high-resolution displays.

Alternative Energy

• Trend: Solar and wind power sectors are expected to recover, with increased government support and investment.
• Recommendations:
  • Tianneng (819 HK): Buy with a target price of HK$6.65. Earnings recovery expected due to improved margins and battery demand.
  • Goldwind (2208 HK): Buy with a target price of HK$10.04. Strong Q3 results and improved gross margin.
  • Singyes (750 HK): Buy with a target price of HK$10.73. Synergies from O2O strategy and BOT/BT business.

Energy Saving & Environment Protection

• Trend: Strong government investment in environmental protection, with coal-fired power plants expected to increase denitration efforts.
• Recommendations:
  • Guodian T&E (1296 HK): Non-rated. The wind power business is expected to bottom out in 2014, with environmental business showing strong growth.

Branded Apparel

• Trend: O2O strategies are becoming more prominent, with traditional brands needing to adapt.
• Recommendations:
  • Li Ning (2331 HK): Buy with a target price of HK$7.70. Strong retail model and new sports resources.
  • Belle (1880 HK): Buy with a target price of HK$14.03. Synergies from O2O strategy and strong market position in women's footwear.
  • Daphne (210 HK): Suggest attention. Low valuation and O2O alignment, but with high volatility and risks from 4Q2013 results.

Oil & Gas

• Trend: Focus on energy equipment localization, with natural gas equipment manufacturers being more attractive than oil service providers.
• Recommendations:
  • Jutal Offshore Oil Services (3303 HK): Buy with a target price of HK$2.40. Strong growth in oil & gas processing equipment.
  • Chu Kong Steel Pipe (1938 HK): Buy with a target price of HK$3.47. Land value on balance sheet supports valuation.

Mining

• Trend: SOE reform and industry consolidation are key investment themes.
• Recommendations:
  • China Hongqiao (1378 HK): Buy with a target price of HK$5.80. Cost and business model advantages.
  • Yitiai Coal (3948 HK): Buy with a target price of HK$25.1. Production cost advantage and expected coal volume growth.

Machinery & Equipment

• Trend: Recovery in construction machinery, with excavators and loaders showing strong growth.
• Recommendations:
  • Lonking (3339 HK): Buy with a target price of HK$1.92. Positive profit alert and strong fundamentals.
  • Sany Heavy Equip (0631 HK): Buy with a target price of HK$3.40. Strong cost control and growth in mining trucks.

Retail

• Trend: Department store sales growth is expected to slow in 2014 due to market saturation and online competition.
• Recommendations:
  • Intime (1833 HK): Buy with a target price of HK$10.3. Transitional strategy expected to benefit long-term.
  • Gome Electrical (493 HK): Buy with a target price of HK$1.9. Strong supply chain and e-commerce growth potential.
  • Haier Electronics (1169 HK): Buy with a target price of HK$24.4. Integrated channel service and white goods business growth.

Shipping

• Trend: Dry bulk shipping demand growth is expected to slightly exceed supply, leading to upward BDI. Container shipping demand recovery depends on Europe and America.
• Recommendations:
  • OOIL (316 HK): Buy with a target price of HK$51.00. Strong container capacity and profitability.

Railway Equipment

• Trend: Railway fixed asset investment for 2014 is expected to be lower than market expectations due to funding issues.
• Recommendations:
  • CSR (1766 HK): Buy with a target price of HK$8.08. Strong fundamentals and growth potential.
  • Times Electric (3898 HK): Buy with a target price of HK$32.03. Key supplier of railway electrical systems.

Automobile, Parts and Dealership

• Trend: Short-term underweight due to tighter purchase policies, but long-term potential remains.
• Recommendations:
  • Great Wall Motor (2333 HK): Buy with a target price of HK$43.40. Market had overreacted to H8 model delay.

Food & Beverage

• Trend: Consumer packaged goods are a key investment theme, with a focus on sustainable competitive advantage.
• Recommendations:
  • Mengniu (2319 HK): Buy with a target price of HK$33.26. Strong position in dairy industry and recent acquisitions.
  • Tingyi (322 HK): Buy with a target price of HK$25.4. Market share gains in multiple segments.