20171207-广发证券_香港_-Dim_Sum_Express_5页_539kb

Equity Research Summary: Dim Sum Express (Dec 7, 2017)

Key Index Performance

Core Investment Strategies

1. Winners and Losers of the US Tax Bill

• Positive Impact on:

  • Export-oriented companies
  • Transportation firms (e.g., shipping)
  • Companies with significant US income
  • Commodities producers (e.g., aluminum, copper)

• Negative Impact on:

  • TMT (Technology, Media, Telecommunications) stocks in Hong Kong
  • Tech stocks in the US due to sector rotation towards financials and consumer stocks

• Expected Beneficiaries (H-shares):

  • Lenovo
  • Li & Fung
  • COSCO Shipping
  • Man Wah
  • Techtronic
  • VTech
  • Samsonite
  • WH Group
  • Nexteer
  • Jiangxi Copper
  • Chalco

• Market Outlook:

  • The Hong Kong market is expected to remain promising despite short-term volatility.
  • The impact of the tax bill on individual stocks may take time to materialize.
  • The tax bill may lead to a temporary market correction, but fundamentals remain strong.

2. Market Likely to Remain Weak Before Year-End

• Downside Risks:

  • Imminent US tax reform approval
  • Surge in HK HIBOR rate
  • Geopolitical tensions (Korean Peninsula, Middle East)

• Expected Correction:

  • Up to 10% from the peak
  • Larger correction for top performers
  • Considered an opportunity to buy at lower levels

• Portfolio Recommendations:

  • Balanced portfolio with exposure to:
    • High-growth sectors (TMT, auto)
    • Re-rating potential sectors (insurance, banks, financial intermediates)
    • Policy-driven sectors (healthcare, environmental, education)

Key Company Analysis

Geely Auto (175 HK, Buy)

• Performance:

  • Nov sales: 141,265 units, up 37.9% YoY and 12.9% MoM
  • 11M17 sales: 1.09m units, reaching 99% of 2017 target
  • SUV sales: 77,156 units in Nov, up 95.7% YoY and 14.3% MoM
    • Boyue model: 30,884 units, up 67.8% YoY
    • Emgrand GS: 17,487 units, up YoY
    • Vision X3: 10,102 units in Nov, up 44.2% MoM

• Outlook:

  • 2018 is a key year with five new launches (2 SUVs, 2 sedans, 1 MPV)
  • Contribution from Lynk & Co’s 01 SUV model
  • Current P/E: 11.4x, undervalued
  • Target price: HK$33.29 (based on 15x 2018E P/E)

Pharmaceutical Sector: Positive for CSPC Pharma (1093 HK, Accumulate)

• Recent Development:

  • Sino Biopharma (1177 HK) received registration approval for Tenofovir Disoproxil Fumarate
  • First generic drug to complete bioequivalence studies

• CSPC Pharma:

  • Three generics pending approval in 2017
  • Expected combined sales of Rmb700m-1.2bn in 2018
  • 19 products undergoing bioequivalence studies or clinical trials
  • Target price: HK$16.10

Construction Machinery: Lonking (3339 HK, Buy)

• Performance:

  • Nov excavator sales: 13,822 units, up 107.4% YoY
  • 11M17 sales: 126,298 units, up 99.2% YoY
  • Strong sales driven by FAI and replacement cycles

• Outlook:

  • Lonking's sales growth is expected to outperform peers
  • Recent weak stock performance due to concerns over Nov sales figures
  • Target price: HK$4.30
  • Current P/E: 9.6x, undervalued

Rating Definitions

• Company Ratings:

  • Buy: Expected to outperform benchmark by >15%
  • Accumulate: Expected to outperform benchmark by 5%–15%
  • Hold: Expected relative performance between -5% and 5%
  • Underperform: Expected to underperform benchmark by >5%

• Sector Ratings:

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

Analyst Certification and Disclosure

• The analysts certify that the views expressed reflect their personal opinions.
• No direct or indirect remuneration is linked to specific recommendations.
• GF Securities (Hong Kong) and its affiliates do not hold shares in the mentioned securities.
• No investment banking relationship with the companies mentioned in the past 12 months.
• Analysts and their associates have no financial interests in the securities discussed.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• The information may be subject to change without notice.
• GF Securities (Hong Kong) accepts no liability for any losses arising from the use of this material.
• Past performance does not guarantee future results.
• Readers should seek professional advice before making investment decisions.