20140513-大华继显-Regional_Morning_Notes_16页_880kb

Regional Morning Notes Summary - 13 May 2014

Core Content Overview

This document provides a comprehensive update on financial and market activities across China, Hong Kong, and Indonesia, focusing on the banking sector, automobile industry, and key economic indicators. It includes analysis of financial performance, market trends, and investment recommendations.

Main Points

China - Banking Sector

• April Monetary Data: Despite new loans being slightly lower than expected (Rmb774.7b vs Rmb800b), the overall loan mix remained solid.
• Key Takeaways:
  • The PBOC is likely to continue tightening shadow banking while promoting direct financing via bond and equity issuance.
  • The "mini-stimulus" announced in early April is being implemented, as evidenced by the growth in M-LT corporate loans.
• Total Social Financing (TSF):
  • April TSF stood at Rmb1.55t, down 11.4% yoy but better than Bloomberg estimates.
  • Increased equity financing (Rmb75.1b, +174% yoy) and bond issuance (Rmb366b, +92.8% yoy) drove TSF growth.
  • Shadow banking items (trust loans and entrusted loans) declined significantly, indicating tighter regulation.
• M2 Growth:
  • M2 growth rebounded to 13.2% yoy, despite a deposit outflow of Rmb654.6b.
  • System LDR increased slightly to 69.8% in April.
• Loan Growth:
  • Household loans declined 24% yoy, mainly due to reduced short-term loans.
  • M-LT corporate loans grew 84.8% yoy, contributing to 65.4% of total corporate loans in April.
• Market Weight:
  • Maintain MARKET WEIGHT on the banking sector due to stable data and ongoing policy trends.
• Top Sector Picks:
  • CCB (BUY, Target: HK$6.10), ABC (BUY, Target: HK$3.80), and others.

China - Automobile Industry

• Brilliance Auto (1114 HK):
  • 4M14 sales beat expectations, growing 37% yoy to 91,824 units.
  • Sales growth driven by capacity expansion and favorable car loan packages.
  • Target price maintained at HK$17.50, with 43.4% upside from current price.
  • Key models: 3-series (up 34% yoy) and X1 (up 126% yoy) led the growth.
• Guangzhou Auto (2238 HK):
  • April sales growth slowed to 8% yoy, below expectations.
  • Sales rebound is expected due to easing of dealer incentive policies and new models (Accord and Fit).
  • Target price reduced to HK$10.00, with a 4% cut in 2014 EPS forecast.
  • Maintain BUY rating, as mid- to long-term growth remains intact.

Key Indices

• DJIA: 16695.5 (1D: +0.7%, 1W: +1.0%, 1M: +4.2%, YTD: +0.7%)
• S&P 500: 1896.7 (1D: +1.0%, 1W: +0.6%, 1M: +4.5%, YTD: +2.6%)
• FTSE 100: 6851.8 (1D: +0.5%, 1W: +0.4%, 1M: +4.4%, YTD: +1.5%)
• AS30: 5429.0 (1D: -0.2%, 1W: -0.3%, 1M: +0.1%, YTD: +1.4%)
• CSI 300: 2180.1 (1D: +2.2%, 1W: +1.1%, 1M: -4.0%, YTD: -6.4%)
• FSSTI: 3222.4 (1D: -0.9%, 1W: -0.6%, 1M: +0.8%, YTD: +1.7%)
• HSCEI: 9827.9 (1D: +1.5%, 1W: +0.3%, 1M: -3.9%, YTD: -9.1%)
• HSI: 22261.6 (1D: +1.8%, 1W: 0.0%, 1M: -3.2%, YTD: -4.5%)
• JCI: 4913.0 (1D: +0.3%, 1W: +1.5%, 1M: +2.0%, YTD: +14.9%)
• KLCI: 1866.1 (1D: 0.0%, 1W: +0.3%, 1M: +0.7%, YTD: 0.0%)
• Nikkei 225: 14149.5 (1D: -0.4%, 1W: -2.3%, 1M: +1.4%, YTD: -13.1%)

Key Assumptions

• GDP Growth:
  • China: 7.8 (2012), 7.7 (2013F), 6.9 (2014F)
  • US: 2.8 (2012), 1.9 (2013F), 3.0 (2014F)
  • Euro Zone: -0.7 (2012), -0.4 (2013F), 1.0 (2014F)
  • Japan: 2.0 (2012), 1.5 (2013F), 2.5 (2014F)
  • Indonesia: 6.2 (2012), 5.8 (2013F), 5.5 (2014F)
• Commodity Prices:
  • Brent: 110 (2013), 110 (2014F), 110 (2015F)
  • Copper: 7,354 (2013), 6,850 (2014F), 6,750 (2015F)
  • Gold: 1,407 (2013), 1,200 (2014F), 1,300 (2015F)
  • Iron Ore: 135 (2013), 120 (2014F), 110 (2015F)
  • CPO: 2,627 (2013), 2,858 (2014F), 2,858 (2015F)
  • BDI: 987 (2013), 1,500 (2014F), 1,800 (2015F)

Corporate Events

• Centaline Property Agency Luncheon: Hong Kong, 14 May
• Macau Gaming and China Telecommunications Analyst Presentation: Kuala Lumpur (14 May), Singapore (16 May)
• Singapore Banks Analyst Presentation: Singapore (19 May), Kuala Lumpur (21 May)
• Luncheon Presentation with Mr. Tristan Gerra: Hong Kong, 23 May
• QT Vascular Corporate Roadshow: Singapore, 29 May
• Hong Kong & China Consumer Outlook Analyst Presentation: Canada (26 May), US (29 May)

Analysts

• Edmond Law: +852 2826 4837, edmond.law@uobkayhian.com.hk
• Terrance Liu: +852 2826 1351, Terrance.liu@uobkayhian.com.hk
• Ken Lee: +852 2236 6760, ken.lee@uobkayhian.com.hk
• Renee Tai: +852 2826 1324, renee.tai@uobkayhian.com.hk

Stock Impact and Recommendations

• Brilliance Auto (1114 HK):
  • Maintain BUY recommendation.
  • Target price: HK$17.50, with 43.4% upside.
  • Sales momentum expected to accelerate in 2Q14 and toward year-end due to production ramp-up and economies of scale.
• Guangzhou Auto (2238 HK):
  • April sales growth slowed to 8% yoy, but expected to rebound.
  • Maintain BUY rating, with lower target price to HK$10.00.
  • Sales forecast revised down by 4% for 2014.

Valuation Metrics

• Brilliance Auto:
  • Current Price: HK$12.78
  • Target Price: HK$17.50
  • 2014F PE: 10.4x (vs historical mean of 15x)
  • EPS: 46.1 (2013), 92.2 (2014F), 119.3 (2015F), 145.5 (2016F)
  • Net Profit (2014F): Rmb4.606b
  • Net Margin: Not meaningful for 2013, but improving for 2014F.
  • ROE: 29.3% (2013), 30.1% (2014F), 29.3% (2015F), 27.6% (2016F)

Key Risks

• Brilliance Auto:
  • Risks include worse-than-expected NPL formation and faster-than-expected interest rate liberalisation.
• Banking Sector:
  • Risks to target prices include NPL formation and interest rate changes.

Conclusion

The report highlights a stable but cautious outlook for China's banking sector, with continued focus on tightening shadow banking and promoting direct financing. The automobile industry, particularly Brilliance Auto, shows strong performance and growth potential, while Guangzhou Auto faces short-term challenges. Investment recommendations remain BUY for both companies, with adjustments to target prices based on revised sales and profit forecasts.