20160527-招商证券_香港_-Morning_Express_14页_724kb

Morning Express Summary

Core Content

The document provides a comprehensive overview of financial performance and market outlook for several companies, primarily focusing on Lenovo Group and Cowell, along with broader market insights and investment recommendations across different sectors. It also includes economic data, exchange rates, and stock indices, and outlines key trends in the semiconductor industry and cloud computing.

Main Points

Lenovo Group (992 HK, HK$4.48, TP under review)

• Financial Performance (FY4Q16):

  • Revenue declined by 19% YoY to HK$9,133 million, below both the analyst and consensus estimates.
  • Gross profit fell by 15% YoY to HK$1,518 million, with a 16.6% gross margin, up from 14.6% in FY3Q16.
  • Net profit was HK$180 million, in-line with expectations, partly due to US$71 million in R&D-related government grants.
  • Operating income dropped by 35% QoQ to HK$248 million, and pre-tax income fell by 40% QoQ to HK$193 million.

• Segment Analysis:

  • PC segment: Revenue declined by 13.6% YoY to HK$6,188 million, with 12.1 million units shipped, down 9% YoY.
  • Mobile devices: Revenue dropped 38.9% YoY to HK$1,737 million, with 10.9 million units shipped, down 18% YoY. The segment's operating loss widened to -4.8%.
  • Enterprise segment: Revenue declined 7.6% YoY to HK$985 million, with 8% YoY growth in China. However, the segment's performance was slower than expected.
  • Others: Revenue declined by 15.6% YoY to HK$222 million.

• Outlook:

  • The PC and mobile restructuring will continue to be challenging.
  • Enterprise integration is also slower than anticipated.
  • The outlook for FY17E has become more cautious due to the above factors.

• Key Comments:

  • The management's comments on multiple-quarter investment in mobile were disappointing.
  • Product rebranding and sales channel rebuilding are difficult processes in the smartphone market.
  • The breakeven time for the mobile segment is expected to be extended.

Cowell (1415 HK, HK$2.92, BUY, TP HK$4.3)

• Event:

  • Sony announced it would exit the high-end camera module business, which includes Apple as a major client.
  • Sony's FY16 operating loss widened to ¥40 billion, primarily due to the Kumamoto earthquakes and withdrawal from the high-end camera module market.

• Comment:

  • Cowell is expected to benefit from Sony's exit, as it is one of the major suppliers of Apple's front camera modules.
  • LGI is the sole supplier of Apple's dual camera modules for the iPhone 7, making it a major beneficiary.
  • Cowell's accelerated share gains in the Apple supply chain and expansion into rear-cam products are key growth drivers.
  • The target price of HK$4.3 is based on a 6.5x FY16E P/E ratio, which is 50% below peers' average.

• Investment Advice:

  • Maintain BUY rating.
  • Upcoming catalysts include stronger Apple shipment data and major product launches in 3Q.

Key Recommendations

Semiconductor Industry

• Localization Opportunities:

  • The semiconductor equipment and materials industry is expected to see significant growth in China.
  • The global market size is US$80 billion, with China's annual demand projected to exceed US$20 billion by 2020.
  • Government policy support and customer demand will drive localization.

• Top Picks:

  • Sanon Optoelectronics (600703)
  • Sevenstar Electronics (002371)
  • Han's Laser Technology (002008)
  • Shanghai Sinyang (300236)
  • Fastprint Circuit Tech (002436)
  • Nata Optoelectronic (300346)
  • Jingsheng Mechanical & Electrical (300316)
  • SVG Optronics (300331)
  • Taiji Industry (600667)
  • Juhua (600160)
  • Three-Circle Group (300408)
  • Dinglong (300054)
  • Phichem Material (300398)
  • Tronly New Electronic Materials (300429)
  • Guanghua Sci-Tech (002741)
  • Feilihua (300395)

• Risk Factors:

  • Industry boom weaker than expected
  • Semiconductor investment progress below expectations

Cloud Computing

• Trends:

  • The trend of cloud computing includes big data and AI, hardware reconfiguration + software-defined computing, open source cloud computing, and IaaS/PaaS integration.
  • The future trend will focus on field applications, ubiquitous resource technology, system platform development, and service quality enhancement.

• Key Recommendations:

  • NSFOCUS Information Technology (300369)
  • Dawning Information Industry (603019)
  • Wangsu Science & Technology (300017)
  • Thunisoft Corp (300271)
  • Taiji Computer (002368)
  • Beijing Tongtech (300379)
  • Transtrue Technology (002771)
  • SuperMap Software (300036)

• Risk Warning:

  • Cloud development slower than expected
  • Major security issues in cloud computing

What to Watch

Economic Data

• Japan: CPI and Core Nationwide YY on May 27, 2016.
• US: GDP 2nd Estimate and GDP Deflator Prelim.
• US: U Mich Sentiment.

Company Events (May 27, 2016)

• Sincere Co. Ltd. (244 HK): Annual Report.
• Infinity Development Holdings (640 HK): Interim Results/Dividend.
• Willas-Array Electronics (854 HK): Results/Final Dividend.
• Water Oasis Group (1161 HK): Interim Results/Dividend.
• Sino Harbour Holdings (700 HK): Interim Results/Dividend.
• NetDragon (777 HK): Interim Results/Dividend.

Research Coverage List (May 27, 2016)

Conclusion

The document highlights the challenges faced by Lenovo in its PC and mobile segments, with a slower-than-expected turnaround. It also identifies Cowell as a BUY due to its benefits from Sony's exit in the camera module business. The semiconductor industry and cloud computing are noted as growth opportunities in China, with specific investment recommendations. The research coverage list and economic data provide further insights into the market dynamics and investment opportunities.