20160805-中国银河-A-Share_Monthly_Portfolio__Focusing_on_stocks_with_solid_profits_in_a_volatile_market_--_Investment_Portfolio_for_August_2016_18页_1mb

A-Share Monthly Portfolio Summary - August 2016

Core Content

This document outlines the A-Share Monthly Portfolio for August 2016, focusing on stocks with solid profits in a volatile market. The portfolio includes 10 stocks, each from different sectors, with an emphasis on dividend yield, growth potential, strategic importance, and market performance.

Main Points

• July Performance: The Galaxy portfolio returned -0.44%, slightly underperforming the CSI 300 Index by 2.02ppt. However, the cumulative return from January to July 2016 was -1.78%, outperforming the CSI 300 Index by 12.34ppt. Since January 2013, the cumulative rate of return for Galaxy's monthly golden stocks has been 335%, outperforming the CSI 300 Index by 308ppt and significantly higher than the ChiNext Index gain of 191%.

• August Outlook: The market is expected to be range-bound due to stable peripheral environment, moderate domestic economic conditions, and policy changes. Speculative stocks may face increased risk, while stocks with solid earnings are likely to attract funds inflow.

Portfolio Focus

The August portfolio includes one stock each from the following sectors:

• Transportation: China Eastern Airlines (600115.CH)
• Auto: Huayu Auto (600741.CH)
• Building: (Not specified)
• Non-ferrous Metals: (Not specified)
• Electronics: HaiteGaoxin (002023.CH), Sunway Communication (300136.CH), Datang Telecommunications (600198.CH)
• Telecommunications: Datang Telecommunications (600198.CH)
• Agriculture: (Not specified)
• Pharmaceuticals: Tasly (600535.CH), Jinyu Bio-technology (600201.CH)
• Machinery/Military: Jianxin Mining (000688.CH), WeihaiGuangtai (002111.CH), HaiteGaoxin (002023.CH)

Key Investment Recommendations

• China Eastern Airlines (600115.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Air transport up-cycle, oil price suppression, RMB devaluation control, and benefits from Shanghai Disneyland.
  • Valuation: EPS forecast at 0.50/0.57 RMB for 2016-17, PER at 13.9/12.2x.
  • Risk Factors: Sudden RMB devaluation, greater-than-expected airline capacity growth.

• Huayu Auto (600741.CH):

  • Investment Rating: Recommend
  • Performance Drivers: High dividend yield, robust growth in main business, R&D investment in intelligent driving and NEVs, and internationalization strategy.
  • Valuation: EPS forecast at 1.63/1.76 RMB for 2016-17, PER at 9.8/9.1x.
  • Risk Factors: Lower-than-expected auto sales, problems with internal business integration.

• WeihaiGuangtai (002111.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Military-civilian integration, UAV and general aviation growth, smart home products, and favorable policies.
  • Valuation: EPS forecast at 0.74/0.99/1.34 RMB for 2016-18, PER at 34.0/25.4/18.8x.
  • Risk Factors: Slow general aviation development, slower military equipment progress, and slower industry integration.

• HaiteGaoxin (002023.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Breakthrough in RF chips, growth in aviation products and services, and strategic importance in national defense and general aviation.
  • Valuation: EPS forecast at 0.16/0.37/0.73 RMB for 2016-18, PER at 106.6/46.1/23.4x.
  • Risk Factors: Slower chip development, delayed military product delivery, and slow general aviation growth.

• Datang Telecommunications (600198.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Leader in 3G and 4G standards, development of IoV standards, mobile chip layout, and institutional reform.
  • Valuation: EPS forecast at 0.16/0.37/0.77 RMB for 2016-18, PER at 126.0/54.5/26.2x.
  • Risk Factors: IoV standard not issued, slow institutional reform.

• Tasly (600535.CH):

  • Investment Rating: Recommend
  • Performance Drivers: FDA Phase III results for CDDP expected in Q3 2016, expansion in biological medicine through partnerships and R&D.
  • Valuation: EPS forecast at 1.37/1.53/1.74 RMB for 2015-17, PER at 26.1/23.0/20.4x.
  • Risk Factors: Industry cost control and bidding pressure.

• Sunway Communication (300136.CH):

  • Investment Rating: Recommend
  • Performance Drivers: High profit growth, leading provider of mobile terminal solutions.
  • Valuation: EPS forecast at 0.52/0.97 RMB for 2016-17, PER at 36.2/19.4x.
  • Risk Factors: Not specified in detail.

• Jinyu Bio-technology (600201.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Expected improvement in Q3 performance due to late-cycle boom.
  • Valuation: EPS forecast at 1.10/1.45 RMB for 2016-17, PER at 26.6/20.2x.
  • Risk Factors: Not specified in detail.

• Jianxin Mining (000688.CH):

  • Investment Rating: Recommend
  • Performance Drivers: Strong fundamentals in the zinc industry.
  • Valuation: EPS forecast at 0.29/0.35 RMB for 2016-17, PER at 30.4/25.2x.
  • Risk Factors: Not specified in detail.

• Mei Chen Technology (300237.CH):

  • Investment Rating: Recommend
  • Performance Drivers: PPP-based landscape + tourism model, continued M&A expansion.
  • Valuation: EPS forecast at 0.39/0.51 RMB for 2016-17, PER at 27.1/20.7x.
  • Risk Factors: Not specified in detail.

Summary of Key Themes

• Military-civilian integration is a major theme, with stocks like WeihaiGuangtai and HaiteGaoxin benefiting from this trend.
• UAVs and general aviation are expected to drive growth for WeihaiGuangtai and HaiteGaoxin.
• Internet of Vehicles (IoV) is a significant growth area for Datang Telecommunications.
• High dividend yield is a key factor for Huayu Auto.
• Pharmaceutical innovation, especially Tasly's CDDP FDA Phase III results, is a major catalyst.
• Stable earnings and strong fundamentals are the main drivers for China Eastern Airlines and Jianxin Mining.

Main Risks

• RMB devaluation could negatively impact airline stocks.
• Slower-than-expected growth in key sectors like general aviation and military equipment.
• Policy delays in areas such as general aviation and IoV.
• Industry cost control and bidding pressure in the pharmaceutical sector.

Conclusion

The August 2016 A-Share investment portfolio is focused on stocks with solid earnings and growth potential, especially in the aviation, auto, and pharmaceutical sectors. The analysts highlight the strategic importance of these stocks, particularly in military-civilian integration, UAV development, and pharmaceutical innovation. The market is expected to be range-bound, with speculative stocks facing increased risk. The portfolio maintains a Recommend rating for all selected stocks, based on their strong fundamentals, dividend yields, and growth prospects.