Summary of the Document
Core Content
The document provides a detailed overview of the Chinese stock market and specific company analyses for Industrial Securities Co., Ltd., covering market indices, sector performance, daily headlines, and investment recommendations for selected stocks. It also includes financial data and key financial ratios for two companies: Flying Technology (603488.SH) and Zhangzhou Pientzehuang Pharmaceutical (600436.SH).
Market Indices Overview
- SSE Composite Index: Closed at 3253.24, up 0.11% from the previous session, ending higher for the sixth consecutive week.
- SZSE Component Index: Closed at 10437.94, up 0.41%.
- ChiNext Index: Closed at 1734.07, down 0.47%.
- HSI: Closed at 26979.39, down 0.56%.
- HSCEI: Closed at 10756.08, down 0.94%.
- Aggregate Market Volume: CNY 458.98 billion, down 16.9% from the previous session.
- Market Performance: Losers outnumbered winners by 1919-to-1019.
Sector Review
Winners
- Nonferrous metal shares led the market with gains of +6.21% and +7.43% for China Molybdenum Co. and China Northern Rare Earth (Group) High-Tech Co. respectively.
- Liquor names surged with Jiangsu Yanghe Brewery Joint-Stock Co. up +5.22% and Sichuan Swellfun Co. up +10.00%.
- Steel makers outperformed with Baoshan Iron & Steel Co. up +0.99% and Hesteel Co. up +8.23%.
Losers
- Military sector lagged with declines of -1.48% for AVIC Aviation Engine Corporation PLC. and -1.84% for North Navigation Control Technology Co.
- Transportation names saw corrections with Shanghai International Port (Group) Co. down -1.16% and Henan Zhongyuan Expressway Co. down -2.83%.
Daily Headlines
- China Eastern Airlines is considering separating its Shanghai Airlines Co. division to maintain dominance on the Shanghai to Beijing route.
- Kweichow Moutai Co. reported a 28% increase in first-half profit to CNY 11.3 billion.
- Sunac China Holdings Ltd. plans to reduce leverage after acquiring Dalian Wanda Group Co. theme parks.
- Leshi Internet shares held by Jia Yueting and Leshi Holding are frozen by a Beijing court.
- China and Switzerland renewed a 150 billion yuan local-currency swap agreement.
- Hong Kong Exchange Fund posted a record investment income.
- Baidu Inc. reported quarterly results that exceeded analysts' expectations.
- Li Ka-shing agreed to acquire Ista International GmbH for about 4.5 billion euros.
- Fosun International Ltd. and Beijing Sanyuan Foods Co. are close to a joint deal to acquire St Hubert from Montagu Private Equity.
Investment Recommendations
5G and RF Front-end Technology
- RF front-end is expected to benefit from the application of 5G and millimeter-wave (MMW) technology.
- Market scale for cellphone RF front-end is projected to grow from USD 12 billion in 2016 to USD 16 billion in 2018, with further acceleration as 5G technology develops.
- Commercial 5G application is expected to begin in 2020, with 4G technology remaining relevant until 2030.
- Mobile apps providing immersive experiences are seen as a key driver for 5G expansion.
- The gradual maturing of 5G is expected to have a profound impact on global economic growth, offering a prosperous outlook for the RF front-end industry.
Recommended Stocks in Electronics Sector
| Ticker |
Name Abbreviation |
Rating |
17E EPS |
18E EPS |
PE Ratio |
| 600584 |
JCET |
Strong Buy |
0.51 |
0.80 |
40.7x / 37.9x |
| 600703 |
SAN'AN OPTO |
Buy |
0.65 |
0.79 |
40.7x / 37.9x |
| 300136 |
SUNWAY COMM |
Buy |
0.91 |
1.34 |
40.7x / 37.9x |
| 300319 |
MICROGATE TECH |
Unrated |
0.28 |
0.37 |
40.7x / 37.9x |
Key Financial Highlights
- Potential Risk: The penetration speed of 5G technology may be lower than expected.
Company Analysis: Flying Technology (603488.SH)
Key Financial Indicators
| FY |
2016 |
2017E |
2018E |
2019E |
| Revenue (Mn/CNY) |
282 |
292 |
309 |
328 |
| YoY (%) |
-5.3% |
3.6% |
5.9% |
6.0% |
| Net Profit (Mn/CNY) |
73 |
77 |
83 |
87 |
| YoY (%) |
-10.5% |
6.2% |
7.3% |
5.0% |
| Gross Margin (%) |
42.9% |
42.3% |
41.9% |
41.5% |
| Net Profit Margin (%) |
25.8% |
26.4% |
26.7% |
26.5% |
| ROE (%) |
18.0% |
9.0% |
8.8% |
8.4% |
| EPS (CNY) |
0.35 |
0.37 |
0.40 |
0.42 |
| OCFPS (CNY) |
0.30 |
0.44 |
0.25 |
0.38 |
| BVPS (CNY) |
2.59 |
4.13 |
4.53 |
4.95 |
| PE Ratio |
43.2 |
40.7 |
37.9 |
36.1 |
| PB Ratio |
7.8 |
3.6 |
3.3 |
3.0 |
Key Financial Ratios
| FY |
2016 |
2017E |
2018E |
2019E |
| Increase Rate of Business Revenue |
-5.3% |
3.6% |
5.9% |
6.0% |
| Increase Rate of Business Profit |
-12.7% |
7.1% |
8.2% |
5.6% |
| Net Profit Growth Rate |
-10.5% |
6.2% |
7.3% |
5.0% |
| Asset Turnover Ratio |
59.6% |
39.9% |
30.8% |
30.3% |
| AR Turnover Ratio |
342.6% |
341.2% |
342.9% |
343.1% |
| Current Ratio |
4.02 |
5.47 |
7.66 |
8.07 |
| Quick Ratio |
3.62 |
5.18 |
7.27 |
7.69 |
| Asset-liability Ratio |
17.2% |
11.8% |
8.9% |
8.9% |
Investment Recommendation
- Rating: Buy (Maintained)
- Reason: The company is a leading elevator service provider, with a diversified product system and stable shareholding structure.
- Market Trends: The downstream elevator industry is expected to grow due to urbanization and renovation demand.
- Business Development: The company plans to expand its market share in elevator control systems and supporting parts.
- Potential Risks: Bad debt risk from accounts receivable and core business unitary structure.
Company Analysis: Zhangzhou Pientzehuang Pharmaceutical (600436.SH)
Key Financial Indicators
| FY |
2016 |
2017E |
2018E |
2019E |
| Revenue (Mn/CNY) |
2309 |
3600 |
4449 |
5471 |
| YoY (%) |
22.4% |
55.9% |
23.6% |
23.0% |
| Net Profit (Mn/CNY) |
536 |
697 |
897 |
1168 |
| YoY (%) |
14.9% |
29.9% |
28.7% |
30.3% |
| Gross Margin (%) |
48.9% |
42.2% |
44.0% |
45.9% |
| Net Profit Margin (%) |
23.2% |
19.4% |
20.2% |
21.4% |
| ROE (%) |
15.3% |
16.6% |
17.6% |
18.6% |
| EPS (CNY) |
0.89 |
1.15 |
1.49 |
1.94 |
| OCFPS (CNY) |
0.65 |
0.74 |
1.01 |
1.38 |
Key Financial Ratios
| FY |
2016 |
2017E |
2018E |
2019E |
| Increase Rate of Business Revenue |
22.4% |
55.9% |
23.6% |
23.0% |
| Increase Rate of Business Profit |
14.9% |
29.9% |
28.7% |
30.3% |
| Net Profit Growth Rate |
14.9% |
29.9% |
28.7% |
30.3% |
| Gross Margin Rate |
48.9% |
42.2% |
44.0% |
45.9% |
| Net Profit Margin |
23.2% |
19.4% |
20.2% |
21.4% |
| ROE |
15.3% |
16.6% |
17.6% |
18.6% |
| PE Ratio |
47x |
40.7x |
37.9x |
36.1x |
| PB Ratio |
7.8 |
3.6 |
3.3 |
3.0 |
Investment Recommendation
- Rating: Buy (Maintained)
- Reason: The company's core product PTH is expected to maintain fast earnings growth due to price hikes and effective brand promotion.
- Price Hike: PTH retail price was raised by 6% from CNY 500 to CNY 530 per pill.
- Performance: In 17Q1, the company reported 34.32% revenue growth and 57.12% earnings growth.
- Expectations: The company is expected to maintain fast growth in the second half of 2017.
- Potential Risks: Sales control and extra expenses in Q1 may affect interim report performance.
Analysts
