20161108-中国银河国际证券-Cautiously_Optimistic—Investment_Portfolio_of_November_2016_20页_1mb

A-Share Monthly Portfolio Summary - November 2016

Core Content

This document outlines the investment strategy and portfolio recommendations for November 2016 by Galaxy Securities, highlighting the performance of the previous month and providing forecasts for the upcoming month. It also includes detailed analysis of several stocks in the portfolio, focusing on their business models, growth potential, and market positioning.

Main Portfolio Focus

• Investor Guidance: Investors are advised to be optimistic but cautious in November, selecting stocks through a bottom-up approach.
• Portfolio Composition: The portfolio includes one stock each from the following sectors: securities, petrochemical, defence, non-ferrous metals, electronics, pharmaceuticals, computer, and auto industries, with two stocks in the military machinery sector.

Key Stocks in the Portfolio

Stock Analysis Highlights

Huatai Securities (601688.CH)

• Performance: The stock underperformed the CSI 300 Index in October but has a strong cumulative return over the year.
• Key Drivers: Strong brokerage business, expansion in investment banking and asset management, and the acquisition of US-based AssetMark.
• Valuation: Forecast EPS of RMB0.95/1.61/1.35 for 2016-2018 with corresponding PER of 21.7/17.8/15.3.
• Recommendation: Recommend.
• Risk Factors: Market fluctuations, regulatory changes.

Uroica (300099.CH)

• Performance: Strong growth potential in the defence sector, with a forecast of EPS of RMB0.18/0.24 for 2017-2018 and PER of 54/40.
• Key Drivers: Transformation into a defence company, growth in communications and coal production sectors.
• Valuation: Forecast net profit of RMB110m and RMB150m for 2016-2017.
• Recommendation: Recommend.
• Risk Factors: Slow recovery in coal business, regulatory risks.

Zhongding Group (000887.CH)

• Performance: Strong growth in sales and net profit, with a 20m share stock-ownership plan.
• Key Drivers: Expansion into automotive electronics, ADAS, and new energy vehicles; collaboration with China North Industries Group.
• Valuation: Forecast EPS of RMB0.86/1.10/1.32 for 2016-2018 with corresponding PER of 21.8/18.2.
• Recommendation: Recommend.
• Risk Factors: Competition in LNG imports, exchange rate and natural rubber price fluctuations.

Sinoenergy Corporation (600856.CH)

• Performance: Strong net profit growth in 1H16, with a forecast of RMB530m and RMB805m for 2016-2017.
• Key Drivers: Natural gas reform, expansion of the national network, and low-cost oil and gas resources.
• Valuation: Forecast EPS of RMB0.44/0.71 for 2016-2017 with corresponding PER of 28.1/17.4.
• Recommendation: Recommend.
• Risk Factors: Decline in international oil prices, slow market reforms for natural gas.

Yunnei Power (000903.CH)

• Performance: Expected net profit growth of 25-30% in 2016, with strong recovery in Q3 and growth in Q4.
• Key Drivers: Expansion in off-road diesel engines, new contracts in NEV industry, and logistics automation.
• Valuation: Forecast EPS of RMB0.28/0.37 for 2016-2017 with corresponding PER of 28.5/21.6.
• Recommendation: Recommend.
• Risk Factors: Slow policy easing on dismantling, delayed project execution.

Miracle Automation (002009.CH)

• Performance: Steady growth in automation business, with potential for expansion in the automotive dismantling field.
• Key Drivers: Major contract in NEV industry, logistics automation with global team members, and acquisition of Hubei Lidi.
• Valuation: Forecast EPS of RMB0.34/0.40/0.54 for 2016-2018 with corresponding PER of 52.6/44.7/33.1.
• Recommendation: Recommend.
• Risk Factors: Slow business expansion, regulatory delays.

Outlook for November

• Market Factors: Peripheral markets may influence A-shares, with potential volatility due to US interest rate hike expectations and the American Presidential Election results.
• RMB Stability: The stability of the RMB is critical to avoid excessive market concern.
• Economic Outlook: The domestic economy is expected to remain stable in Q4 2016, with the real estate sector cooling down.
• Policy Outlook: Monetary policy is likely to remain stable, macro-liquidity may tighten slightly, and fiscal policy will continue.
• Market Events: The Shenzhen-Hong Kong Stock Connect is expected to commence, positively impacting the market.

Summary of Investment Strategy

• Approach: A bottom-up selection of stocks with a focus on sectors showing growth potential.
• Optimism with Caution: The market is expected to be cautiously optimistic, with potential for growth in key industries.
• Key Sectors: Brokerage, defence, automotive electronics, natural gas, and logistics automation are highlighted as areas of opportunity.

Main Risk Factors Across the Portfolio

• Market Volatility: Affects all stocks.
• Regulatory Changes: Impact on asset management and automotive dismantling sectors.
• Economic Slowdown: Possible effects on real estate and related industries.
• Project Delays: Risks in expanding production capacity and implementing new strategies.
• Exchange Rate and Commodity Prices: May influence profitability and market performance.