Morning Express Summary
Core Content
The document provides a comprehensive overview of financial market analysis and insights for China and global markets, covering equity research highlights, stock market indices, commodity prices, exchange rates, and key company events and valuations. It also includes commentary on the impact of regulatory changes, industry trends, and company performance.
Main Points
China Telcos
- Event: MIIT issued a basic telecom service license to CRTN, enabling it to operate a national optical broadband network.
- Comment: The license is in line with previous reports of CRTN's application. However, the three major telcos are unlikely to face significant short-term competition from CRTN due to several factors:
- CRTN lacks sufficient funding to build a large-scale national broadband network.
- CRTN's existing cable broadband network is inferior in terms of bandwidth and speed compared to telcos' optical networks.
- CRTN has limited operational experience and execution capability, especially in the national mobile broadband market.
China Hardware Technology
- Huawei Honor V8 vs. Xiaomi Mi Max: Both will launch on 10 May. Huawei's V8 is expected to be a higher cost-performance model, potentially gaining more market share in the mid-end segment.
- Supplier Outlook: Positive on Huawei's supply chain (Sunny Optical, Tongda, BYDE) but cautious on Xiaomi's supplier FIH due to losing market share.
- China Biologic Products (CBPO US): Strong Q1 performance, with revenue up 22% YoY and earnings up 19.26% YoY. Maintained BUY rating with a target price of US$144.
China Banks
- 1Q16 Performance: Positive NPAT growth for all H-share China banks, with an average YoY increase of 2.5%.
- Drivers: Strong non-interest income from fee income and investment gains, offsetting slower net interest income.
- Asset Quality: NPL balance and ratio increased, with elevated credit costs and coverage ratio decline.
- Valuation: Attractive with 0.66x FY16E P/B and 4.88x FY16E P/E. Reiterated OVERWEIGHT rating with BOC as top pick.
China Brokers
- 1Q16 Results: NPAT growth for H-share China brokers declined by 48% YoY, primarily due to A-share correction.
- Positive Trends: Investment banking and asset management businesses saw significant growth in net fee and commission income.
- Valuation: Attractive despite negative earnings outlook, with 1.27x FY16E P/B and 13.38x FY16E P/E. Reiterated OVERWEIGHT rating with HTS as top pick.
US Domestic Demand
- Mixed Signals: While US domestic demand remains a major GDP contributor, recent data suggests underlying weakness.
- Possible Explanations:
- Weak wage growth due to low productivity.
- Inventory cycle drag, with restocking expected to boost demand in the coming quarters.
- Conclusion: US GDP growth is likely to stabilize and remain near or just below 2015 levels.
A-share Research Highlights
- Yili (600887 CH): Q1 results exceeded expectations, with strong earnings growth. Maintained Strong Buy rating with a target price of RMB20.
Key Information
Stock Market Indices
| Index |
Close |
1-daychg |
%chg |
| Hang Seng Index |
20449 |
-76.01 |
-0.37 |
| Hang Seng Finance Index |
26814 |
-53.45 |
-0.2 |
| Hang Seng Utilities Index |
52306 |
+264.53 |
+0.51 |
| Hang Seng Property Index |
28528 |
-241.52 |
-0.84 |
| Hang Seng Industrial Index |
12309 |
-70.6 |
-0.57 |
| HSCEI |
8626 |
-70.64 |
-0.81 |
| CSI 300 |
3213 |
+4.46 |
+0.14 |
| Shanghai Composite Index |
2997 |
+6.57 |
+0.22 |
| TWSE |
8167 |
-17.51 |
-0.21 |
Global Markets
| Commodity |
Last Price |
Chg |
%Chg |
| Brent Oil |
45.21 |
+0.59 |
+1.32 |
| COMEX Gold |
1279.6 |
+5.2 |
+0.41 |
| COMEX Copper |
214.45 |
-4.2 |
-1.92 |
| LME Aluminum |
1606.0 |
-27.5 |
-1.68 |
| LME Copper |
4770.5 |
-96.5 |
-1.98 |
| BDI |
642.0 |
-10.0 |
-1.53 |
Exchange Rates
| Currency Pair |
Last Price |
Chg |
%Chg |
| USD/RMB |
6.5 |
+0.01 |
+0.1 |
| USD/HKD |
7.76 |
-0.0 |
-0.03 |
| EUR/USD |
1.14 |
-0.01 |
-0.73 |
| 1Y RMB NDF |
6.69 |
+0.01 |
+0.11 |
| 3M Libor |
0.63 |
+0.0 |
+0.19 |
| 3M Shibor |
2.9 |
-0.0 |
-0.1 |
| 10Y US T-Note Yield |
1.79 |
-0.02 |
-1.11 |
Research Coverage List (As of May 6, 2016)
| Company | Ticker | Rating | Share Price (May 5) | 12-month TP | % Upside | Mkt Cap (US$mn) | EPS 2015 | EPS 2016E | EPS 2017E | P/E 2015 | P/E 2016E | P/E 2017E |
|---------|-------|--------|---------------------|--------------|----------|------------------|----------|-----------|-----------|-----------|-----------|-----------|-----------|
| Brilliance China | 1114 HK | BUY | HK$7.55 | HK$8.2 | 9 | 4,915 | 0.69 | 0.74 | 0.84 | 8.8 | 8.2 | 9.0 |
| China ZhengTong Auto | 1728 HK | BUY | HK$3.08 | HK$3.5 | 14 | 878 | 0.29 | 0.39 | 0.46 | 8.5 | 6.4 | 6.7 |
| Geely Automobile | 175 HK | BUY | HK$3.75 | HK$4.6 | 23 | 4,274 | 0.26 | 0.33 | 0.40 | 11.5 | 9.2 | 9.4 |
| BAIC Motor | 1958 HK | NEUTRAL | HK$5.98 | HK$6.5 | 9 | 5,792 | 0.44 | 0.52 | 0.58 | 10.9 | 9.3 | 0.0 |
| Great Wall Motor | 2333 HK | NEUTRAL | HK$5.77 | HK$7.0 | 21 | 6,794 | 0.88 | 0.94 | 1.02 | 5.3 | 5.0 | 5.7 |
| Fuyao Glass | 3606 HK | BUY | HK$17.44 | HK$20.0 | 15 | 5,644 | 1.09 | 1.16 | 1.31 | 12.8 | 12.1 | 11.0 |
| China Harmony Auto | 3836 HK | BUY | HK$4.47 | HK$6.2 | 39 | 909 | 0.39 | 0.42 | 0.50 | 9.2 | 8.6 | 0.0 |
| Zhongsheng Group | 881 HK | NEUTRAL | HK$3.98 | HK$3.8 | -5 | 1,102 | 0.21 | 0.25 | 0.29 | 15.2 | 12.9 | 13.7 |
Oil and Gas
| Company |
Ticker |
Rating |
Share Price (May 5) |
12-month TP |
% Upside |
Mkt Cap (US$mn) |
EPS 2015 |
EPS 2016E |
EPS 2017E |
P/E 2015 |
P/E 2016E |
P/E 2017E |
| Sinopec Oilfield Service |
1033 HK |
NEUTRAL |
HK$1.63 |
HK$1.5 |
-8 |
4,744 |
0.01 |
-0.01 |
0.05 |
208.1 |
N.A. |
17.1 |
| China Oilfield Services |
2883 HK |
SELL |
HK$6.37 |
HK$4.5 |
-29 |
3,921 |
0.23 |
-0.24 |
0.10 |
22.2 |
N.A. |
8.1 |
| CNOOC |
883 HK |
BUY |
HK$9.11 |
HK$10.7 |
17 |
52,469 |
0.45 |
0.01 |
0.39 |
16.2 |
735.5 |
6.8 |
Property
| Company |
Ticker |
Rating |
Share Price (May 5) |
12-month TP |
% Upside |
Mkt Cap (US$mn) |
EPS 2015 |
EPS 2016E |
EPS 2017E |
P/E 2015 |
P/E 2016E |
P/E 2017E |
| China Resources Land |
1109 HK |
BUY |
HK$18.66 |
HK$23.8 |
28 |
16,684 |
2.59 |
2.36 |
2.71 |
7.2 |
7.9 |
5.4 |
| Yuzhou Property |
1628 HK |
BUY |
HK$2.17 |
HK$2.6 |
20 |
1,068 |
0.54 |
0.52 |
0.61 |
4.0 |
4.2 |
3.6 |
| Country Garden |
2007 HK |
NEUTRAL |
HK$3.14 |
HK$3.0 |
-4 |
9,150 |
0.54 |
0.56 |
0.67 |
5.8 |
5.6 |
4.7 |
| Agile Property |
3383 HK |
BUY |
HK$4.39 |
HK$5.0 |
14 |
2,218 |
0.75 |
0.78 |
0.89 |
5.9 |
5.6 |
4.9 |
| Greentown China |
3900 HK |
NEUTRAL |
HK$5.75 |
HK$6.7 |
17 |
1,604 |
0.70 |
1.24 |
1.37 |
8.2 |
4.6 |
4.2 |
| China Overseas Land |
688 HK |
NEUTRAL |
HK$23.5 |
HK$28.2 |
20 |
29,894 |
3.47 |
3.27 |
3.46 |
6.8 |
7.2 |
6.8 |
| CH OVS G OCEANS |
81 HK |
BUY |
HK$2.47 |
HK$3.3 |
34 |
727 |
0.47 |
0.63 |
0.98 |
5.3 |
3.9 |
2.5 |
| Shimao Property |
813 HK |
BUY |
HK$10.68 |
HK$14.0 |
31 |
4,784 |
2.15 |
2.35 |
2.72 |
5.0 |
4.5 |
3.9 |
| CIFI Holdings |
884 HK |
BUY |
HK$1.75 |
HK$2.0 |
14 |
1,527 |
0.41 |
0.44 |
0.51 |
4.3 |
4.0 |
3.2 |
| China Merchants Land |
978 HK |
BUY |
HK$1.14 |
HK$1.5 |
32 |
721 |
0.06 |
0.06 |
0.06 |
0.0 |
0.0 |
0.0 |
What to Watch
Economic Data
| Country/Region |
Date |
Event |
Prior |
Forecast |
| US |
2016/05/06 |
Non-Farm Payrolls |
215k |
203k |
| US |
2016/05/06 |
Private Payrolls |
195k |
195k |
| US |
2016/05/06 |
Unemployment Rate |
5% |
5% |
| US |
2016/05/06 |
Average Earnings MM |
0.30% |
0.30% |
| China |
2016/05/08 |
Exports YY |
11.50% |
-- |
| China |
2016/05/08 |
Imports YY |
-7.60% |
-- |
| China |
2016/05/08 |
Trade Balance |
29.86bn |
-- |
Company Events
| Date |
Ticker |
Company |
Event |
| 2016/05/06 |
8031 HK |
ETS Group Ltd. |
1ST QTR RES/INT DIV (3-MTH-ENDED31/03/16) |
| 2016/05/06 |
8045 HK |
Jiangsu Nandasoft Technology Co. Ltd. - H Shares |
1ST QTR RES/INT DIV (3-MTH-ENDED31/03/16) |
| 2016/05/06 |
8048 HK |
Hong Kong Jewellery Holding Ltd. |
1ST QTR RES/DIV (3-MTH-ENDDED31/03/16) |
| 2016/05/06 |
8068 HK |
New Universe International Group Ltd. |
QTR RES/DIV (3-MTH-ENDDED31/03/16) |
| 2016/05/06 |
8097 HK |
Pinestone Capital Limited |
1ST QTR RES/INT DIV (3-MTH-ENDED31/03/16) |
| 2016/05/06 |
8123 HK |
First China Financial Network Holdings Ltd. |
RES/DIV (3-MTH-ENDDED31/03/16) |
| 2016/05/06 |
8227 HK |
Xi'an Haitian Antenna Holdings Co., Ltd. - H Shares |
QTR RES/DIV (3-MTH-ENDDED31/03/16) |
| 2016/05/06 |
8262 HK |
Super Strong Holdings Limited |
3RD QTR RES/3RD QTR DIV (9-MTH-ENDDED31/03/16) |
| 2016/05/06 |
8265 HK |
Powerwell Pacific Holdings Ltd. |
1ST QTR RES/DIV (3-MTH-ENDDED31/03/16) |
| 2016/05/06 |
3383 HK |
Agile Property |
1ST QTR RES/DIV (3-MTH-ENDDED31/03/16) |
Conclusion
The document outlines key market movements and company-specific insights, emphasizing the potential for growth in certain sectors like China Biologic Products and Yili, while cautioning about the challenges faced by CRTN and Xiaomi in the telecom and hardware markets. It also highlights the attractive valuations of China banks and brokers, and provides a clear view of the current economic landscape in the US and China.
