20160516-招商证券_香港_-Morning_Express_14页_1mb

China Banks & Industry Research Summary (May 16, 2016)

Core Content

In April 2016, China's new loans dropped sharply to RMB556 billion, far below the market consensus of RMB800 billion. This decline was primarily attributed to weak corporate loan demand, with short-term and medium & long-term enterprise loans decreasing by RMB93 billion and RMB43 billion, respectively. The corporate bond financing also saw a significant contraction due to increased default risks and reduced investor interest. However, long-term household loans remained robust, accounting for 77.0% of total new loans. The total social financing (TSF) declined to RMB751 billion, also below expectations, with a 67.9% MoM drop and 29.0% YoY decline. Despite this, the sector's valuation remains attractive, with a P/B ratio of 0.64x and a P/E ratio of 4.71x, compared to historical averages of 1.23x P/B and 7.15x P/E.

Main Points

• New Loans Decline:

  • New loans in April 2016 were RMB556 billion, significantly lower than the consensus of RMB800 billion.
  • Corporate loan demand was weak, contributing to the decline.
  • Short-term and medium & long-term enterprise loans fell by RMB93 billion and RMB43 billion, respectively.
  • Bill financing added RMB239 billion, helping to offset the decline in enterprise loans.

• Total Social Financing (TSF):

  • TSF in April 2016 was RMB751 billion, down 67.9% MoM and 29.0% YoY.
  • Corporate bond financing dropped to RMB210 billion from RMB646 billion in March due to increased default risks and lower investor interest.
  • Shadow banking contracted by RMB82 billion, mainly due to a drop in bank acceptance bills.

• Valuation and Outlook:

  • The banking sector is trading at 0.64x FY16E P/B and 4.71x FY16E P/E.
  • Valuation is considered attractive compared to historical averages.
  • The sector is rated as OVERWEIGHT, with BOC as the top pick.

Investment Recommendations

• Lithium Battery Materials:

  • The industry is expected to thrive, with a golden period likely to be verified.
  • NEV production and sales in April were 31,266 and 31,772 units, up 178.3% and 190.6% YoY.
  • Easpring Material and Mingzhu Plastic are recommended as key picks.
  • Investment recommendation: "Overweight" for the lithium battery materials sector.

• Computer Industry:

  • Policy tightening and M&A trends are key factors.
  • Cross-industry M&A has led to higher valuations and result commitments, adding pressure on the industry.
  • Regulators are becoming more pragmatic, which is favorable for long-term development.
  • Key recommendations include Netposa Technologies, Hithink RoyalFlush Information Network, Trust&Far Technology, and others.

• Other Sectors:

  • Auto & Auto Parts: Brilliance China, China ZhengTong Auto, Geely Automobile, and others are recommended.
  • Oil and Gas: CNOOC is recommended, while Sinopec Oilfield Service and China Oilfield Services are rated NEUTRAL or SELL.
  • Property: China Resources Land, Yuzhou Property, and Agile Property are recommended.
  • Technology, Media & Telecom: China Telecom, China Unicom, China Mobile, and others are recommended.
  • Consumer Staple: Hengan Int'l and Jiashili Group are recommended.
  • Retail: Sinomax, Cosmo Lady, and Intime Retail Group are recommended.
  • Alternative Energy: GCL-Poly Energy and China Longyuan Power are recommended.
  • Pharmaceutical & Healthcare: 3SBio, TRAD CHI MED, and China Medical System are recommended.

Key Information

• Market Valuation: The banking sector is undervalued with attractive P/B and P/E ratios.
• Economic Outlook: Despite the weak loan data, the full-year target for new loans is still expected to be slightly higher than the previous year.
• Regulatory Impact: Policy tightening and M&A regulations are influencing the market, with a focus on risk control and long-term development.
• Investment Focus: Companies with high growth certainty and strong fundamentals are highlighted across various sectors.

Summary

The report highlights a significant drop in April 2016 new loans and TSF, driven by weak corporate demand and cooling bond financing. Despite this, the banking sector remains undervalued, with favorable valuations and potential catalysts such as monetary and fiscal policy loosening. The lithium battery materials sector is seen as entering a golden period, with NEV production growth and positive industry trends. The computer industry faces challenges due to M&A regulations but is expected to benefit from long-term policy adjustments. Investment recommendations are provided across multiple sectors, emphasizing growth potential and strong fundamentals.