20150623-招商证券_香港_-Morning_Express_14页_1mb

CMS(HK) Research Highlights Summary

China Biologic Products (CBPO US, US$117, BUY, TP US$135)

• Core Content:

  • CBPO is a solitary offshore investment opportunity in the plasma industry.
  • It has a proven track record and is a direct beneficiary of favorable policy support.
  • The Chinese plasma-derived market has high barriers to entry and is highly regulated.
  • CBPO is the only offshore investment option in the industry.

• Main Growth Catalysts:

  1. Distinguish industry and company-level development.
  2. Continued growth in collection volume at existing centers and expansion into new territories.
  3. Increasing variety of plasma-based products.
  4. Improvement in plasma fractionating techniques.
  5. Recent purchase of 143 tonnes of plasma to improve utilization in Guizhou station.
  6. Favorable policy support, including removal of price ceilings.

• Growth Forecasts:

  • Top-line growth expected at 20% in FY15E, 22% in FY16E, and 22% in FY17E.
  • Bottom-line growth is expected to outpace top-line due to enhanced per unit economics.
  • Non-GAAP diluted EPS forecasts are -1% in 2015E, +2% in 2016E, and +2% in 2017E.

• Valuation:

  • DCF-based target price (TP) of US$135.
  • Implies a +15.4% upside potential to current price.
  • P/E ratio of 30x for 2016E and PEG ratios of 1.25x and 0.95x for FY15E and FY16E, respectively.

NetDragon (777 HK, HK$34.80, BUY, TP HK$41.30)

• Core Content:

  • NetDragon is building a K12 education ecosystem centered on interactive classroom and cloud platform.
  • The company is guided by flipped classroom and has a strong background in mobile Internet and online gaming.

• Market Position:

  • Rooted in education digitization, supported by government spending and market expansion.
  • Covers 30 provinces in China through sales agents and serves 101 students via e-commerce.

• Valuation:

  • SOTP-based target price (TP) of HK$41.30.
  • 2016E P/E of 12.6x for games business and 16x for education business.
  • Combined with HK$4.3 billion in cash, the TP is reiterated as HK$41.30.
  • Implies a 19% upside potential to current price.

Greentown China (3900 HK, HK$10.40, BUY, TP HK$12.0)

• Core Content:

  • Greentown is transforming into a large SOE with potential in property assets restructuring within CCCG.
  • High sensitivity to home sales rebound in major cities, which account for 80% of FY15E profits.

• Background:

  • China Communications Construction Group increased its stake to 28.9% from 24.3%.
  • Now has 4 representatives in the 13-person board.

• Restructuring:

  • CEO Shou Bainian has resigned, and new CEO Cao Zhounan has been appointed.
  • CCCG may inject property assets into Greentown or collaborate with its property arms.
  • This could significantly improve landbank portfolio and growth prospects.

• Valuation:

  • Target price (TP) of HK$12.0, implying a 15% upside potential.
  • Attractive 43% discount to end-FY15E NAV.
  • P/E ratio of 6.0x for 2016E and PEG ratio of 5.7x for FY15E.

Trinity (891 HK, HK$1.63, NEUTRAL, TP under review)

• Core Content:

  • Trinity announced a negative profit alert for 1H15E, expecting an operating loss.
  • Decline in ASP and one-time restructuring costs are key factors.

• Performance:

  • Negative surprise in earnings and recent share price rally may lead to downside pressure.
  • Expectations of continued adverse conditions into 2H15E.

• Valuation:

  • Current TP is under review.
  • P/E ratio of 12.5x for 2015E and 9.1x for 2017E.

Global Macro Weekly Digest

• Greek Bailout Plan:

  • Eurozone leaders will meet on June 22 to discuss Greece's liquidity concerns.
  • Greece faces a EUR 1.54 billion repayment to IMF on June 30.
  • No grace period is expected, and a default may occur if no agreement is reached.
  • Possible scenarios include last-minute agreement, no deal, or further stopgap measures.

• Market Impact:

  • Greek stocks and bonds have slid, and CDS spreads have increased.
  • Risks have spread to other Eurozone countries, causing market volatility.
  • If Greece defaults, it could lead to significant market instability.

A-share Research Highlights

• Power Industry:

  • Profit of the thermal power industry is expected to stabilize.
  • Companies are shifting from operational to strategic level due to abundant cash flow.
  • Asset securitization and SOE reform are key strategic directions.

• Key Companies:

  • Huaneng Group, Guodian, Datang Group, and China Power Investment are likely to inject assets into listed companies.
  • Asset securitization rates vary, with Huaneng at 57.35% and potential for 42.65% increase.

• Other Sectors:

  • Retail: Sinomax, Intime Retail Group, and Gome Electrical are highlighted.
  • Technology, Media & Telecom: NetDragon, Tencent, and others are rated BUY or NEUTRAL.
  • Food & Beverage: China Mengniu Dairy and others are rated BUY or NEUTRAL.
  • Alternative Energy: China Wind Power and GCL-Poly Energy are rated BUY.

Summary of Key Metrics

Key Takeaways

• Positive Outlook: CBPO, NetDragon, and Greentown China are highlighted with BUY ratings, showing strong growth potential.
• Negative Outlook: Trinity is rated NEUTRAL due to negative earnings and share price pressure.
• Global Risks: Greece's default risk and related market volatility are significant concerns.
• Sector Analysis: Power industry is expected to stabilize, while some sectors like retail and technology show mixed performance.
• Valuation Metrics: Target prices and upside potential are key indicators for investment decisions.