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Weekly A-share Market Recommendations Summary

Core Content Overview

This document presents weekly stock recommendations from the Industrial Securities Research Institute for various sectors in October 2016. It includes detailed EPS forecasts, investment highlights, and potential risks for each company. The recommendations are categorized under different sectors such as Construction, Automobile, Hardware, EV, Fodder, TCM, and Banking.

Top Stock Recommendations

Sector-Specific Highlights

Construction (ARTS Group)

• Company Profile: Engaged in construction design, EPC, construction supervision, and project management.
• Investment Highlights:
  • Expanding businesses to more regions, with acquisitions like ECD to support development in southwestern China.
  • Exploring new businesses combining VR technology with architectural construction.
  • Collaborating with Chongqing Lufu Yinxiang Digital Technology for BIM and VR expansion.
• EPS Forecast: CNY 0.50 (2016), CNY 0.61 (2017), CNY 0.67 (2018).
• Potential Risk: Sharp government investment slump, slower-than-expected contract signing.

Automobile (SAIC Motor)

• Company Profile: Engaged in automobile manufacture and distribution, with financial services.
• Investment Highlights:
  • Industry recovery is expected to boost sales of JV-brand vehicles, especially the Roewe RX 5 model.
  • Anticipated earnings improvement for both self-owned and JV brands in 2016.
  • EPS forecast: CNY 2.85 (2016), CNY 3.00 (2017), CNY 3.17 (2018).
• Potential Risk: Passenger vehicle industry downturn, weaker-than-expected new product sales.

Hardware (Shenzhen Laibao Hi-tech)

• Company Profile: Engaged in R&D, manufacturing, and sale of display materials and touch devices.
• Investment Highlights:
  • Leading manufacturer of OGS touch panels, with expected sharp sales increase for larger-size full lamination panels.
  • Added touch panels for AIO PCs to its product mix.
  • Revenue and net profit improved significantly in H1 2016.
• EPS Forecast: CNY 0.28 (2016), CNY 0.42 (2017), CNY 0.62 (2018).
• Potential Risk: Demand for two-in-one laptops not meeting expectations, touch technology roadmap changes.

Expressway (Shenzhen Expressway)

• Company Profile: Constructing, managing, and operating toll highways and expressways.
• Investment Highlights:
  • Favorable conditions in the expressway sector, with stable earnings from mature roads.
  • Market cap valued at CNY 30.8 billion via FCFE model, with current stock price at 40% discount.
  • Received large government subsidies and has a strong cash balance.
• EPS Forecast: CNY 0.92 (2016), CNY 1.06 (2017), CNY 1.13 (2018).
• Potential Risk: Reduced traffic flow due to systematic risk, lower returns from newly-built expressways.

EV (Guangdong Highsun Group)

• Company Profile: Engaged in commercial property management, kaolin products, carbon blacks, and recently expanded into EV sector.
• Investment Highlights:
  • Fast-paced revenue and earnings growth despite industry slowdown.
  • Stable cash flow supports M&A and overseas expansion.
  • Key growth engines include fodder, overseas business, and pig-raising.
• EPS Forecast: CNY 0.77 (2016), CNY 1.01 (2017), CNY 1.12 (2018).
• Potential Risk: Overseas political risks, natural disasters.

Fodder (Guangdong Haid Group Company)

• Company Profile: Mainly engaged in animal feed production and marketing.
• Investment Highlights:
  • Strong growth despite destocking in the poultry industry.
  • Material cost decrease enhances profitability.
  • Leading position in the fodder market.
• EPS Forecast: CNY 0.77 (2016), CNY 1.01 (2017), CNY 1.12 (2018).
• Potential Risk: Lower-than-expected milk production, major epidemics.

TCM (Zhangzhou Pientzehuang Pharmaceutical)

• Company Profile: Produces and sells Chinese patent medicines in multiple international markets.
• Investment Highlights:
  • Focused on TCM business with modern distribution and innovative products.
  • Promising developments in wearable devices.
  • Valuation near historical average.
• EPS Forecast: CNY 1.00 (2016), CNY 1.28 (2017), CNY 1.55 (2018).
• Potential Risk: Deceleration in sales growth post-price markup, lower sales of innovative products.

Banking (Bank of Nanjing)

• Company Profile: Provides commercial banking services including deposits, loans, and financial bond issuance.
• Investment Highlights:
  • Fixed-income products are a key asset, benefiting from interest rate declines.
  • Clients include local government and SOEs, reducing bad loan risks.
• EPS Forecast: CNY 2.58 (2015), CNY 3.04 (2016), / (2017).
• Potential Risk: Systematic risk in the banking industry.

Key Information

• Rating: Most companies are rated BUY or STRONG BUY based on EPS forecasts and growth potential.
• EPS Forecasts: All companies have detailed EPS projections for 2016–2018, indicating expected earnings growth.
• Market Cap & Valuation: Market data includes closing prices, shares outstanding, and BVPS, highlighting valuation levels and potential upside.
• Growth Drivers: Companies are expected to benefit from government support, technological innovation, and industry recovery.
• Risks: Each recommendation includes potential risks, such as industry downturns, slower-than-expected growth, and external factors like natural disasters or political issues.

Disclaimer

• The report is issued by Industrial Securities Co., Ltd., a qualified securities investment consulting institute.
• It is intended for use by the company’s clients only.
• The views and recommendations are subject to change and not guaranteed.
• Unauthorized redistribution is prohibited without prior consent.

Analyst Certification

• The analysts are certified by the Securities Association of China.
• The report is based on legitimate and public information.
• All recommendations reflect the analysts’ personal views, and no direct or indirect compensation is involved.