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报告摘要

Summary of Industrial Securities Co., Ltd. Report

Core Content

This report provides an overview of the Chinese stock market performance, sector analysis, daily headlines, company events, and investment insights from Industrial Securities Co., Ltd. It highlights key financial metrics for Hangzhou Hikvision Digital Technology (002415: SZ), including revenue, net profit, and valuation ratios, and outlines investment recommendations based on market trends and company fundamentals.

Main Market Indices

Index	Close	Daily Change	% Change
SSE Composite	4070.91	↓53.51	↓1.29%
SZSE Component	13518.52	↓236.01	↓1.72%
CSI 300	4176.28	↓74.53	↓1.75%
ChiNext	2897.82	↓70.13	↓2.36%
HSI	25128.51	↓270.34	↓1.06%
HSCEI	11679.02	↓155.45	↓1.31%

The overall market volume reached CNY 1586 billion, with a significant increase of 13.5% compared to the previous week. Declining stocks outnumbered advancing ones by a ratio of approximately 3-to-1.

Market Review

Performance: China stocks fell on Friday, snapping a six-day winning streak.
Fundamentals: Economic data, including the Caixin-Markit China manufacturing PMI and electricity consumption growth, indicated weak market fundamentals.
Rumors: There were rumors that the IMF urged China to exit stabilization measures and allow more market forces to operate, which raised investor concerns.
Indices: Despite the drop, the Shanghai Composite Index was still up 2.87% for the week, and the Shenzhen Component Index was up 3.95% from last weekend.

Sector Review

Strong Performers: Military-related stocks led the market, with China Spacesat Co., Ltd. (600118) and AVIC Aero-Engine Controls Co., Ltd. (000738) rising by 3.89% and 2.84%, respectively.
Outperformers: Tourism companies also performed well, with Songcheng Performance Development Co., Ltd. (300144) up 1.53%.
Decliners: Media and Internet companies, such as East Money Information Co., Ltd. (300059) and Leshi Internet Information & Technology Corp., Bei Jing (300104), saw sharp declines of 7.66% and 6.42%, respectively. Brokerage firms and agriculture names also underperformed.

Daily Headlines

Caixin-Markit PMI: The preliminary reading for July may improve to 49.7, with the final June reading at 49.4. A reading below 50 indicates contraction.
IMF Rumors: The IMF is reportedly urging China to exit stabilization measures, raising concerns among investors.
Government Actions: The State Council approved a cross-border cooperation zone in Yunnan, and the State Administration of Taxation launched a pilot program for electronic invoices in key cities.
Corporate Activities: Central Huijin Investment purchased shares in China Everbright Bank, and several local government financing vehicles have sold bonds overseas.

Latest Company Events

China Eastern (600115.SH): H shares remain halted.
China Everbright Bank (601818.SH): Central Huijin increased H-shr holdings.
China Hi-Tech Group (600730.SH): Under investigation by the CSRC.
China Merchants Securities (600999.SH): 1H net profit rose 436.4% YoY to 7.32 billion yuan.
China State Const Eng (601668.SH): Signed a $1.1 billion deal for a power plant in Zimbabwe.
Hareon (600401.SH): Plans to invest up to $40 million in an Indian solar cell project.
New China Life (601336.SH): Expected 1H net profit rise of 80% YoY.
Sinosteel (000928.SZ): Supports efforts to remove CuDeco Chairman.
Tianwei Baobian (600550.SH): Plans to auction equity assets on August 12.
Zhujiang Brewery (002461.SZ): Seeks private placement of up to 4.8 billion yuan.

Industry Insights

BDI Rebound, Oil Shipping Boom

BDI Performance: The Baltic Dry Index (BDI) rebounded 89% from 589 points on June 1 to 1113 points on July 21.
SOE Reform: Shipping companies are undergoing SOE reforms, with joint ventures and private control influencing market dynamics.
Profitability: China Merchants Energy Shipping Co., Ltd. (601872.SH) and China Shipping Development Company Limited (600026.SH) are expected to benefit from the industry's growth and reform.
Investment Highlights: EPS forecasts are CNY 0.39 and CNY 0.27 for 2015, implying 22x/38x PE and 4x/1.6x PB.
Risks: Potential risks include lower-than-expected shipping prices, slower SOE reforms, and market uncertainties.

New Policy on E-invoice Launched

Pilot Program: Electronic invoice implementation will begin in Beijing, Shanghai, Zhejiang, and Shenzhen on August 1, 2015.
System Integration: The new system will integrate with the VAT invoice system to provide tax services.
Recommendations: Aisino Corporation (600271.SH) and Tungkong Inc. (002117.SZ) are recommended due to their involvement in electronic invoice systems.
Risks: Policy changes and slower implementation could affect the progress of the reform.

Hangzhou Hikvision Digital Technology (002415: SZ)

Key Financial Indicators

FY	2014	2015E	2016E	2017E
Revenue (Mn/CNY)	17233	27776	41372	59228
YoY (%)	60.4%	61.2%	48.9%	43.2%
Net Profit (Mn/CNY)	4665	6684	9529	13297
YoY (%)	52.1%	43.3%	42.6%	39.5%
EPS (CNY)	1.15	1.64	2.34	3.27

Financial Performance (15H1)

Revenue: CNY 9.80 billion, up 62.84% YoY.
Net Profit: CNY 2.21 billion, up 45.20% YoY.
EPS: CNY 0.55.
15Q2 Revenue: CNY 5.51 billion, up 61% YoY or 28.46% QoY.
15Q2 Net Profit: CNY 1.16 billion, up 39.49% YoY or 11.22% QoY.
Gross Margin: 41.94% in 15Q2, down 2.29 percentage points QoQ.
Net Profit Margin: 24.1% in 15Q2, down 3.0 percentage points YoY.
Days Sales of Inventory: 82 days, down 18 days QoQ.

Investment Highlights

Growth Momentum: The company is expected to maintain strong growth in the next two years.
IPO Efforts: The company's plans for a Hong Kong IPO may help improve its valuations.
Internet Expansion: The company is expanding into the Internet industry with a series of products and platforms.
EPS Forecast: Revised to CNY 1.64 in 2015, CNY 2.34 in 2016, and CNY 3.27 in 2017, implying 20x, 14x, and 10x P/E ratios, respectively.
Investment Recommendation: Reiterate OUTPERFORM.

Potential Risks

AR Collection: Difficulties in collecting accounts receivable.
Gross Margin: Possible decline.
Internet Business: Uncertainties in the development of Internet-based businesses.

Investment Rating

Industry Investment Rating: Based on the performance of the industry index relative to the market benchmarks, the rating is defined as Overweight, Neutral, or Underweight.
Company Investment Rating: OUTPERFORM is maintained for Hangzhou Hikvision Digital Technology (002415: SZ) due to its strong growth momentum and expansion into the Internet industry.