20160805-中国银河-A-Share_Monthly_Portfolio_Focusing_on_stocks_with_solid_profits_in_a_volatile_market_--_Investment_Portfolio_for_August_2016_19页_1mb

A-Share Monthly Portfolio Summary - August 2016

Core Content

This document provides an investment portfolio recommendation for the month of August 2016, focusing on stocks with solid earnings in a volatile market. The report highlights the performance of the Galaxy Securities portfolio, which underperformed slightly in July but showed strong cumulative returns from January to July 2016. It forecasts a range-bound market in August, emphasizing the importance of solid earnings and the potential for speculative stocks to face increased risks.

Main Portfolio Focus

The August portfolio includes the following stocks across various sectors:

• Transportation: China Eastern Airlines (600115.CH)
• Auto: Huayu Auto (600741.CH)
• Building: WeihaiGuangtai (002111.CH)
• Non-ferrous Metals: HaiteGaoxin (002023.CH)
• Electronics: Datang Telecommunications (600198.CH)
• Telecommunications: Sunway Communication (300136.CH)
• Agriculture: Tasly (600535.CH)
• Pharmaceuticals: Jinyu Bio-technology (600201.CH)
• Machinery/Military: Jianxin Mining (000688.CH) and Mei Chen Technology (300237.CH)

Key Points of Each Stock

China Eastern Airlines (600115.CH)

• Performance: The stock is expected to benefit from the up-cycle in the air transport market and the opening of Shanghai Disneyland.
• Earnings: Expected EPS of RMB0.50 in 2016 and RMB0.57 in 2017.
• Valuation: PER of 13.9x in 2016 and 12.2x in 2017.
• Catalysts: Strong demand from tourism, favorable RMB exchange rate, and improved operational efficiency.
• Risks: Potential for sudden RMB devaluation and overcapacity in the airline industry.

Huayu Auto (600741.CH)

• Performance: Strong revenue and earnings growth, with a high dividend yield.
• Earnings: Expected EPS of RMB1.63 in 2016 and RMB1.76 in 2017.
• Valuation: PER of 9.8x in 2016 and 9.1x in 2017.
• Catalysts: Robust main business growth, R&D in intelligent driving and new energy vehicles, and international expansion.
• Risks: Lower-than-expected auto sales and internal business integration challenges.

WeihaiGuangtai (002111.CH)

• Performance: High profit growth driven by military and civil integration, general aviation, and UAVs.
• Earnings: Expected EPS of RMB0.74 in 2016 and RMB0.99 in 2017.
• Valuation: PER of 34.0x in 2016 and 25.4x in 2017.
• Catalysts: Favorable policies for general aviation, large domestic and overseas orders, and industry chain integration.
• Risks: Slow progress in general aviation policies, delayed military equipment development, and industry integration issues.

HaiteGaoxin (002023.CH)

• Performance: Strong growth in high-end RF chips, aviation maintenance, and training services.
• Earnings: Expected EPS of RMB0.16 in 2016 and RMB0.37 in 2017.
• Valuation: PER of 106.6x in 2016 and 46.1x in 2017.
• Catalysts: Progress in chip projects, approval of new aviation systems, and helicopter winch development.
• Risks: Slow chip development, delayed military product delivery, and general aviation industry development.

Datang Telecommunications (600198.CH)

• Performance: Leading in chip design and 5G standards, with potential benefits from IoV and e-sports.
• Earnings: Expected EPS of RMB0.16 in 2016 and RMB0.37 in 2017.
• Valuation: PER of 126.0x in 2016 and 54.5x in 2017.
• Catalysts: IoV standard adoption, mobile Internet and IoT growth, and institutional reform.
• Risks: Delayed IoV standard issuance and institutional reform challenges.

Tasly (600535.CH)

• Performance: Anticipates positive FDA Phase III results for its CDDP, which could boost its pharmaceutical business.
• Earnings: Expected EPS of RMB1.53 in 2016 and RMB1.74 in 2017.
• Valuation: PER of 26.1x in 2016 and 23.0x in 2017.
• Catalysts: FDA Phase III results unblinding, strategic R&D collaborations, and product line upgrades.
• Risks: Industry cost control and bidding pressures.

Sunway Communication (300136.CH)

• Performance: Leading provider of mobile terminal solutions with high profit growth.
• Earnings: Expected EPS of RMB0.52 in 2016 and RMB0.97 in 2017.
• Valuation: PER of 36.2x in 2016 and 19.4x in 2017.
• Catalysts: Strong performance in peak season and industry growth.
• Risks: Market volatility and competition in the mobile terminal solutions sector.

Jinyu Bio-technology (600201.CH)

• Performance: Expected to improve in Q3 due to late-cycle boom.
• Earnings: Expected EPS of RMB1.10 in 2016 and RMB1.45 in 2017.
• Valuation: PER of 26.6x in 2016 and 20.2x in 2017.
• Catalysts: Improved Q3 performance and favorable industry conditions.
• Risks: Lower-than-expected sales and operational challenges.

Jianxin Mining (000688.CH)

• Performance: Strong fundamentals in the zinc industry.
• Earnings: Expected EPS of RMB0.29 in 2016 and RMB0.35 in 2017.
• Valuation: PER of 30.4x in 2016 and 25.2x in 2017.
• Catalysts: Continued industry growth and stable financial performance.
• Risks: Market fluctuations and regulatory changes.

Mei Chen Technology (300237.CH)

• Performance: Expanding through M&A and PPP-based models in tourism and smart home.
• Earnings: Expected EPS of RMB0.39 in 2016 and RMB0.51 in 2017.
• Valuation: PER of 27.1x in 2016 and 20.7x in 2017.
• Catalysts: Continued M&A and PPP expansion, and improved performance.
• Risks: Market volatility and competition in the smart home and tourism sectors.

Investment Recommendations

• The portfolio is recommended for investors looking for stocks with strong earnings and growth potential.
• The report suggests that the market will remain range-bound in August, with a focus on stocks with solid earnings.
• The analysts believe that the selected stocks will outperform the market due to their strong fundamentals and strategic positions in key industries.

Main Risk Factors

• RMB Devaluation: Sudden and significant devaluation could affect financial performance.
• Market Volatility: Increased speculative activity and policy changes could impact stock prices.
• Industry-Specific Risks: Each stock faces unique risks related to its sector, such as competition, regulatory changes, and development delays.

Summary

The report highlights a strategic focus on stocks with solid earnings and growth potential across various sectors, including transportation, auto, building, non-ferrous metals, electronics, telecommunications, agriculture, and pharmaceuticals. The analysts maintain a "Recommend" rating for all selected stocks, based on their strong fundamentals, strategic positioning, and expected performance improvements. The report also outlines key catalysts for each stock's potential growth and identifies main risk factors that could affect their performance.