Industrial Securities Co., Ltd. Summary
Core Content
Industrial Securities Co., Ltd. provides a comprehensive market analysis report, covering stock indices, sector performance, daily headlines, company news, and financial data. The report is dated April 26, 2016, and highlights the performance of Chinese stocks, liquidity conditions in the bond market, and specific insights on Kemen Noodle Manufacturing (002661.SZ).
Main Market Indices
| Index |
Close |
Daily Change |
% Change |
| SSE Composite |
2964.70 |
↑ 18.03 |
↑ 0.61% |
| SZSE Component |
10209.90 |
↑ 103.11 |
↑ 1.02% |
| CSI 300 |
3179.16 |
↑ 17.13 |
↑ 0.54% |
| ChiNext |
2155.70 |
↑ 28.87 |
↑ 1.36% |
| HSI |
21407.27 |
↑ 102.83 |
↑ 0.48% |
| HSCEI |
9016.12 |
↑ 29.79 |
↑ 0.33% |
- Market Volume: RMB 381.9 billion (USD 58.92 billion), a 2.3% decrease from the previous session.
- Performance: Winners outnumbered losers by 2102-to-364.
Market Review
- Stock Market: Chinese stocks rallied on Tuesday, recovering from earlier losses. Mid and small-cap stocks outperformed blue-chip SOEs.
- Monetary Policy: The PBOC injected 267 billion yuan via MLF and improved short-term liquidity with 140 billion yuan reverse repo, resulting in a net injection of 50 billion yuan.
- Liquidity Concerns: Despite the liquidity injection, market panic was driven by downgraded creditability of SOE bonds, and inter-bank liquidity tightened due to factors like quarterly tax payments and maturing MLFs.
Sector Review
- Outperforming Sectors: Agricultural, media, IT, power equipment, and telecommunication sectors showed strong gains.
- Underperforming Sectors: Cyclical industries, such as precious metals and coal miners, faced declines.
- Key Gainers: New Hope Liuhe Co. (000876), Heilongjiang Agriculture Company Limited (600598), Chinese Universe Publishing and Media Co. (600373), and Huayi Brothers Media Corporation (300027).
- Key Losers: Hunan Gold Corporation Limited (002155), Wintime Energy Co. (600157).
Daily Headlines
- Foreign Exchange Reserves: China's foreign-exchange reserves increased by $10.3 billion to $3.21 trillion in March.
- SDR Reporting: The PBOC will start reporting foreign-exchange reserves in SDR from April to reduce valuation changes.
- Investment Registration: Shanghai halted registration of investment companies following a risk incident involving Wealthroll Asset Management.
- Monetary Policy Outlook: The PBOC may pause monetary easing to avoid fueling inflation, despite risks to the bond rally.
- Steel Exports: China's steel exports remain high as domestic demand declines.
- Autonomous Cars: China is developing rules for hi-def maps for autonomous vehicles.
Latest Company News
- Baofeng Tech (300431.SZ): A major shareholder reduced its stake via block trades.
- China Railway Group (601390.SH): Won a bid for 42.5 billion yuan projects.
- Guangzhou Auto (601238.SH): March vehicle sales reached 133,427 units.
- Jianghuai Auto (600418.SH): Signed a pact for new energy vehicles.
Bond Market Review
- Liquidity Impact: Liquidity has become the key factor affecting bond pricing, with all types of assets experiencing price drops.
- Market Panic: SOE bond defaults have increased concerns and led to higher redemption pressure.
- Primary Market: New bond issuance increased to 204.1 billion yuan, but net supply slightly declined.
- Secondary Market: Yields increased, particularly for short-end low-rating bonds. Credit spreads expanded, while term spreads mostly shrank.
- Bond Yield Data:
- Treasury Bond: 1Y (2.27%), 3Y (2.50%), 5Y (2.72%), 7Y (2.99%), 10Y (2.93%).
- CDB Bond: 1Y (2.73%), 3Y (3.05%), 5Y (3.29%), 7Y (3.55%), 10Y (3.43%).
Kemen Noodle Manufacturing (002661.SZ)
Outperform (Maintained)
- Key Financials:
- 2015 Revenue: CNY 1.892 billion (+23.88% YoY).
- 2015 Net Profit: CNY 108 million (+64.41% YoY).
- EPS: CNY 1.29.
- 2016 Revenue Forecast: CNY 2284 million.
- 2016 Net Profit Forecast: CNY 132 million.
- 2016 EPS Forecast: CNY 1.17.
- 2017 EPS Forecast: CNY 1.46.
- 2018 EPS Forecast: CNY 1.79.
Company Profile
- Develops, manufactures, and sells noodle products.
- Main product series include nutrition, power, wish, high gluten, gifts, and kids.
Key Financial Indicators
| Metric |
2015 |
2016E |
2017E |
2018E |
| Revenue (Mn/CNY) |
1892 |
2284 |
2769 |
3393 |
| Net Profit (Mn/CNY) |
108 |
132 |
164 |
201 |
| Gross Margin (%) |
21.4 |
21.7 |
21.7 |
21.8 |
| Net Profit Margin (%) |
5.7 |
5.8 |
5.9 |
5.9 |
| EPS (CNY) |
0.96 |
1.17 |
1.46 |
1.79 |
Potential Risks
- Intensified market competition.
- Food safety concerns.
Balance Sheet (Mn/CNY)
| Item |
2015 |
2016E |
2017E |
2018E |
| Current Assets |
1659 |
1749 |
1874 |
2083 |
| Cash and Cash Equivalent |
1212 |
1176 |
1234 |
1279 |
| Total Assets |
2456 |
2545 |
2627 |
2806 |
| Total Liabilities |
454 |
440 |
437 |
494 |
| Total Shareholders' Equity |
2002 |
2105 |
2190 |
2312 |
Cash Flow Statement (Mn/CNY)
| Item |
2015 |
2016E |
2017E |
2018E |
| Net Profit |
108 |
132 |
164 |
201 |
| Net Change in Cash |
1131 |
-36 |
58 |
45 |
Income Statement (Mn/CNY)
| Item |
2015 |
2016E |
2017E |
2018E |
| Operating Income |
1892 |
2284 |
2769 |
3393 |
| Net Profit |
108 |
132 |
164 |
201 |
Key Financial Ratios
| Ratio |
2015 |
2016E |
2017E |
2018E |
| Gross Margin (%) |
21.4 |
21.7 |
21.7 |
21.8 |
| Net Profit Margin (%) |
5.7 |
5.8 |
5.9 |
5.9 |
| ROE (%) |
5.4 |
6.3 |
7.5 |
8.7 |
| PE Ratio |
61.5 |
50.5 |
40.6 |
33.1 |
| PB Ratio |
3.3 |
3.2 |
3.0 |
2.9 |
Investment Rating
- Industry Investment Rating:
- Overweight: If the industry outperforms the market.
- Neutral: If the industry performs about the same as the market.
- Underweight: If the industry underperforms the market.
- Company Investment Rating:
- Buy: If the stock outperforms the market by more than 15%.
- Outperform: If the stock outperforms the market by 5% to 15%.
- Neutral: If the stock outperforms or underperforms the market by less than 5%.
- Underperform: If the stock underperforms the market by more than 5%.
Conclusion
The report highlights the overall market recovery, the impact of liquidity on bond pricing, and the continued deleveraging in the financial sector. Kemen Noodle Manufacturing is highlighted as an outperforming stock due to its strong fundamentals, growth potential, and improved financial metrics. However, potential risks such as intensified competition and food safety remain.
