20150922-大华继显-Regional_Morning_Notes_31页_2mb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive market analysis for the consumer sector in Indonesia and highlights key updates on China Power International Devt (CPI) and other regional stocks. It includes investment recommendations, financial forecasts, and insights on economic trends.

Key Stories

Indonesia - Consumer Sector

• Sector Rating: OVERWEIGHT due to:

  • Higher disposable income from tax cuts.
  • Expansion of the middle class and working class.
  • Immunity to rupiah depreciation.
  • No consecutive years of profit decline recorded.
  • More reasonable valuations now.

• Top Picks:

  • Gudang Garam (GGRM IJ): BUY with a target price of Rp50,000 (19% upside).
  • Nippon Indosari Corpindo (ROTI IJ): BUY with a target price of Rp1,330 (17% upside).
  • Tiga Pilar Sejahtera (AISA IJ): BUY with a target price of Rp2,000 (28.2% upside).
  • Unilever Indonesia (UNVR IJ): SELL with a target price of Rp33,900 (16% downside).

• Key Factors for Gudang Garam:

  • Strong pricing power with tobacco demand elasticity of -0.6.
  • Shift in consumer preference from SKT (hand-rolled) to SKM-FF (full-flavor machine-rolled) cigarettes.
  • Gaining market share in the SKM Mild segment.
  • Risk of share price pressure due to HM Sampoerna's (HMSP) rights issue.

China Power International Devt (2380 HK)

Key Points

• Rating: BUY
• Target Price: HK$6.40 (+16.1% upside)
• Recent Performance:
  • Thermal power output volume rebounded in 2H15.
  • Coal prices weakened further, potentially offsetting tariff cuts.
• Earnings Growth:
  • Expected to continue with strong core earnings growth in 2H15.
  • Net profit is forecasted to grow by 20.1% yoy in 2016.
• Asset Injection:
  • Expected to be a major catalyst for growth.
  • Potential capacity growth of 30GW via parent company's asset injections.
  • First asset injection likely by the end of 2015.
• Financial Highlights:
  • Net profit (adj.) expected to grow from Rmb2,766m in 2015 to Rmb3,695m in 2017.
  • EPS is forecasted to increase from 42.0 fen in 2015 to 56.1 fen in 2017.
  • Valuation remains attractive with 10x 2016F PE and 1.3x 2016F P/B.

Key Indices Performance

Key Assumptions

• Brent Crude: Expected to average Rmb61/ton in 2015, up to Rmb67/ton in 2016.
• CPO (Crude Palm Oil): Forecasted to increase from Rmb722/ton in 2014 to Rmb765/ton in 2015 and Rmb788/ton in 2016.

Corporate Events

• China Traditional Chinese Medicine Roadshow: Hong Kong, 24 Sep 2015.
• Far East Consortium Roadshow: Toronto and Montreal, 8-9 Oct 2015.
• Asian Gems Conference: Singapore, 12-13 Oct 2015.

Valuation & Recommendations

• Gudang Garam (GGRM):

  • 2016F PE: 14.6x
  • 2016F P/B: 1.9x
  • Dividend Yield: 4.6%
  • Target: Rp50,000 (19% upside)

• Nippon Indosari (ROTI):

  • 2016F PE: 13.4x
  • 2016F P/B: 5.1x
  • Dividend Yield: 4.6%
  • Target: Rp1,330 (17% upside)

• Tiga Pilar (AISA):

  • 2016F PE: 11.4x
  • 2016F P/B: 1.5x
  • Dividend Yield: 4.6%
  • Target: Rp2,000 (28.2% upside)

• Unilever Indonesia (UNVR):

  • 2016F PE: 46.9x
  • 2016F P/B: 55.4x
  • Dividend Yield: 4.6%
  • Target: Rp33,900 (16% downside)

Conclusion

The document highlights the resilience of the Indonesian consumer sector, emphasizing strong pricing power, market share gains, and the absence of consecutive profit declines. CPI is recommended as a top BUY due to its potential for earnings growth and asset injection. The market is expected to be neutral in Malaysia, while Singapore and Thailand show mixed performance. Valuation metrics suggest opportunities for long-term investment in selected Indonesian consumer stocks.