20180807-广发证券_香港_-A-Share_Architectural_Decoration_Sector_3页_364kb

报告摘要

A-Share Architectural Decoration Sector Summary

Core Content

The A-Share Architectural Decoration Sector is currently experiencing a positive outlook due to favorable policy environments and improving valuations. The sector is being supported by both monetary and fiscal policy adjustments, which are expected to enhance liquidity and infrastructure investment expectations. Despite challenges such as economic slowdown and rising interest rates, the architectural decoration industry continues to show strong earnings growth, with 1H18 net profit increasing by 26.8% year-over-year, surpassing the 2017 growth rate by 1.9 percentage points.

Key Points

Valuation and Earnings

Valuation: The sector remains undervalued, with a P/E ratio of 11.6x and a P/B ratio of 1.29x, both at historical lows.
Earnings Growth: 60 companies in the sector have issued profit alerts, indicating a strong performance in the first half of 2018.

Fund Flow

Mutual Fund Positions: The sector's share in mutual fund holdings decreased to 0.73% in 2Q18 from 1Q18, reflecting its low valuation and investor caution.

Recommended Stocks

SOEs with Low P/B: Gezhouba Group (600068 CH), China State Construction Engineering (601668 CH), China Communications Construction (601800 CH), China Railway Construction (1186 HK), and China National Chemical Engineering (601117 CH) are highlighted.
Home Decoration/Design Blue-Chips: Gold Mantis Construction Decoration (002081 CH), Dong Yi Ri Sheng Home Decoration Group (002713 CH), and JSTI Group (300284 CH) are recommended due to their solid earnings growth and lower valuations.
Overseas Projects Benefiting from RMB Depreciation: Sinoma International Engineering (600970 CH) is noted for its potential to benefit from RMB depreciation.

Policy Environment

Monetary Policy

On June 24, the PBoC cut the RRR to release Rmb700bn into the market.
The 2Q18 monetary policy meeting emphasized maintaining sufficient liquidity.
On July 18, the central bank guided banks to increase low-rating credit bonds and use MLF funds to support loans and credit bonds.
On July 23, Rmb502bn was injected into the MLF, marking the largest injection since its establishment, confirming a loosening monetary policy.
Analysts expect 1-2 RRR cuts in 2H18.

Fiscal Policy

The State Council Standing Committee on July 23 encouraged a more active fiscal policy and moderate monetary easing.
Infrastructure investment in 1H18 grew by 7.3%, and it is expected to bottom out in 2H18, leading to improved fundamentals.

Investment Highlights

Policy Clarity: Focus on low P/B SOEs that have corrected.
Concentration Subsectors: Watch for blue-chip companies in home decoration/design with strong earnings.
Overseas Exposure: Favor companies with overseas projects that benefit from RMB depreciation.

Risks

Unexpected RMB Exchange Shocks
Macro Economic Shocks
Rising Interest Rates
Disappointing Company Earnings
Trade Receivables Recognition Falling Short of Expectations

Rating Definitions

Rating	Definition
Buy	Expected to outperform benchmark by more than 15%
Accumulate	Expected to outperform benchmark by more than 5% but not more than 15%
Hold	Expected relative performance ranges between -5% and 5%
Underperform	Expected to underperform benchmark by more than 5%

Sector Rating	Definition
Positive	Expected to outperform benchmark by more than 10%
Neutral	Expected relative performance ranges between -10% and 10%
Cautious	Expected to underperform benchmark by more than 10%

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is intended solely for clients of GF Securities (Hong Kong). The information is subject to change and should not be relied upon as a substitute for professional advice. GF Securities (Hong Kong) may issue other communications with differing views.

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