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Industrial Securities Co., Ltd. Summary

Core Content

Industrial Securities Co., Ltd. provides a comprehensive overview of the Chinese stock market and related economic and industry developments. The report includes market indices, sector performance, daily headlines, company news, and in-depth analysis of trade tensions and policy changes.

Market Indices

• Market Volume: CNY 546 billion (USD83.99 billion)
• Market Performance: Losers outnumbered winners by 1601-to-855
• Market Outlook: The A-share market closed down for the week, with the Shanghai Composite down 0.39%, and the Shenzhen Component down 0.27%.

Sector Review

• Positive Performers:

  • Nuclear Power: Zhejiang Jiuli Hi-Tech Metals Co. (002318) surged 10.03%, Taihai Manoir Nuclear Equipment Co. (002366) jumped 9.99%.
  • Lithium Battery: Guangzhou Tinci Materials Technology Co. (002709) leapt 10.01%, Mianyang Fulin Precision Machining Co. (300432) added 10.01%.
  • Satellite Navigation: Chengdu Corpro Technology Co. (300101) soared 10.02%, Beijing Bdstar Navigation Co. (002151) climbed 10.01%.
  • Speak System Producers: Edifier Technology Co. (002351) rose 10.00%, Guoguang Electric Co. (300183) hiked up 10.01%.

• Weak Sectors:

  • IC Chip Makers: Lanzhou Sanmao Industrial Co. (000779) slumped 7.26%, Shanghai Sinyang Semiconductor Materials Co. (300236) plunged 3.99%.
  • OLED Names: Irico Display Devices Co. (600707) slid 4.03%, Shenzhen Tatfook Technology Co. (300134) shedding 3.28%.
  • TMT Names: Hunan TV & Broadcast Intermediary Co. (000917) plunged 9.73%, Sichuan Xun You Network Technology Co. (300467) declined 4.54%.

Daily Headlines

• Trade Data: China's exports in May may have dropped 4% y/y in USD terms, while imports may have fallen 6.8%, improving from a 10.9% fall in April.
• Foreign Exchange Reserves: China's reserves slipped to the lowest level since late 2011 due to a strong dollar.
• U.S.-China Trade Tensions: The U.S. listed China as a currency manipulator and raised tariffs on steel, reflecting global demand issues.
• Regulatory Changes: China allows domestic and foreign companies to apply for bank card clearing business licenses. Rules for reverse mergers are being revised to match IPO requirements.
• Annuity Reform: China seeks to lower the maximum contribution ratio of annuity from 16.6% to 12%.
• Energy Transition: China plans to reduce coal consumption to 60% of energy mix by 2020 and to 55% by 2030.

Latest Company News

• Baofeng Group (300431.SZ): CSRC rejects asset purchase plan.
• China Pacific Insurance (601601.SH): Unit to set up insurance company with Baidu unit.
• China Railway Group (601390.SH): Agreed to finance hydropower plant in Congo.
• Fosun Pharma (600196.SH): Wu Yifang named CEO.
• Gezhouba (600068.SH): Plans investment in Kazakhstan cement project.
• HNA Infrastructure (600515.SH): Asset restructuring approved, resuming trading.
• Huatai Securities (601688.SH): May unconsolidated net income of CNY 3.158 billion.
• Poly Real Estate (600048.SH): May contract sales up 5.31% y/y.
• SAIC Motor (600104.SH): May vehicle sales of 466,035 units.
• Shanghai SMI (600649.SH): Plans up to CNY 7.5 billion investment in Western Securities (002673.SZ).
• Yanzhou Coal (600188.SH): Yanzhou and Apollo-Xcoal consortium may bid for Anglo mines.

Industry Insight: New Phase in House Lease Market

• Guideline Overview: Released by the General Office of the State Council on June 3, 2016.

  • Support for House Leasing: Especially for unsold houses of real estate developers.
  • Regulatory Changes: Stricter regulations on real estate agencies.
  • Tax Incentives: Added-value tax cut from 5% to 1.5%, income tax reduced by half.
  • Public Rental Houses: Local governments may appoint professional agencies.

• Impact on Market:

  • Encourages real estate developers to convert commercial properties into rental houses.
  • Reduces costs for tenants and promotes supply and demand balance.
  • Aims to accelerate destocking in the real estate sector, particularly in first- and second-tier cities.

• Investment Recommendations:

  • Recommend Shenzhen World Union Properties Consultancy Inc (002285: SZ), Chongqing Wanli New Energy Co Ltd (600847: SH), and Everyday Network Co Ltd (300295: SZ).

Wanda Cinema Line Co., Ltd. (002739.SZ) - New Step Towards 'Film Empire'

• Acquisition Details:

  • Proposed to acquire 100% stake in Wanda Media Co. Ltd.
  • Payment via 497 million shares at CNY 74.48 per share, totaling CNY 37.204 billion.
  • Wanda Investment Co. Ltd pledged cumulative net profits of Wanda Media Co. Ltd from 2016–2018 will be no less than CNY 5.98 billion.
  • Plans to raise supporting funds of no more than CNY 8 billion.

• Financial Projections:

  • Net Profit (2016–2018): CNY 1.85 billion / CNY 2.57 billion / CNY 3.36 billion
  • EPS (2016–2018): CNY 1.58 / CNY 2.19 / CNY 2.87
  • PE (2016–2018): 51x / 37x / 28x

• Comment:

  • The acquisition strengthens Wanda's position in the film industry chain.
  • It allows the company to expand into online games and overseas businesses.
  • Wanda is a key player in the downstream film industry and a leader in the upstream.
  • The company is expected to carry out more M&As and implement the "membership+" strategy.
  • Rating: OUTPERFORM (Maintained)

• Potential Risks:

  • Slower-than-expected acquisition.
  • Dim prospects in the film industry.
  • Slower-than-expected progress in cinema construction.
  • Lower-than-expected box office.

Key Financial Indicators

Balance Sheet (Mn/CNY)

Conclusion

Industrial Securities Co., Ltd. highlights the current state of the Chinese stock market, with a focus on the A-share market and its performance across various sectors. The report also provides insights into the broader economic context, including trade tensions and regulatory changes. Additionally, it discusses the potential impact of new policies on the real estate and film industries, offering investment recommendations and identifying key risks.