20161026-兴业证券-A-Share_Daily_Express_17页_885kb

Summary of Industrial Securities Co., Ltd. Report

Core Content

This report provides a comprehensive overview of the Chinese stock market performance on October 26, 2016, with a focus on key indices, sector movements, and company-specific updates, particularly for Jiangsu Hengli Hydraulic and Maiquer Group.

Market Overview

• Indices Performance:

  • SSE Composite: Closed at 3116.31, down 0.50%.
  • SZSE Component: Closed at 10817.51, down 0.50%.
  • ChiNext Index: Closed at 2184.49, down 0.71%.
  • HSI: Closed at 23325.43, down 1.02%.
  • HSCEI: Closed at 9698.85, down 1.41%.
  • Total Market Volume: CNY 547.26 billion, up 1.6% from the previous session.
  • Market Sentiment: Losers outnumbered winners by 1796-to-912, indicating a bearish trend.

• Market Trends:

  • Defensive sectors such as food & beverage and healthcare outperformed.
  • Large-cap and small-cap stocks were weak, with significant corrections.
  • Coal miners and construction sectors were under pressure.
  • IT, ground transportation, and chemical sectors also declined.

Sector Highlights

Winners

• Food & Beverage:
  • Wuliangye Yibin Co. (000858) +1.75%.
  • Inner Mongolia Yili Industrial Group Co. (600887) +6.36%.
• Agriculture:
  • Guangdong Wen's Foodstuffs Group Co. (300498) +1.66%.
  • Fujian Sunner Development Co. (002299) +4.89%.
• Healthcare:
  • Jiangsu Hengrui Medicine Co. (600276) +1.11%.
  • Shanghai Fosun Pharmaceutical (Group) Co. (600196) +0.77%.

Losers

• Coal Miners:
  • China Coal Energy Co. (601898) -3.98%.
  • Shaanxi Coal Industry Co. (601225) -4.59%.
• Construction:
  • China State Construction Engineering Corporation Limited (601668) -2.72%.
  • China Railway Group Limited (601390) -1.22%.
• Other Decliners:
  • IT, ground transportation, and chemical sectors were among the top losers.

Daily Headlines

• Coal Production: The National Development and Reform Commission urged coal miners to increase production to stabilize prices.
• Xiaomi Launches High-End Handsets: Xiaomi Corp. unveiled its most expensive handsets to re-enter the high-end smartphone market.
• China's Economic Outlook: The Xinhua News Agency noted that the economy is moving toward stabilization but still faces risks such as export uncertainty, financial risks, and employment pressures.
• HNA Group's Acquisition Delay: The potential bid for Singapore logistics provider CWT Ltd. has been delayed due to changes in deal structure.
• Bank of China's Q3 Profit: The bank is scheduled to announce its 3Q profit after market close, the first of the big four lenders to do so.

Company News

Jiangsu Hengli Hydraulic (601100.SH)

• Revenue: CNY 967 million for 16Q3, up 20.5% YoY.
• Net Profit: CNY 41.1 million for 16Q3, down 37.5% YoY.
• EPS: CNY 0.06 for 16Q3.
• Earnings Forecast:
  • 2016: CNY 88 million net profit, CNY 0.14 EPS.
  • 2017: CNY 186 million net profit, CNY 0.30 EPS.
  • 2018: CNY 314 million net profit, CNY 0.50 EPS.
• Key Growth Drivers:
  • Non-standard oil cylinders: Expected to grow significantly due to subway construction.
  • Shield tunneling machines: Expected to drive a 50% YoY revenue increase.
  • Pump valve products: Anticipated to experience explosive growth.
• Risks: Potential slowdown in infrastructure construction and challenges in marketing new products.

Maiquer Group (002719.SZ)

• Revenue: CNY 425 million for 16Q3, up 16.26% YoY.
• Net Profit: CNY 46 million for 16Q3, down 19.3% YoY.
• EPS: CNY 0.10 for 16Q3.
• Earnings Forecast:
  • 2016: CNY 68 million net profit, CNY 0.63 EPS.
  • 2017: CNY 77 million net profit, CNY 0.71 EPS.
  • 2018: CNY 88 million net profit, CNY 0.81 EPS.
• Key Business Areas:
  • Dairy Products: Includes sterilized milk, modulation milk, and milk-containing beverages.
  • Bakery Chain: A unique selling point as the only dairy company with its own bakery chain.
• M&A Strategy:
  • Acquired Xiyuchun, a leading organic food producer in Xinjiang.
  • Plans to acquire Hutubi Cattle Farm to strengthen its supply chain.
• Investment Grade: Maintained "Buy" rating due to strong business strategy and potential for growth.
• Risks: Potential slowdown in infrastructure, challenges in new product marketing.

Financial Highlights

Jiangsu Hengli Hydraulic

• Key Financial Indicators:
  • Revenue: CNY 1088 Mn (2015A), CNY 1306 Mn (2016E), CNY 1541 Mn (2017E), CNY 1880 Mn (2018E).
  • Net Profit: CNY 64 Mn (2015A), CNY 88 Mn (2016E), CNY 186 Mn (2017E), CNY 314 Mn (2018E).
  • EPS: CNY 0.10 (2015A), CNY 0.14 (2016E), CNY 0.30 (2017E), CNY 0.50 (2018E).
  • Gross Margin: Improved from 21.2% (2015A) to 24.3% (2018E).
  • ROE: Increased from 1.8% (2015A) to 8.0% (2018E).
• Valuation Ratios:
  • PE: 26.8 (2015A), 27.3 (2016E), 21.8 (2017E), 14.5 (2018E).
  • PB: 2.4 (2015A), 2.3 (2016E), 2.1 (2017E), 1.9 (2018E).

Maiquer Group

• Key Financial Indicators:
  • Revenue: CNY 1088 Mn (2015A), CNY 1306 Mn (2016E), CNY 1541 Mn (2017E), CNY 1880 Mn (2018E).
  • Net Profit: CNY 64 Mn (2015A), CNY 88 Mn (2016E), CNY 186 Mn (2017E), CNY 314 Mn (2018E).
  • EPS: CNY 0.10 (2015A), CNY 0.14 (2016E), CNY 0.30 (2017E), CNY 0.50 (2018E).
• Valuation Ratios:
  • PE: 95x (2016E), 84x (2017E), 73x (2018E).
  • PB: 2.4 (2015A), 2.3 (2016E), 2.1 (2017E), 1.9 (2018E).

Analysts

Jiangsu Hengli Hydraulic

• Analyst: SHI Mingxuan
• Contact: shimingxuan@xyzq.com.cn

Maiquer Group

• Analyst: CHEN Songkun
• Contact: chensongk@xyzq.com.cn

Assistant Analysts:

• MAN Zaipeng (yangmo@xyzq.com.cn)
• ZHANG Xinhe (zhangxinhe@xyzq.com.cn)
• PAN Mengchen (panmengchen@xyzq.com.cn)

Key Financial Ratios

Jiangsu Hengli Hydraulic

• Current Ratio: 2.60 (2015), 2.63 (2016E), 3.69 (2017E), 4.79 (2018E).
• Quick Ratio: 2.05 (2015), 1.98 (2016E), 2.87 (2017E), 3.81 (2018E).
• Asset Turnover Ratio: 0.25 (2015), 0.28 (2016E), 0.33 (2017E), 0.39 (2018E).
• ROE: 1.8% (2015), 2.5% (2016E), 5.1% (2017E), 8.0% (2018E).
• Net Profit Growth Rate: -30.9% (2015), 38.9% (2016E), 111.0% (2017E), 68.7% (2018E).

Maiquer Group

• Current Ratio: 2.60 (2015), 2.63 (2016E), 3.69 (2017E), 4.79 (2018E).
• Quick Ratio: 2.05 (2015), 1.98 (2016E), 2.87 (2017E), 3.81 (2018E).
• Asset Turnover Ratio: 0.25 (2015), 0.28 (2016E), 0.33 (2017E), 0.39 (2018E).
• ROE: 1.8% (2015), 2.5% (2016E), 5.1% (2017E), 8.0% (2018E).
• Net Profit Growth Rate: -30.9% (2015), 38.9% (2016E), 111.0% (2017E), 68.7% (2018E).

Conclusion

The report highlights the mixed performance of the Chinese stock market on October 26, 2016, with defensive sectors showing resilience while others, such as coal and construction, faced declines. Jiangsu Hengli Hydraulic and Maiquer Group are both recommended as "Strong Buy" and "Buy" respectively, due to their strong fundamentals, growth potential, and strategic M&A activities. Both companies are expected to see significant improvements in profitability and market share in the coming quarters.