20110816-申万宏源研究_香港_-Top_picks_for_the_next_3_months__SWS_Conviction_Buy_List_for_HK-listed_China_Stocks_19页_360kb

Summary of SWS Conviction Buy List for HK-listed China Stocks (August 16, 2011)

Core Content

This document outlines the performance and investment rationale of the SWS Conviction Buy List for Hong Kong-listed China stocks as of August 16, 2011. It includes the performance of the portfolio from August 9 to August 15, the list of recommended stocks, and detailed analysis for each stock.

Key Performance Metrics

• Portfolio Performance:
  • Previous Period (Aug 9 - Aug 15): 3.10% return
  • Cumulative Return (since Oct 20, 2010): 7.91%
  • HSCEI Performance (Previous Period): -1.52%
  • HSCEI Performance (Cumulative): -19.37%
  • Excess Return over HSCEI (Previous Period): 4.63%
  • Excess Return over HSCEI (Cumulative): 27.28%

Top Picks for the Next 3 Months

The following are the stocks currently in the SWS Conviction Buy List:

1. Yanzhou Coal Mining (1171 HK)
2. China Shanshui Cement Group (691 HK)
3. China National Building Material (3323 HK)
4. China Petroleum & Chemical (386 HK)
5. Zhaojin Mining Industry (1818 HK)
6. Jiangxi Copper Co Ltd (358 HK)
7. Intime Department Store (1833 HK)
8. China Unicom Hong Kong Ltd (762 HK)
9. Kingdee International Software (268 HK)
10. China Minsheng Banking-H (1988 HK)
11. PICC Property & Casualty -H (2328 HK)
12. China National Aviation Holding (753 HK)

Detailed Stock Analysis

Yanzhou Coal Mining (1171 HK)

• Investment Rating: Buy
• Closing Price (Aug 15, 2011): HKD 25.05
• Target Price: HKD 34.50
• Potential Upside: 38%
• Rationale: Valuation based on DCF, with strong downstream demand and better-than-expected production growth.
• Key Assumptions: Strong downstream demand, better cost control, and faster production ramp-up.
• Catalysts: Improved production and potential price increases due to structural changes.
• Major Risks: Macroeconomic downturn, coal production delays, and depreciation.

China Shanshui Cement Group (691 HK)

• Investment Rating: Buy
• Closing Price (Aug 15, 2011): HKD 8.69
• Target Price: HKD 13.50
• Potential Upside: 55%
• Rationale: Strong sales and profitability due to structural changes in the market.
• Key Assumptions: Sales volume of 59M tonnes, higher gross margin.
• Catalysts: Profit alerts and interim results.
• Major Risks: Tightening policies and inflation.

China National Building Material (3323 HK)

• Investment Rating: Buy
• Closing Price (Aug 15, 2011): HKD 14.00
• Target Price: HKD 24.60
• Potential Upside: 76%
• Rationale: Strong growth in sales and profitability, with a lower P/E than the industry average.
• Key Assumptions: Higher sales volume and improved gross margin.
• Catalysts: Stronger-than-expected cement prices and positive news on IPO.
• Major Risks: Tightening policies and inflation.

China Petroleum & Chemical (386 HK)

• Investment Rating: OUTPERFORM
• Closing Price (Aug 15, 2011): HKD 6.79
• Target Price: HKD 9.50
• Potential Upside: 40%
• Rationale: Potential pricing mechanism reform and weak oil prices.
• Key Assumptions: Average Brent oil price of US$108/b, increased oil and gas production.
• Catalysts: Better-than-expected interim results.
• Major Risks: Crude oil price jumps.

Zhaojin Mining Industry (1818 HK)

• Investment Rating: Buy
• Closing Price (Aug 15, 2011): HKD 16.64
• Target Price: HKD 20.95
• Potential Upside: 26%
• Rationale: High gold prices and mine expansion.
• Key Assumptions: Gold price peak at US$1,470 in 2011 and 20% CAGR for mine production.
• Catalysts: Gold price surge due to Euro-debt crisis or QE3 speculation.
• Major Risks: Trend reversal in gold price.

Jiangxi Copper Co Ltd (358 HK)

• Investment Rating: OUTPERFORM
• Closing Price (Aug 15, 2011): HKD 23.45
• Target Price: HKD 32.46
• Potential Upside: 38%
• Rationale: Copper price recovery and inventory rebuilding.
• Key Assumptions: Copper price peaks at RMB 75,000/t in 2012.
• Catalysts: Higher copper price due to loosening policies.
• Major Risks: CPI increase and global economic slowdown.

Intime Department Store (1833 HK)

• Investment Rating: OUTPERFORM
• Closing Price (Aug 15, 2011): HKD 12.38
• Target Price: HKD 16.60
• Potential Upside: 34%
• Rationale: Strong SSSG and interim results.
• Key Assumptions: Lower commission rates, higher SSSG growth.
• Catalysts: Better-than-expected SSSG and potential M&A.
• Major Risks: Dependence on flagship stores and intensified competition.

Key Points

• The portfolio outperformed the HSCEI index in both the previous period and cumulative returns.
• The addition of Sinopec (386 HK) to the Conviction Buy List is based on its low P/E and potential for re-rating due to pricing mechanism reform.
• Each stock's performance and valuation are based on detailed financial analysis, including revenue, net income, EPS, and PE/PB ratios.
• The document highlights the expected impact of macroeconomic factors, such as CPI, on stock performance.
• The SWS analysts differ from the market consensus in their assumptions and forecasts, particularly regarding production growth and market dynamics.