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报告摘要

Market Report Summary - 24 June 2015

Core Content Overview

This market report provides an analysis of China Huishan Dairy (6863.HK) and a summary of TMT sector updates and major financial indicators for the Hong Kong, China, and Asian markets. It also includes details on commodity prices, interest rates, and currency movements.

China Huishan Dairy (6863.HK)

Company Performance

FY15 Results: Missed consensus estimates by 11.8% in revenue and 27.4% in core net profit.
Revenue: Rmb3.9bn, up 11% YoY, driven by liquid milk and milk powder businesses.
Gross Profit: Rmb2.3bn, up 3% YoY, but gross margin contracted to 57.6% from 60.8%.
Core Operating Profit: Rmb1.289bn, down 14% YoY.
Net Profit: Rmb877.1mn, down 29.8% YoY.
Core Net Margin: 23.1%, down 12.3ppt YoY.

Key Factors Affecting Performance

Weak Raw Milk Prices: Expected to remain weak until 2HFY16.
Delayed Production Base: Jiangsu production line not expected to commence until 3Q16.
High Expenses: Selling expenses rose 73% YoY, financial costs are expected to remain high.

Valuation

Forward PE: 11.5x, a 7% premium over historical average PE of 10.8x.
Downside Risks: Street may cut earnings estimates further in the near term.

Business Breakdown

Dairy Farming Revenue: Rmb1.0bn, up 4% YoY.
Liquid Milk Revenue: Rmb2.4bn, up 6% YoY, driven by ASP increase and volume growth.
Milk Powder Revenue: Rmb473mn, up 87% YoY, due to product mix changes and volume growth.
Downstream Business: Accounts for 74% of total revenue in FY15.

Financial Ratios

Net Gearing Ratio: 26.2% (up from 9.5% in FY14).
Dividend Payout Ratio: 25%, consistent with last year.

TMT Sector Update

Highlights

Alibaba & Ant Financial: Investing nearly $1 billion in local services startup.
China Cross-Border E-commerce: Government to promote cross-border e-commerce with tax incentives and pilot projects.
Xiaomi: Turning to traditional ads in India for brand awareness.
Ant Financial: Launching internet bank (MYbank) in China.
Amazon: New Kindle Paperwhite available globally from June 30.

Market Indices and Commodity Prices

Hong Kong Equities

Hang Seng Index: 27,333, +0.9%.
H-share Index: 13,609, +1.7%.
Turnover: HK$136.0bn, up 50.1%.
-% from HSI: 25.5%.
-% CBBC, wrnt: 24.2%.

China Equities

CSI 300 Index: 4,786, +3.2%.
Shanghai Composite Index: 16,046, +2.0%.
Shenzhen Composite Index: 2,775, +1.2%.

Asian Equities

Nikkei 225: 20,809, +1.9%.
Korea KOSPI: 2,081, +1.3%.
Taiwan TWSE: 9,391, +0.5%.
India Sensex 30: 27,804, +0.3%.

US/European Equities

DJIA: 18,144, +0.1%.
S&P 500: 2,124, +0.1%.
NASDAQ: 5,160, +0.1%.
UK FTSE 100: 6,835, +0.1%.
Germany DAX: 11,543, +0.7%.
France CAC40: 5,058, +1.2%.

Commodity Prices

WTI Oil: $61.0/bl, +1.0%.
Gold: $1,178.2/troy oz, -0.6%.
Copper Futures: $5,654.0/metric ton, no change.
Aluminium Futures: $1,709.0/metric ton, no change.
Reuters/Jefferies CRB Futures: 224.4, +0.5%.
Baltic Dry Index: 790.0, +1.4%.

Interest Rates and Yields

UST Yield 3m: 0.01%, no change.
UST Yield 10y: 2.41%, +0.036%.
HIBOR 3m: 0.39%, +0.004%.
USD LIBOR 3m: 0.28%, no change.

HK Listco ADRs

Petrochina: ADR cIs HK$8.92, +0.70%.
China Mobile: ADR cIs HK$104.28, -0.40%.
HSBC: ADR cIs HK$73.36, -0.46%.
China Life: ADR cIs HK$35.15, +0.15%.
Sinopec Corp: ADR cIs HK$6.85, +1.07%.
CNOOC: ADR cIs HK$11.32, +0.88%.
Cheung Kong: ADR cIs HK$185.30, +56.77%.
China Telecom: ADR cIs HK$4.86, +0.87%.
Sun Hung Kai: ADR cIs HK$129.86, +0.51%.
China Unicom: ADR cIs HK$12.61, +1.50%.

Note: ADRs account for 33.9% of HSI and 21.5% of H-share Index.

Price Performance

6863.HK: 10.6% 1m, 33.1% 3m, 46.3% 6m.
HSI: -2.4% 1m, +12.0% 3m, +17.1% 6m.

Key Data

Ticker	Price (23 Jun)	52W High	52W Low	Mkt. Cap. (HK$bn)	Mkt. Cap. (US$bn)	Total Issued Share (bn)	Avg. 3mths t/o (HK$mn)
6863.HK	HK$1.77	HK$1.92	HK$1.15	25.35	3.27	14.32	104.33

Shareholding Structure

Shareholder	Percentage
Charmp Harvest Limited	60.55%
Free float	39.45%

Conclusion

China Huishan Dairy continues to underperform against expectations due to weak raw milk prices, delayed production base, and high expenses. The company's focus on downstream business has led to a significant portion of revenue (74% in FY15), but its profitability remains under pressure. The TMT sector saw notable developments including major investments by Alibaba and Ant Financial, as well as new product launches and policy changes in cross-border e-commerce. Overall market indices showed mixed performance, with some Asian markets outperforming others.

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