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Weekly A-share Market Recommendations Summary

Core Content Overview

This document provides weekly investment recommendations for several A-share companies in China, focusing on their earnings forecasts, sector performance, and potential risks. The recommendations are based on Industrial Securities Research Institute's analysis, with a particular emphasis on the aviation, chemical engineering, real estate, construction, and agriculture sectors.

Top Stock Recommendations

Main Points and Key Information

China Southern Airlines (600029: SH)

• Sector: Aviation
• Earnings Forecast: CNY 0.80 in 2015, CNY 0.95 in 2016
• Rating: OUTPERFORM
• Key Highlights:
  • High demand for air transport due to tourism and relaxed monetary/fiscal policies
  • Strong earnings growth expected, with a projected profit of CNY 8 billion in 2015
  • High-beta airline stocks are at reasonable valuations, with China Southern expected to see more substantial earnings improvement than competitors
• Potential Risks:
  • Macroeconomic downturn
  • Oil price surge
  • Exchange rate depreciation
  • High-speed train competition
  • Safety accidents or epidemics

Kingfa Sci & Tech (600143: SH)

• Sector: Chemical Engineering
• Earnings Forecast: CNY 0.36 in 2015, CNY 0.46 in 2016, CNY 0.60 in 2017
• Rating: BUY
• Key Highlights:
  • Strong position in modified plastics manufacturing
  • Active expansion into new chemical materials and biodegradable plastics
  • Plans to establish a supply chain management subsidiary
• Potential Risks:
  • Slower-than-expected project progress
  • Failure to achieve marketing results for new materials

Guoxing Rongda Real Estate (000838: SZ)

• Sector: Real Estate
• Earnings Forecast: CNY 0.60 in 2015, CNY 0.75 in 2016, CNY 0.86 in 2017
• Rating: BUY
• Key Highlights:
  • Strong support from major shareholder Chongqing Casin Group
  • High margin of safety with RNAV of CNY 10 per share
  • Private placement adjustments and long-term plans
• Potential Risks:
  • Private placement implementation may fail expectations

Shandong Meichen Science & Technology (300237: SZ)

• Sector: Construction
• Earnings Forecast: CNY 0.72 in 2015, CNY 1.18 in 2016, CNY 1.57 in 2017
• Rating: BUY
• Key Highlights:
  • Growth from both auto parts and garden businesses
  • Strategic transformation and M&A efforts
• Potential Risks:
  • M&A results may not meet expectations
  • New orders may be lower than expected

Shenzhen Victor Onward Textile Industrial (000018: SZ)

• Sector: Conglomerates
• Earnings Forecast: CNY 0.88 in 2015, CNY 1.40 in 2016, CNY 1.84 in 2017
• Rating: BUY
• Key Highlights:
  • Backdoor listing through Sino Great Wall International
  • Active overseas expansion and 'One Belt One Road' projects
  • Plans for M&A and business expansion
• Potential Risks:
  • Slow progress in overseas orders
  • Currency exchange losses

Lander Sports Development (000558: SZ)

• Sector: Real Estate
• Earnings Forecast: CNY 0.09 in 2015, CNY 0.21 in 2016, CNY 0.17 in 2017
• Rating: OUTPERFORM
• Key Highlights:
  • Expansion into the sports industry with online platform development
  • Strong market cap and potential for growth
• Potential Risks:
  • Projects progress slower than expected

Macrolink Real Estate (000620: SZ)

• Sector: Real Estate
• Earnings Forecast: CNY 0.35 in 2015, CNY 0.40 in 2016, CNY 0.47 in 2017
• Rating: BUY
• Key Highlights:
  • Rich land resources and strong regional development position
  • Transformation into cultural tourism company
  • Expansion into financial industry
• Potential Risks:
  • Systematic risks in the real estate industry

Shanghai Ganglian E-Commerce Holdings (300226: SZ)

• Sector: Steel
• Earnings Forecast: CNY 0.17 in 2015, CNY 0.66 in 2016, CNY 1.03 in 2017
• Rating: OUTPERFORM
• Key Highlights:
  • Undervalued in the steel e-commerce industry
  • Strong growth prospects with M&A and ecosystem development
• Potential Risks:
  • Less synergy from acquisitions
  • Economic downturn affecting digital marketing

Zhejiang Kaier New Materials (300234: SZ)

• Sector: Construction Material
• Earnings Forecast: CNY 0.53 in 2015, CNY 0.70 in 2016, CNY 0.92 in 2017
• Rating: OUTPERFORM
• Key Highlights:
  • Key player in vitreous enamel cladding panel market
  • Clear growth strategy targeting energy-saving and environmental protection
• Potential Risks:
  • Urban rail construction delays
  • New product marketing challenges

Guangdong Sky Dragon Printing Ink Group (300063: SZ)

• Sector: Media
• Earnings Forecast: CNY 0.55 in 2015, CNY 0.72 in 2016, CNY 0.93 in 2017
• Rating: OUTPERFORM (Initiated)
• Key Highlights:
  • Transformation into digital marketing platform
  • Strong valuation and growth potential
• Potential Risks:
  • Less synergy from acquisitions
  • Economic downturn impacting digital marketing

Guangdong Dahuanong Animal Health Products (300186: SZ)

• Sector: Agriculture
• Earnings Forecast: CNY 1.93 in 2015, CNY 3.31 in 2016
• Rating: BUY
• Key Highlights:
  • Strong profit growth due to rising pork prices and poultry farming demand
  • Low stock price relative to peers
• Potential Risks:
  • Pork price volatility

China Union Holdings (000036: SZ)

• Sector: Real Estate
• Earnings Forecast: CNY 0.07 in 2015, CNY 0.90 in 2016, CNY 1.26 in 2017
• Rating: BUY
• Key Highlights:
  • High margin of safety with low valuation
  • Active business transformation and private placement
• Potential Risks:
  • Slower-than-expected business transformation
  • Drop in aluminum processing fees

Jiangsu Alcha Aluminum (002160: SZ)

• Sector: Non-ferrous Metal
• Earnings Forecast: CNY 0.18 in 2015, CNY 0.32 in 2016, CNY 0.39 in 2017
• Rating: OUTPERFORM
• Key Highlights:
  • Business transformation into healthcare and biopharmaceutical sectors
  • Recent private placements and strong stock price support
• Potential Risks:
  • Uncertainty in private placement
  • Slow progress in business transformation

Summary of Key Investment Themes

• Aviation Sector: Strong demand and high utilization rates; China Southern Air is highlighted with OUTPERFORM rating due to low base and potential for growth.
• Chemical Engineering: Kingfa Sci & Tech is recommended with BUY rating due to its strategic expansion and growth in new materials.
• Real Estate: Multiple companies are recommended, with strong support from major shareholders and potential for growth through M&A and private placements.
• Construction & Materials: Shandong Meichen Science & Technology and Zhejiang Kaier New Materials are recommended due to strategic growth and industry-specific opportunities.
• Steel E-commerce: Shanghai Ganglian E-Commerce Holdings is noted for its undervaluation and potential to become a market leader.
• Agriculture: Guangdong Dahuanong Animal Health Products is recommended for its growth in the animal health sector.
• Non-ferrous Metals: Jiangsu Alcha Aluminum is recommended for its transformation into healthcare and biopharmaceutical sectors.

Potential Risks Across All Companies

• Macroeconomic downturn
• Oil price fluctuations
• Exchange rate depreciation
• Project delays or underperformance
• Regulatory and market volatility
• Currency exchange losses
• Less synergy from acquisitions
• Industry-specific challenges (e.g., pork price volatility, aluminum processing fees)

This summary highlights the key investment opportunities and risks across the recommended companies, providing a clear view of the research institute's outlook for the Chinese A-share market in September 2015.