Equity Research Summary - Nov 7, 2017
Core Content Overview
This report provides an analysis of the performance of various equity indices and highlights key insights from mutual fund managers and private equity fund managers on the A-share and Hong Kong markets. It also includes detailed evaluations of specific companies, such as Geely Auto, GAC Group, Modern Dental, and ENN Energy, along with the China Property sector.
Key Index Performance
| Market |
1D Chg (%) |
1M Chg (%) |
YTD Chg (%) |
17E EPS (%) |
18E EPS (%) |
17E P/E |
18E P/E |
| HSI |
0.0 |
0.5 |
30.0 |
22.7 |
8.8 |
13.0 |
11.9 |
| HSEI |
-0.7 |
0.6 |
22.7 |
9.4 |
9.5 |
8.8 |
8.0 |
| MXCN |
1.0 |
1.7 |
50.0 |
26.5 |
14.7 |
15.4 |
13.4 |
| SHS2300 |
0.7 |
4.8 |
21.5 |
18.7 |
14.4 |
15.4 |
13.4 |
| SHCOMP |
0.5 |
1.2 |
9.2 |
27.0 |
12.9 |
14.7 |
13.0 |
| SZCOMP |
1.2 |
0.5 |
1.5 |
51.9 |
25.1 |
26.0 |
20.8 |
| INDU |
0.0 |
3.4 |
19.2 |
15.9 |
9.1 |
18.7 |
17.2 |
| SPX |
0.1 |
1.6 |
15.7 |
22.8 |
10.1 |
19.4 |
17.7 |
| CCMP |
0.3 |
3.0 |
26.1 |
55.0 |
12.9 |
24.1 |
21.3 |
| UKX |
0.0 |
0.5 |
5.9 |
163.8 |
6.4 |
15.3 |
14.3 |
| NYK |
0.2 |
9.2 |
18.2 |
37.0 |
12.3 |
19.4 |
17.3 |
Hong Kong ADRs
| Company |
Local (HK$) |
Daily (%) |
ADR (US$) |
Daily (%) |
| 700 TENCENT |
377.0 |
2.45 |
48.9 |
3.45 |
| 1398 ICBC |
6.2 |
-1.44 |
15.8 |
-0.94 |
| 857 PETROCHINA |
5.4 |
3.03 |
71.3 |
5.22 |
| 939 CCB |
6.8 |
-1.02 |
17.4 |
-0.14 |
| 941 CHINA MOBILE |
78.7 |
-0.25 |
50.7 |
-0.37 |
| 5 HSBC |
75.3 |
-0.40 |
48.3 |
-0.19 |
| 2318 PING AN |
70.8 |
0.14 |
18.4 |
0.99 |
| 3988 BANK OF CHINA |
3.8 |
-0.52 |
12.3 |
0.05 |
| 2628 CHINA LIFE |
27.0 |
-1.10 |
17.4 |
-0.80 |
| 386 SINOPEC |
5.7 |
-0.17 |
75.5 |
2.66 |
Main Investment Views
Bullish View #1
- Focus on cheaply valued sectors with high earnings visibility.
- Highlight strong business conditions in baijiu, consumer electronics, and leading manufacturing companies.
- Improved competitive landscape in these sectors is seen as a positive factor.
Bullish View #2
- 3Q17 economic data exceeded expectations.
- Positive outlook on the healthcare, consumer, insurance, and import substitution sectors.
- Expectations for Singles' Day online shopping spree to boost market performance.
Neutral View
- Current positions are in high earnings visibility sectors.
- New positions may be allocated to cheaply valued sectors with relatively high earnings visibility in 2018, such as emerging industries and traditional industries undergoing supply-side reform.
Private Equity Fund Manager View
- Trump's visit to China and Singles' Day are viewed as positive market catalysts.
- Expect market turbulence this week.
- Recommend avoiding high-priced stocks and watching for low-priced stocks and newly blue-chip tech names.
- Highlight financial services and F&B as key sectors with net fund inflows.
Company Highlights
Geely Auto (175 HK, Buy)
- Oct 2017 sales reached 125,118 units, a 30.1% YoY increase and 14.9% MoM increase.
- SUV sales surged, with Boyu surpassing 30,000 monthly units.
- Expected to exceed sales targets in 2017, with 56% YoY growth.
- Plans to launch five new models in 2018, including two SUVs, two sedans, and first MPV.
- Maintained Buy rating.
GAC Group (2238 HK, Buy)
- GAC Honda sales hit 68,867 units in Oct, a 9.4% YoY increase.
- Own brands saw a 14.3% YoY increase but 1.6% MoM decline.
- Trumpchi GS8 is expected to return to normal production levels in 4Q17, boosting sales.
- GAC-FCA SUVs also support sales growth.
- Maintained Buy rating.
Modern Dental (3600 HK, Buy)
- Share price rose 7% in the morning after 15% gain the previous week.
- 9M17 revenue reached HK$1.6bn, up 42% YoY.
- Europe and Greater China markets performed better than expected.
- MicroDental acquisition strengthened position in the US.
- Maintained Accumulate rating and target price of HK$3.10.
ENN Energy (2688 HK)
- Urban gas supply business continues to grow.
- Coal-to-gas substitution is a major growth driver.
- Selling & admin expense ratio is expected to decline further to 5.1% in 2019.
- EPS forecasts for 2017-2019 are Rmb3.104, 3.838, and 4.692.
- P/E ratios are 15.7x, 12.7x, and 10.4x for 2017-2019.
- Key risks include execution challenges in coal-to-gas substitution and price spread decline.
China Property Sector
- Primary sales area dropped 7% WoW and 13% YoY in the first week of Nov.
- Bearish outlook on the primary property market in 4Q17 due to tightening policies and reduced property-related loans.
- Expected GFA sold to drop 10% YoY in 2018.
- Recommend taking profit on most China property stocks.
- Positive outlook on landowners in the Guangdong-Hong Kong-Macau Bay Area, where land prices are expected to double over five years.
Rating Definitions
| Rating |
Description |
| Buy |
Expected to outperform benchmark by more than 15% |
| Accumulate |
Expected to outperform benchmark by more than 5% but not more than 15% |
| Hold |
Expected relative performance ranges between -5% and 5% |
| Underperform |
Expected to underperform benchmark by more than 5% |
Sector Ratings
| Rating |
Description |
| Positive |
Expected to outperform benchmark by more than 10% |
| Neutral |
Expected relative performance ranges between -10% and 10% |
| Cautious |
Expected to underperform benchmark by more than 10% |
Analyst Certification & Disclosure
- Analyst Certification: Views expressed reflect personal opinions, and no direct financial incentive is tied to specific recommendations.
- Disclosure of Interests:
- GF Securities (Hong Kong) and its affiliates do not hold any shares in the mentioned securities.
- No investment banking relationships with the companies mentioned in the past 12 months.
- Analysts and their associates are not officers of the mentioned companies and have no financial interests in the securities.
Disclaimer
- This report is solely for informational purposes.
- It does not constitute an offer to buy or sell any securities.
- Investments involve risks, and security prices may fluctuate.
- Past performance does not guarantee future results.
- Recommendations are based on current analysis and may change without notice.
