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Equity Research Summary: Dim Sum Express (Aug 15, 2018)

Core Content Overview

This report provides an analysis of key market indices and equity research on specific sectors and companies, including the banking and media industries, as well as Li Ning (2331 HK). It outlines the performance of various markets and the outlook for the banking and media sectors, along with investment recommendations and risk assessments.

Key Index Performance

The report summarizes the performance of several major indices:

Banking Sector Analysis

Key Points:

• New Total Social Financing (TSF) in July was Rmb1.04trn, a YoY decrease of Rmb124.2bn, but an increase of 10.3% YoY and a decrease of 0.20pp MoM.
• M2 Growth increased to 8.5% YoY, while M1 rose to 5.10% YoY.
• Shadow Banking Credit Contraction continues, with TSF growth hitting new lows.
• Policy Tailwinds and improved credit incentives have not yet stopped credit contraction in shadow banking.
• Sector Re-rating is coming to an end, and the focus is shifting to policy signals.
• High Inter-Bank Liabilities may lead to outperformance of certain banks over large blue-chip banks.
• Interest Spread Improvements are expected at joint-stock banks between 4Q18 and 1Q19.
• Risks include liquidity shocks, interest rate fluctuations, economic growth, asset quality deterioration, and trade frictions.

Media Sector Analysis

Key Points:

• In June, multiple departments announced joint management of high remuneration and tax evasion in the film and television industry.
• iQiyi, Youku, Tencent Video, and six film and television production companies issued a statement to avoid high remuneration and illegal taxation practices.
• Regulatory Measures are reshaping the film and television value chain.
• Short-term Impact includes higher GPMs and cash flow for companies, but medium-term risks include undermining price hikes.
• Online Video Platforms may benefit from upstream price cuts, enhancing distribution channels' bargaining power.
• Risks include further tightening in follow-up supervision and increased financing pressure for film and television drama companies.

Li Ning (2331 HK) Analysis

Key Points:

• 1H18 Net Profit increased by 42% YoY, aligning with expectations.
• 3Q18 SSSG maintained high single-digit growth, with wholesale channel slightly better than 1H18.
• Management maintained FY18 guidance for mid-teen revenue growth and a 100pp GPM expansion.
• Store Expansion plans are cautious, with a focus on improving store efficiency.
• Li Ning Young plans to increase net store openings from 100-200 to 250, aiming to reach 750 stores by end-FY18.
• Danskin Stores will increase to 15-20.
• Net Cash Balance rose to Rmb2.8bn in 1H18 and is expected to increase further by end-FY18.
• Dividend Resumption is anticipated during FY18 annual results.
• Target Price is lifted from HK$8.10 to HK$8.50, based on 22x FY19E P/E.
• Anta (2020 HK) is expected to have a higher valuation than Li Ning due to greater market share and execution track record.

Rating Definitions

• Buy: Stock expected to outperform benchmark by more than 15%

• Accumulate: Stock expected to outperform benchmark by more than 5% but not more than 15%

• Hold: Expected stock relative performance ranges between -5% and 5%

• Underperform: Stock expected to underperform benchmark by more than 5%

• Positive: Sector expected to outperform benchmark by more than 10%

• Neutral: Expected sector relative performance ranges between -10% and 10%

• Cautious: Sector expected to underperform benchmark by more than 10%

Analyst Certification

The research analyst(s) certifies that:

1. All views expressed accurately reflect their personal views.
2. No part of their remuneration is directly or indirectly linked 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 relationship with the companies mentioned in the past 12 months.
• Analysts and their associates are not officers of the companies and have no financial interests in the securities.

Disclaimer

• This report is for information purposes only and does not constitute an offer to buy or sell securities.
• It is intended for GF Securities (Hong Kong) clients only.
• The information may not be allowed to be sold in certain jurisdictions.
• The report is not a substitute for professional advice.
• GF Securities (Hong Kong) may issue inconsistent communications with this report.
• Opinions and forecasts are subject to change and may not reflect the views of GF Securities (Hong Kong) or its affiliates.