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Industrial Securities Co., Ltd. Summary

Core Content Overview

Industrial Securities Co., Ltd. provides a comprehensive summary of the Chinese and Hong Kong stock markets, including key indices, market performance, sector analysis, daily headlines, and detailed company reports. The report covers market indices, trading volume, and a list of companies with investment recommendations and financial outlooks.

Market Indices and Performance

• SSE Composite Index: Closed at 2925.23, up 0.40%.
• SZSE Component Index: Closed at 10274.03, up 0.64%.
• ChiNext Index: Closed at 2188.56, up 0.91%.
• HSI: Closed at 20859.22, up 0.47%.
• HSCEI: Closed at 8756.38, up 0.55%.
• Total Market Volume: CNY 561 billion, down 14.3% from the previous session.
• Market Sentiment: Winners outnumbered losers by 1919 to 536, indicating a positive session.

Main Points and Key Information

Market Review

• China stocks closed slightly higher on Thursday.
• Mid and small-cap stocks outperformed financial blue chips.
• Market expectations were cautious due to external factors like the Fed's rate hike and PBOC's macro prudential assessment.
• The market experienced heavy volume but showed mixed performance.

Sector Review

• Electronic Components: Strong performance, with Universal Scientific Industrial and Tianma Microelectronics up 9.89% and 4.84%, respectively.
• Building Materials: Fangda Carbon and CSG Holding closed 2.43% and 6.25% higher.
• IT Firms: Shenzhen Kingdom Sci-Tech and Shanghai DZH Limited gained 6.03% and 2.10%.
• Chemical Enterprises: Zhejiang Longsheng Group and Zhejiang Juhua Co. rose 4.94% and 3.17%.
• Banks: Underperformed, with China Merchants Bank and Shanghai Pudong Development Bank down 0.56% and 0.93%, respectively.

Daily Headlines

• Policy Changes: China will reduce vocational qualification requirements to support college graduates and laid-off workers.
• Cybersecurity Protests: U.S. and global business groups protested China's planned cybersecurity rules for the insurance industry.
• Bond Market: China's bond regulator discussed credit-default swaps.
• Insurance Regulation: CIRC suspended channel business at insurance asset management companies.
• Market Access: China permits Hong Kong and Macau companies to enter certain sectors.
• Yuan Volatility: Onshore yuan had three volatile minutes.
• EU Tariffs: EU threatens to widen tariffs on Chinese aluminum foil.
• China-North Korea Relations: Positive signals for improving ties.
• Robinhood-Baidu Partnership: Offers U.S. stock trading service to Chinese customers.

Latest Company News

• Hubei Jiuzhiyang: Trading debut.
• Jiangxi Copper: Plans to set up a HK unit with $105 million in registered capital.
• Liangmianzhen: Plans to sell up to 11.6 million Citic Securities shares.
• Midea Group: Germany exploring ways to block Midea's takeover of Kuka.
• Weichai Power: Cut to underperform at Macquarie.

Company Reports and Investment Recommendations

Shenzhen Comix Group (002301 SZ)

• Outperform Rating Maintained: The company is a pioneer in the video conferencing industry and has the potential to become a leading SaaS company.
• FastMeeting: A strong platform that can expand into education, remote medical, and live interactive businesses. Future plans include VR and big data.
• Financial Highlights:
  • Revenue is expected to grow significantly from 2015 to 2018 (from 1582 to 2986 million CNY).
  • Net profit is projected to increase from 20 million CNY in 2015 to 227 million CNY in 2018.
  • EPS is forecasted at 0.32, 0.43, and 0.61 for 2016, 2017, and 2018 respectively.
  • P/E ratios are expected to decrease from 329.46 in 2015 to 28.62 in 2018.
• Potential Risks: Diversified businesses may incur management risk.

Hangzhou Huaxing Chuangye Communication (300025 SZ)

• Outperform Rating Maintained: Positive outlook for IDC and cloud computing.
• Acquisition of Shenzhen Public Information: Total consideration of CNY 1 billion, with shares offered at CNY 17.31.
• Investment in BIH: Acquired 51% stake to expand into the IDC market.
• Financial Highlights:
  • Revenue is expected to grow from 1281 million CNY in 2015 to 2767 million CNY in 2018.
  • Net profit is forecasted to increase from 108 million CNY in 2015 to 353 million CNY in 2018.
  • EPS is expected to be 0.73, 1.06, and 1.30 for 2016, 2017, and 2018.
  • P/E ratios are projected to be 46x, 31x, and 26x for 2016, 2017, and 2018.
• Potential Risks: Possible industry decline and slower-than-expected M&A pace.

Taihai Manoir Nuclear Equipment Co., Ltd. (002366 SZ)

• Outperform Rating Maintained: Strong position in nuclear power materials and high industry barriers.
• Future Growth: Expected to benefit from the nuclear power industry's positive signals.
• EPS Forecast: 1.3, 1.88, and 2.34 for 2016, 2017, and 2018 respectively.
• P/E Ratios: 35x, 24.1x, and 19.4x for 2016, 2017, and 2018.
• Potential Risks: Low current valuation.

Sunwoda Electronic Co., Ltd. (300207 SZ)

• Outperform Rating Maintained: Capable of maintaining a 30% CAGR until 2025.
• EPS Forecast: 0.86, 1.29, and 1.78 for 2016, 2017, and 2018.
• P/E Ratios: 27.04x, 18.07x, and 13.07x for 2016, 2017, and 2018.
• Potential Risks: None explicitly mentioned, but growth depends on market demand.

Key Financial Indicators

Shenzhen Comix Group

• Revenue Growth: Expected to increase by 27.2% in 2016, 21.2% in 2017, and 22.4% in 2018.
• Net Profit Growth: Expected to surge by 512.2% in 2016, 34.0% in 2017, and 40.4% in 2018.
• Profitability: Gross margin is expected to rise from 17.0% to 25.8%.
• ROE: Expected to increase from 1.7% to 13.8%.
• Valuation: P/E ratios are expected to drop significantly, indicating potential undervaluation.

Hangzhou Huaxing Chuangye Communication

• Revenue Growth: Expected to increase by 38.7% in 2016, 28.2% in 2017, and 21.4% in 2018.
• Net Profit Growth: Expected to rise by 84.4% in 2016, 44.8% in 2017, and 22.0% in 2018.
• ROE: Expected to increase from 13.0% to 20.4%.
• Valuation: P/E ratios are projected to decrease, suggesting growing value.

Analyst and Translator Information

• Shenzhen Comix Group: Yuan Yuming (S0190515040001), Liu Liang (liuliang@xyzq.com.cn).
• Hangzhou Huaxing Chuangye Communication: Shi Mingxuan (S1440514090001), Cheng Shangwen (chengshangwen@xyzq.com.cn), Li Xing (lixingyj@xyzq.com.cn).

Conclusion

The report highlights a mixed but generally positive market performance, with mid and small-cap stocks outperforming financial blue chips. It provides detailed insights into key sectors such as electronics, building materials, and IT, along with investment recommendations for specific companies. The focus is on growth potential, strategic acquisitions, and future expansion into emerging areas like SaaS, cloud computing, and IDC. Analysts maintain "Outperform" ratings for these companies, emphasizing their strong fundamentals and strategic positioning.