20171116-广发证券_香港_-Dim_Sum_Express_4页_495kb

Dim Sum Express Summary

Core Content

This document provides an analysis of the performance of various stock indices and specific companies listed in Hong Kong, including their financial results, sector outlook, investment strategy, and valuation analysis. It also includes risk assessments and rating definitions.

Key Index Performance

Sector Outlook: Consumer Discretionary

• Two-child policy: The number of newborns increased by 12% YoY in 2016 and 8% YoY in 5M17. The policy was not mentioned in the 19th CPC National Congress report, suggesting potential easing.
• Education sector: Private schools are expected to gain market share due to rising middle-class income and demand for quality education. The sector is fragmented, offering consolidation opportunities.
• Top Picks:
  • Wisdom Education (6068 HK, Buy): Expected to expand its school network in the Guangdong-Hong Kong-Macau Bay Area and leverage brand equity.
  • Goodbaby International (1086 HK, Buy): Acquired non-durable MBC product brands and platforms, increasing market exposure and growth potential. Valuation is considered undervalued.

Company Analysis: CSPC Pharma (1093 HK, Accumulate)

• 3Q17 Results: Revenue grew 29% YoY to HK$4.0bn, and net profit grew 37% YoY to HK$730m.
• Growth Guidance: Management has maintained a bottom-line growth guidance of 20-30% for 2018.
• Product Performance:
  • Paclitaxel: Expected to reach Rmb200m in sales in 2018, with a target market share of 20%.
  • Metformin: Targeting Rmb500m-1bn in sales in 2018, with a market share of 25%.
• R&D Investment: R&D expenses are expected to double in 2017 and increase by 50% in 2018, driven by BE testing and a stronger pipeline of specialty pharmaceuticals and biologics.

Valuation Analysis

• Juvenile Products: Goodbaby International is trading at 13.8x 1-year forward P/E, below its 3-year historical average of 17.2x, indicating attractive valuation.
• Education Sector:
  • Maple Leaf (1317 HK, Buy): Trading at 20.9x 1-year forward P/E, below its historical high of 28x.
  • Wisdom Education (6068 HK, Buy): Trading at 23.0x 1-year forward P/E, below its historical high of 26x.
  • Both are below the sector's weighted average P/E of 30.8x/22.6x FY18/19E, suggesting potential for valuation uplift.

Investment Strategy

• Bottom-up Approach: Preference for companies with re-rating potential due to accelerating earnings growth and attractive valuations.

Risks

• Upside Risks: Better-than-expected student enrollment and revenue growth.
• Downside Risks: Teacher cost pressure, policy risks, and fierce competition.

Rating Definitions

Analyst Certification

• The views expressed in the report reflect the personal opinions of the analysts.
• No part of the analyst's remuneration is directly linked to the recommendations or views in the report.

Disclosure of Interests

• No proprietary trading or investment banking relationships with the companies discussed.
• No financial interests or holdings in the securities mentioned.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• The information may be subject to change without notice.
• GF Securities (Hong Kong) accepts no liability for losses arising from the use of this report.