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Weekly A-share Market Recommendations Summary (May 23, 2016)

Core Content Overview

This report outlines the top stock recommendations from the Industrial Securities Research Institute for May 23, 2016, focusing on key companies across various sectors. The recommendations are based on EPS forecasts, market conditions, and strategic developments. The report highlights growth potential, valuation opportunities, and associated risks for each listed company.

Top Stock Recommendations

Main Sectors and Key Points

Dairy Sector: Bright Dairy & Food

• Earnings Growth: Expected to grow by 30% in 2016, with EPS forecast at CNY 0.44 in 2015, CNY 0.55 in 2016, and CNY 0.63 in 2017.
• Strategic Moves: Streamlined production lines and optimized sales strategies, particularly for the Momchilovtsi brand.
• Risk: Intensifying competition and potential failure in management reforms.

Light Manufacturing: Shanghai M&G Stationery

• Earnings Growth: Projected to maintain over 20% growth, with EPS forecast at CNY 1.01 in 2015, CNY 1.22 in 2016, and CNY 1.47 in 2017.
• Growth Drivers: Expansion of 'Morning Glory Fine Stationary Shop' and 'Morning Glory Colipu' business lines, potential M&A for technology upgrades.
• Risk: Management risk and slower-than-expected expansion in the office supplies market.

Biological Product: Ningbo Medicalsystem Biotechnology

• Earnings Growth: Organic growth of over 10%, with EPS forecast at CNY 0.56 in 2016 and CNY 0.67 in 2017.
• Strategic Focus: Diversification into in-vitro diagnostic products and services, with new projects contributing revenue.
• Risk: Unfreezing of non-tradable shares, product price drops, and intensifying market competition.

Fodder Sector: Guangdong Haid Group Company

• Earnings Growth: Fast-paced growth despite industry slowdown, with EPS forecast at CNY 0.77 in 2016 and CNY 1.02 in 2017.
• Strengths: Stable cash flow and strategic acquisitions, including overseas business expansion.
• Risk: Natural disasters and overseas political risks.

Expressway Sector: Shenzhen Expressway

• Earnings Growth: Expected to grow with EPS forecast at CNY 0.92 in 2016 and CNY 1.05 in 2017.
• Valuation: Current stock price is at a 40% discount to fair value, with strong government support.
• Risk: Systematic risk and lower-than-expected returns on new expressway projects.

IC Sector: Jiangsu Changjiang Electronics Technology

• Earnings Growth: Strong recovery in profitability, with EPS forecast at CNY 0.23 in 2016 and CNY 0.73 in 2017.
• Strategic Developments: Integration with STATs ChipPAC, expected to contribute significant revenue.
• Risk: Semiconductor industry downturn and potential delays in integration with STATs ChipPAC.

Road Transportation Sector: Shandong Hi-Speed Road & Bridge

• Earnings Growth: Expected to show strong resilience, with EPS forecast at CNY 0.39 in 2016 and CNY 0.46 in 2017.
• Valuation: Traded at 16x PE in 2016, offering a high margin of safety.
• Risk: Macro economic downturn and slower-than-expected engineering progress.

Banking Sector: Bank of Nanjing (Stock Connect)

• Earnings Growth: Expected to benefit from interest rate declines, with EPS forecast at CNY 2.10 in 2015, CNY 2.50 in 2016, and CNY 2.80 in 2017.
• Strategic Moves: Strong leasing business, preferred stock issuance, and SOE reforms.
• Risk: Systematic risk in the banking industry.

Paper Making Sector: Shandong Chenming Paper

• Earnings Growth: EPS forecast at CNY 0.52 in 2015, CNY 0.68 in 2016, and CNY 0.87 in 2017.
• Strategic Moves: Upgraded production capacity, reduced costs, and strengthened internal control.
• Risk: Slower-than-expected SOE reform and potential drag on leasing earnings from economic downturn.

Key Risks Across All Recommendations

• Intensifying competition in various sectors.
• Management reform challenges and slower-than-expected business expansion.
• Systematic risks in the banking and expressway sectors.
• Economic downturns and natural disasters.
• Valuation volatility and regulatory changes.

Conclusion

The report emphasizes the potential for growth and value appreciation across multiple sectors, including Dairy, Light Manufacturing, Biological Products, Fodder, Expressway, IC, Road Transportation, and Banking. Each recommendation is backed by EPS forecasts, strategic initiatives, and market positioning. However, potential risks are also outlined, including industry-specific challenges and macroeconomic factors.