The company has announced a strategic collaboration with Xinjiang Deyuan to source plasma, which is expected to alleviate supply shortages and support long-term growth.
The new facility in Shandong is expected to start operations by the end of FY15 and reach full capacity in 3 years, increasing total collection capacity by 5-8%.
The company's current share price is influenced by the RMB depreciation, which negatively impacts earnings and asset values in USD terms.
The target price (TP) is set at US$140, suggesting a 41% upside from the current price, with a 30x 2016E P/E and 1.1x 16E PEG.
Key risks include government policy changes, delays in opening new stations, higher COGS, and further RMB depreciation.
Lonking (3339 HK):
The company faces a severe downturn in the industrial machinery sector, with new housing construction area falling to 2010 levels.
The company is heavily dependent on loaders and excavators, which are experiencing significant declines.
The company has accumulated USD700 million in debt, with no hedging against exchange rate risk.
Earnings estimates for 2015-2017 have been cut by 61%, 61%, and 56%, respectively.
The TP is set at HK$1.23, based on a 0.6x P/B and 2016E NAV per share.
The company is downgraded to NEUTRAL due to the weak industry environment.
A-share Research Highlights:
The RMB depreciation is not expected to stimulate economic growth, as the original exchange rate mechanism is too pegged to the USD.
The Fed rate hike could result in a stronger RMB, further tightening the domestic economy.
The weakening RMB has both expansionary and tightening effects on economic growth.
The expansionary effect on exports is diminishing due to global trade stagnation and currency devaluation.
The long-term economic growth is expected to stabilize the RMB appreciation.
Key Market Indicators
Stock Market Indices
Close
1-daychg
%chg
Hang Seng Index
22131.31
+872.27
+4.1
Hang Seng Finance Index
30565.54
+1354.37
+4.64
Hang Seng Utilities Index
52284.48
+2017.04
+4.01
Hang Seng Property Index
30056.93
+901.87
+3.09
Hang Seng Industrial Index
12797.88
+464.5
+3.77
HSCEI
9975.53
+496.05
+5.23
CSI 300
3399.31
+65.29
+1.96
Shanghai Composite Index
3243.09
+72.64
+2.29
TWSE
8286.92
+285.42
+3.57
Global Market Indicators
Global
Last price
chg
%chg
Brent Oil
47.48
-2.04
-4.12
COMEX Gold
1106.6
-14.4
-1.28
COMEX Copper
242.15
-1.25
-0.51
LME Aluminum
1628.0
-3.0
-0.18
LME Copper
5356.0
+11.0
+0.21
BDI
855.0
-18.0
-2.06
Exchange and Interest Rates
Exchange/interest rates
Last price
chg
%chg
USD/RMB
6.38
+0.01
+0.17
USD/HKD
7.75
+0.0
+0.01
EUR/USD
1.12
+0.0
+0.01
1Y RMB NDF
6.65
+0.0
+0.04
3M Libor
0.33
-0.0
-0.3
3M Shibor
3.09
-0.0
-0.1
10Y US T-Note Yield
2.2
+0.07
+3.29
What to Watch
Economic Data
Event
Date
Prior
Forecast
China - M2 Money Supply YY
2015/09/10
13.30%
13.20%
China - New Yuan Loans
2015/09/10
1,480.00bn
900.00bn
China - Outstanding Loan Growth
2015/09/10
15.50%
15.60%
China - PPI YY
2015/09/13
-5.40%
-5.50%
China - CPI YY
2015/09/13
1.60%
1.80%
U.S. - Import Prices MM
-0.90%
-1.40%
U.S. - Export Prices MM
-0.20%
-0.30%
U.S. - Initial Jobless Claims
-
282.00k
U.S. - EIA Weekly Crude Stocks
-
4.67mn
Company Events
Date
Ticker
Company
Event
2015/09/10
16 HK
Sun Hung Kai Properties Ltd.
FIN RES/DIV (Y.E.30/06/15)
2015/09/10
435 HK
Sunlight Real Estate Investment Trust
FIN RES/DIST (Y.E.30/06/15)
2015/09/10
8169 HK
Eco-Tek Holdings Ltd.
RESULTS/INT DIV (9-MTH-ENDDED31/07/15)
Research Coverage List
Company
Ticker
Rating
Share px (Sep. 9)
12-month TP
% Upside
Mkt cap (US$mn)
EPS (2014)
EPS (2015E)
EPS (2016E)
P/E (2014)
P/E (2015E)
P/E (2016E)
Brilliance China
1114 HK
BUY
HK$9.44
HK$12.5
32
6,137
1.07
0.86
0.99
7.0
8.8
7.7
China ZhengTong Auto
1728 HK
BUY
HK$3.03
HK$5.48
81
864
0.36
0.42
0.51
6.7
5.8
4.8
Geely Automobile
175 HK
BUY
HK$3.29
HK$4.0
22
3,736
0.16
0.24
0.31
16.3
11.0
8.6
BAIC Motor
1958 HK
BUY
HK$6.92
HK$12.81
85
6,702
0.70
0.81
1.07
7.8
6.8
5.2
Great Wall Motor
2333 HK
NEUTRAL
HK$24.25
HK$28.5
18
3,232
2.64
3.10
3.40
7.3
6.3
5.8
Fuyao Glass
3606 HK
BUY
HK$15.26
HK$22.7
49
4,938
1.11
1.10
1.22
10.9
11.1
10.1
China Harmony Auto
3836 HK
NEUTRAL
HK$3.36
HK$6.7
99
683
0.50
0.42
0.45
5.3
6.4
6.0
Zhongsheng Group
881 HK
NEUTRAL
HK$3.05
HK$4.75
56
845
0.35
0.39
0.48
6.9
6.3
5.1
Summary of Key Insights
CBPO US is expected to benefit from the strategic collaboration with Xinjiang Deyuan, which aims to alleviate plasma supply shortages and support growth. The new Shandong facility is expected to increase collection capacity by 5-8% in the long run.
Lonking (3339 HK) faces a severe industry downturn, with a downgrade to NEUTRAL due to weak demand and high forex exposure. The company's earnings estimates have been cut significantly.
RMB depreciation is a key factor affecting earnings and asset values in USD terms for domestic companies. The weakening of the RMB may not necessarily stimulate economic growth.
The stock market indices show mixed performance, with the Hang Seng Index and HSCEI experiencing significant increases, while the CSI 300 and others show modest gains.
The global market indicators reflect a decline in Brent Oil and COMEX Gold, but a slight increase in LME Copper.
Exchange rates are fluctuating, with USD/RMB rising slightly and others showing minimal changes.
The research coverage list highlights various sectors with different ratings and target prices, indicating a mix of bullish and neutral outlooks.
