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报告摘要

Summary of Industrial Securities Co., Ltd. Report

Core Content

Industrial Securities Co., Ltd. provided a detailed analysis of the Chinese stock market and specific company performance on November 3, 2016. The report highlights the overall market performance, sectoral trends, and company-specific insights.

Market Overview

Performance: Chinese stock markets showed strong performance on November 3, 2016, despite a bearish global environment.
Indices:
- SSE Composite: Closed at 3128.94, up 0.84%.
- SZSE Component: Closed at 10743.96, up 0.48%.
- CSI 300: Closed at 3365.09, up 0.95%.
- ChiNext: Closed at 2153.19, up 0.32%.
- HSI: Closed at 22727.09, down 0.37%.
- HSCEI: Closed at 9497.73, down 0.23%.
Volume: Total market volume reached CNY640.50 billion, up 16.8% from the previous day.
Performance Ratio: Winners outnumbered losers by 1898-to-770.

Sectoral Review

Winners:

Construction Sector: Led the market with strong performance.
- China State Construction Engineering Corporation Limited (601668 SH): 9.97% increase.
- China Communications Construction Company Limited (601800 SH): 9.95% increase.
Securities Broker Sector: Second strongest performer.
- Guoyuan Securities Company Limited (000728 SZ): 7.78% increase.
- Soochow Securities Co., Ltd. (601555 SH): 5.55% increase.
Transportation Sector: Rose 1.40%.
- Jiangsu Feiliks International Logistics Inc. (300240 SZ): 10.01% increase.
- Tianjin Tianhai Investment Co., Ltd. (600751 SH): 10.00% increase.

Losers:

Agriculture, Forestry, husbandry & Fishery Sector: Only sector with negative performance.
- Hubei Wuchangyu Co., Ltd. (600275 SH): -4.24%.
- Ningbo Tech-Bank Co., Ltd (002124 SZ): -2.55%.

Daily Headlines

China Unicom & Baidu Collaboration: Agreed to collaborate on mobile internet and AI.
Alibaba's Performance: Quarterly sales and earnings exceeded expectations due to cloud computing growth.
Hong Kong Exchanges: Declined 34% in Q3 earnings due to lower trading and higher costs.
Marks & Spencer: Plans to close some Chinese stores.
Southampton Football Club: In exclusive talks for a Chinese takeover.
COMAC's New Jet: Plans to develop a twin-aisle jet with a range of 12,000 km, in partnership with Russia's United Aircraft Corp.
China's Foreign Theatrical Releases: 38 planned for 2016, exceeding the negotiated quota.
CCP's Discipline Rules: Strengthened supervision on high-level officials and institutions.

Latest Company News

BYD (002594 CH): Ex-dividend.
CCB (601939 CH): Signed debt-to-equity agreement with Xiamen CCRE Group.
China Coal (601898 CH): Signed financing agreement with Prairie for Polish mine.
China Everbright (165 HK): Unit to sell stake in property firms to Shanghai Jiabao (600622 CH) for HK$1.8 billion.
Chongqing Road (600106 CH): Seeks to terminate share sale plan.
Dalian Dafu (600747 CH): Major shareholder plans asset restructuring.
Jiangling Motors (000550 CH): Oct. vehicle sales up 52.5% YoY to 27,151 units.
Leshi Internet (300104 CH): LeEco creates financial affiliate for online payments.
Shenzhen Prince (002735 CH): Agrees to terminate FL Mobile sale.
Vanke (000002 CH): Oct. property sales hit 49 billion yuan.
Xinjiang Zhundong (002207 CH): Under CSRC investigation for suspected rule violations.
Zhejiang Dragon Pipe (002619 CH): China CSRC rejects asset purchase plan.

Pharmaceutical Industry Report

Investment Strategy: Encourage buying fundamentally sound stocks at low prices.
Performance:
- Revenue growth for the industry in the first three quarters of 2016 was 14.53% YoY.
- Earnings growth was 19.58% YoY.
- Net profit after non-recurring items grew 19.9% YoY.
Sub-sectors:
- BPC: Net profit growth of 55.4% YoY.
- Pharmaceutical Commerce: 23.34% YoY.
- Chemical Agents: 19.11% YoY.
Recommendation: Cautiously optimistic about 2017, with November and December as good investment months.
Top Picks:
- Huadong Medicine (000963.SZ)
- Shanghai Pharmaceuticals Holding (601607.SH)
- China Resources Double-Crane Pharmaceutical (600062.SH)
- Livzon Pharmaceutical Group Inc. (000513.SZ)
- Changchun High & New Technology Industries (Group) Inc. (000661.SH)
- Hubei Jumpcan Pharmaceutical (600566.SH)
- Tonghua Dongbao Pharmaceutical (600867.SH)
- Laobaixing Pharmacy Chain Joint Stock Company (603883.SH)

Xiamen Academy of Building Research Group (002398.SZ)

Rating: Strong Buy (Maintained)
Performance:
- Revenue in Q3 2016: CNY 930 million, down 4.8% YoY.
- Net profit: CNY 12,700, down 21.2% YoY.
- EPS: CNY 0.37.
Outlook:
- Revenue growth is expected to accelerate, with net profit growth ranging between -25% and 5% YoY for 2016.
- Gross margin dropped 10 percentage points YoY to 29.5%, due to rising raw material prices.
- Cost-income ratio in Q3 decreased.
- 'Academy of Building Mall' O2O platform is running smoothly, with daily turnover exceeding CNY 1 million.
Long-term Outlook: SOEs will dominate the detection industry, and the company's platform will become a new growth engine.
EPS Forecast:
- 2016: CNY 0.46
- 2017: CNY 0.61
- 2018: CNY 0.77
Potential Risks: Slower-than-expected M&A in the detection industry, continued cost increases.

Foshan Haitian Flavoring and Food Company (603288.SH)

Rating: Buy (Maintained)
Performance:
- Revenue in Q1 2016: CNY 8.96 billion, up 10.3% YoY.
- Net profit: CNY 2.04 billion, up 10.8% YoY.
- EPS: CNY 0.76.
Q3 Performance:
- Revenue: CNY 2.8 billion, up 12.7% YoY.
- Net profit: CNY 553 million, up 9.4% YoY.
Outlook:
- Revenue growth accelerated in Q3, but target of 15% growth for 2016 is still hard to reach.
- Gross profit margin reached a record high of 44.82%, due to optimized product mix and low raw material costs.
- Marketing expenses increased, impacting net profit by 0.6 percentage points.
EPS Forecast:
- 2016: CNY 1.05
- 2017: CNY 1.23 (32.2x PE)
- 2018: CNY 1.46 (27.6x PE)

Key Financial Ratios (Xiamen Academy of Building Research Group)

Ratio	2015	2016E	2017E	2018E
Gross Margin	39.4%	34.5%	35.5%	36.2%
Net Profit Margin	15.0%	12.3%	15.0%	16.8%
ROE	10.1%	7.4%	9.1%	10.4%
PE	21.6	27.8	20.9	16.6
PB	2.2	2.06	1.89	1.72

Key Financial Indicators (Foshan Haitian Flavoring and Food Company)

FY	2015A	2016E	2017E	2018E
Revenue (Mn/CNY)	11294	12682	14489	16723
YoY (%)	15.0%	12.3%	14.2%	15.4%
Net Profit (Mn/CNY)	2510	2852	3338	3961
YoY (%)	20.1%	13.6%	17.0%	18.7%
Gross Margin (%)	41.9%	44.2%	44.6%	45.1%
Net Profit Margin (%)	22.2%	22.5%	23.0%	23.7%
ROE (%)	28.7%	29.0%	28.3%	27.5%
EPS (CNY)	0.93	1.05	1.23	1.46
OCFPS (CNY)	0.81	1.43	1.42	1.59
NAVPS (CNY)	5.83	6.18	6.72	7.37

Analysts

XU Jiaxi: Pharmaceutical Industry report, recommended fundamentally-sound stocks.
LI Huafeng: Xiamen Academy of Building Research Group report.
CHEN Songkun: Foshan Haitian Flavoring and Food Company report.
HUO Ran, PAN Mengchen, XIANG Jun, WANG Xiaoming, YAN Yan, BU Zhonglin, LI Xing: Assistant analysts for respective reports.

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