20161102-兴业证券-A-Share_Daily_Express_12页_951kb

Summary of Industrial Securities Co., Ltd. Document

Core Content

The document provides an overview of the Chinese stock market performance, sector analysis, company news, and investment research for two listed companies: Jiangsu Shanghai Composite Materials (300196.SZ) and Hangzhou Shunwang Technology (300113.SZ). It also includes insights from the Fixed Income Weekly report, highlighting the challenges and opportunities in the bond market amid monetary tightening and economic stabilization.

Market Indices Overview

The Chinese stock markets opened low and fluctuated downward, influenced by bearish overseas markets. Gold shares performed well, causing a temporary rebound in the afternoon. The market volume increased by 13.35% compared to the previous day, with more losers than winners.

Sector Review

Winners:

• Non-ferrous Metal sector was the only positive performer:
  • Guangdong Weihua Corporation (002240 SZ): +10.00%
  • Chenzhou City Jingui Silver Industry Co., Ltd. (002716 SZ): +10.00%

Losers:

• Construction sector topped the loser list:
  • Shaanxi Yanchang Petroleum Chemical Engineering Co., Ltd. (600248 SH): -10.01%
  • Inner Mongolia M-Grass Ecology and Environment (Group) Co., Ltd. (300355 SZ): -6.05%
• Coal sector ranked second:
  • Shanxi Xishan Coal and Electricity Power Co., Ltd. (000983 SZ): -4.04%
  • Shanxi Lu'An Environmental Energy Development Co., Ltd. (601699 SH): -3.71%
• Electric Utilities sector declined by 1.13%:
  • Guangdong Meiyan Jixiang Hydropower Co., Ltd. (600868 SH): -9.97%
  • Chengdu Techcent Environment Co., Ltd. (300362 SZ): -4.91%

Daily Headlines

• NDRC encourages coal and power producers to sign long-term agreements to stabilize prices.
• PBOC offered 451.5b yuan of 6-month and 311.5b yuan of 1-year medium-term lending facility at 2.85% and 3.0% respectively.
• HK Securities and Futures Commission may conduct special checks on Chinese brokers' IPO businesses.
• President Xi Jinping urged the implementation of reform policies and compliance with the Communist Party's communique.
• China's position on ending hostility status with Taiwan is based on the one-China principle.
• Standard Chartered is under scrutiny by Hong Kong's securities regulator for its role in an IPO.

Company News

• Air China (601111 CH): CSRC approved the sale of up to 1.54b shares.
• China Construction Bank (601939 CH): Received a commercial bank license in Malaysia.
• China Eastern (600115 CH): Partnering with Safran for landing gear systems and is the first to produce the C919 jet.
• China Railway Group (601390 CH), China Railway Construction (601186 CH), China Communications Construction (601800 CH): Won a 14.5b yuan railway project in Malaysia.
• Cosco Shipping (600428 CH): Forming a joint venture with DEME for offshore wind energy in China.
• Huatai Securities (601688 CH): Completed the Assetmark deal.
• PetroChina (601857 CH): Still in talks with Saudi Aramco over a Yunnan refinery.
• Sundiro (000571 CH): Plans to sell its stake in a motorcycle venture with Honda.

Investment Research: Fixed Income Weekly

Key Insights:

1. Economic fundamentals in China are expected to remain stable in the next quarter.
2. Market liquidity will stay in tight balance, with interest rates unlikely to fall significantly.
3. WMPs and outsourced investments may slow, putting downward pressure on bond prices.
4. Monetary tightening is ongoing, but the likelihood of rapid deleveraging is low.
5. Bond yields are expected to rise gradually, with investors advised to be patient.
6. Credit spreads may widen in the mid-term, increasing pressure on the credit bond market.
7. Liquidity tightening will be the main constraint on rate products.
8. Deleveraging in the bond market has not yet started; investors should manage liquidity and reduce leverage.
9. Swing trading may become less profitable due to rising financial costs.
10. Investors should focus on long-term strategies and monitor economic conditions.

Company Analysis: Jiangsu Shanghai Composite Materials (300196.SZ)

Key Financial Indicators

Key Highlights:

• The company reported a 21.96% YoY revenue increase in the first three quarters of 2016, reaching CNY 1.30 billion.
• Net profit attributable to shareholders rose by 22.69% YoY to CNY 194 million.
• The company is still experiencing strong demand for felt yarn and chopped strand mat, which helped maintain its gross profit margin.
• The fourth quarter is expected to see a 25% revenue growth, with net profit growth of 15% after non-recurring items.
• The company is expanding into its second main business and may introduce a stock-based incentive plan to support growth.
• The company's stock is rated Strong Buy (Maintained) due to its strong fundamentals and growth potential.

Company Analysis: Hangzhou Shunwang Technology (300113.SZ)

Key Financial Indicators

Key Highlights:

• The company's revenue grew by 78.6% YoY to CNY 1.2 billion in 16Q3.
• Net profit attributable to shareholders increased by 117.4% YoY to CNY 396 million.
• The company signed a project investment framework agreement with Hangzhou Yuhang District Government for the Penggong Online Game Project.
• The company is expected to maintain a strong growth trajectory in the online game, VR, and related sectors.
• The stock is rated Strong Buy (Maintained) due to its strong performance and growth potential.

Key Risks

• Jiangsu Shanghai Composite Materials (300196.SZ): Potential risks include a slowdown in industry outlook and slower-than-expected M&A progress.

Investment Strategy

• Investors are advised to remain patient and focus on long-term strategies as bond yields are expected to increase gradually.
• Credit bonds may increase in the mid-term due to tightening financial controls and monetary policy adjustments.
• Liquidity management and leverage reduction are recommended to mitigate credit risk.
• As deleveraging continues, rates products may experience growth.
• The company should continue to focus on debt management to secure returns driven by economic fundamentals.

Conclusion

The document outlines a mixed performance in the Chinese stock market, with some sectors showing positive trends while others face challenges. Jiangsu Shanghai Composite Materials (300196.SZ) and Hangzhou Shunwang Technology (300113.SZ) are highlighted as strong investment opportunities, with both companies showing robust financial performance and growth potential. The Fixed Income Weekly report emphasizes the need for liquidity management and long-term strategies in the bond market due to tightening monetary conditions.