20171130-广发证券_香港_-Dim_Sum_Express_4页_493kb

Dim Sum Express Summary

Core Content

This document provides an equity research summary from GF Securities (Hong Kong) dated November 30, 2017. It includes market performance data, analysis of key companies, sector outlooks, and rating information for the Hong Kong and A-Share markets.

Key Market Performance

The following table summarizes the performance of various indices and stocks for different time frames:

Hong Kong ADRs Performance

A-Share Market Outlook

Banking Sector Outlook (2018)

• Regulation Strengthening: The banking sector is expected to focus more on its core business, leading to a moderation in asset growth.
• Monetary Environment: Economic growth is likely to moderate slightly in 2018, with a prudent monetary policy stance.
• NIM and NPL Trends: NIM (Net Interest Margin) is expected to rebound, and NPL (Non-Performing Loan) formation is likely to slow due to increased economic stability.
• Transformation: Banks are shifting from volume-driven to value-driven operations, particularly in consumer finance as consumption upgrades continue.
• Stock Picks: Large state-owned banks with minimal policy risks, such as ICBC (601398 CH) and ABC (601288 CH), are preferred. Also recommended are banks with strong fundamentals, including China Merchants Bank (600036 CH) and Bank of Ningbo (002142 CH). Other banks to watch include Ping An Bank (000001 CH), Industrial Bank (601166 CH), and Bank of Nanjing (601009 CH).

Hong Kong Market: Luk Fook (590 HK)

• 1HFY18 Results: Core net profit rose by +21% YoY to HK$520m, 5% / 9% above estimates and Bloomberg consensus.
• GPM Performance: Higher-than-expected gold product GPM due to less promotional activities, while GPM for gem-set products improved.
• Outlook:
  • The best times for jewelry retailers have passed for three reasons: moderation in SSSG (Selling, Service, and Supply Chain Growth), stabilization of HK street shop rental reversion, and easing tensions between China and Korea.
  • The stock is currently trading at 15.9x 1-year forward P/E, which is above its historical average plus 2 standard deviations (15x).
• Future Expectations:
  • Management expects double-digit SSSG in China and single-digit SSSG in HK & Macau for FY18.
  • Net store addition target in China has been raised to not less than 100.
• Results Highlights:
  • Adjusted net profit would have increased by +40% if excluding holding gains from gold price movements.
  • Revenue rose by +15%, driven by SSSG in China and HK & Macau.
  • GPM fell by 1.8ppt to 26.2%, while gold product GPM dropped to 16.1%.
  • Gem-set GPM also declined to 34.8%.
  • Operating profit increased by +15%, while OPM remained flat at 10.3%.
  • Losses at its associate company, 3D-gold, decreased from HK$31m to HK$25m.
  • Net cash balance remained stable at HK$1.4bn.

Rating Definitions

• Buy: Stock expected to outperform benchmark by more than 15%
• Accumulate: Stock expected to outperform benchmark by more than 5% but not more than 15%
• Hold: Expected stock relative performance ranges between -5% and 5%
• Underperform: Stock expected to underperform benchmark by more than 5%

Sector Ratings

• Positive: Sector expected to outperform benchmark by more than 10%
• Neutral: Expected sector relative performance ranges between -10% and 10%
• Cautious: Sector expected to underperform benchmark by more than 10%

Analyst Certification

The research analyst(s) certifies that the views expressed in the report accurately reflect their personal views and that no part of their remuneration is tied to specific recommendations.

Disclosure of Interests

• GF Securities (Hong Kong) and its affiliated companies do not hold any shares of the securities mentioned.
• No investment banking relationship with the companies in the past 12 months.
• Analysts and their associates are not officers of the companies and have no financial interests in the securities.

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is intended for clients of GF Securities (Hong Kong). The report may not be allowed to be sold in certain jurisdictions. The information is subject to change without notice. GF Securities (Hong Kong) accepts no liability for losses arising from the use of the materials.

Copyright

© GF Securities (Hong Kong) Brokerage Limited. All rights reserved.