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报告摘要

Industrial Securities Co., Ltd. Summary

Core Content Overview

Industrial Securities Co., Ltd. provides a comprehensive report on the Chinese financial and stock market, including indices, sector performance, company news, and investment strategies. The report also includes detailed financial data and analysis for Tianshui Huatian Technology (002185: SZ), a company specializing in IC testing and packaging.

Market Indices and Performance

SSE Composite Index: Closed at 3316.70, down 0.25%.
SZSE Component Index: Closed at 11288.14, down 0.15%.
ChiNext Index: Closed at 2429.27, down 0.11%.
HSI: Closed at 22568.43, up 0.89%.
HSCEI: Closed at 10283.42, up 0.42%.
Aggregate Market Volume: CNY 626 billion.

Overall, the market saw a slight decline, with more tickers rising than falling (1192 up vs. 1157 down), indicating a relatively stable but cautious environment.

Sector Review

Agriculture-related sectors showed strength, with several companies surging:
- Henan Huaying Agricultural Development Co., Ltd. (002321): +10.04%
- Shenzhen Jinxinnong Feed Co., Ltd. (002548): +10.03%
- Baotou Huazi Industry Co., Ltd. (600191): +10.00%
Nonferrous metals and light industry manufacturing also performed well, with:
- JCHX Mining Management Co., Ltd. (603979): +10.01%
- Shaanxi Ligeance Mineral Resources Co., Ltd. (000697): +10.00%
Light industry manufacturing had weaker performance, with:
- Shandong Huapeng Glass Co., Ltd. (603021): +4.91%
- Shanghai Baosteel Packaging Company Ltd. (601968): +4.27%
Market volume remained less than satisfactory and continued to shrink.

Daily Headlines

Agricultural Bank of China President Zhang Yun was taken away for an investigation.
Xu Xiang, known as "hedge fund brother No.1", faces an insider probe.
Tsinghua Unigroup agreed to purchase a 7 billion yuan stake in Tongfang Guoxin Electronics, a significant semiconductor acquisition.
China National Nuclear Corp. may acquire a minority stake in Areva SA, with potential nuclear waste recycling cooperation valued at 22.1 billion USD.

Latest Company News

AgBank (601288.SH): President under investigation.
Dongfeng Motor (600006.SH): General Manager Zhu Fushou under investigation.
Sinopec (600028.SH): Oil-processing target unchanged for 2016.

Bond Market Investment Strategy

Short-term rates are expected to drop, with the PBOC's actions dependent on forex movements and leverage.
Market liquidity remains stable during the deleveraging cycle.
Reverse repo rates dropped more sharply than expected after RRR and deposit rate cuts.
Long-term bonds are seen as a growth opportunity, though short-term volatility is expected.
Credit spreads are narrowing due to excess liquidity, but economic downturns may increase credit risks.

Investment Opportunities

Local government bonds are increasingly attractive in a low-yield environment.
Futures strategies: Investors can buy 7-year and 10-year cash bonds while shorting futures, as the yield curve is expected to steepen.

Tianshui Huatian Technology (002185: SZ) Analysis

Key Financial Indicators (FY 2014 to 2017E)

Metric	2014	2015E	2016E	2017E
Revenue (Mn/CNY)	3305	3843	4398	4999
YoY (%)	35.1%	16.3%	14.4%	13.7%
Net Profit (Mn/CNY)	298	343	391	441
YoY (%)	49.7%	15.1%	13.8%	12.8%
EPS (CNY)	0.43	0.49	0.56	0.63
OCFPS (CNY)	0.79	0.76	1.18	1.11

Earnings in Q3 2015

Revenue: CNY 1.1 billion, up 22.96% YoY, 12.82% QoQ.
Net Profit: CNY 89.80 million, up 5.32% YoY, down 15.78% QoQ.
EPS: CNY 0.13.

Earnings Forecast

2015E: Net Profit: CNY 298-388 million, implying a YoY drop of -49.1% to -72.43%.
EPS Forecast:
- 2015: CNY 0.49
- 2016: CNY 0.56
- 2017: CNY 0.63
PE Ratios:
- 2015: 33x
- 2016: 29x
- 2017: 26x

Investment Recommendation

Outperform is reiterated, based on the company's clear development strategy and optimized product mix.
Risks include intensified industry competition, poor performance from Kunshan factory and FCI, and potential underperformance in market expansion.

Company Profile

Tianshui Huatian Technology Co., Ltd. specializes in IC testing and packaging for semiconductors, devices, and components.
The company has three production bases:
- Tianshui: Cost advantage
- Xi'an: Medium and high-end products
- Kunshan: TSV encapsulation
Raised CNY 2 billion in Feb 2015 to update technology, and invested CNY 50 million in a Shenzhen LED encapsulation company.

Financial Highlights

Balance Sheet (Mn/CNY)

Item	2014	2015E	2016E	2017E
Total Assets	4158	4775	5113	5571
Total Liabilities	1633	1941	1983	2110
Total Shareholders' Equity	2525	2834	3130	3461

Cash Flow Statement (Mn/CNY)

Item	2014	2015E	2016E	2017E
Net Profit	306	351	399	449
Net Change in Cash	329	377	200	382

Income Statement (Mn/CNY)

Item	2014	2015E	2016E	2017E
Operating Income	3305	3843	4398	4999
Net Profit	306	351	399	449

Key Financial Ratios

Ratio	2014	2015E	2016E	2017E
Gross Margin (%)	21.9%	21.7%	20.9%	20.0%
Net Profit Margin (%)	9.0%	8.9%	8.9%	8.8%
ROE (%)	12.4%	12.7%	13.0%	13.3%
PE Ratio	37.87	32.90	28.91	25.63
PB Ratio	4.69	4.17	3.77	3.40

Investment Rating

Industry Investment Rating:
- Overweight: Industry outperforms the market.
- Neutral: Industry performs similarly to the market.
- Underweight: Industry underperforms the market.
Company Investment Rating:
- Buy: Stock outperforms the market by more than 15%.
- Outperform: Stock outperforms the market by 5% to 15%.
- Neutral: Stock outperforms or underperforms the market by less than 5%.
- Underperform: Stock underperforms the market by more than 5%.

Conclusion

Industrial Securities Co., Ltd. offers a detailed analysis of the Chinese stock and bond markets, highlighting key trends and investment opportunities. The report indicates a cautious market sentiment, with some sectors like agriculture and nonferrous metals showing positive performance. The bond market is expected to see continued volatility, with local government bonds and futures strategies as potential investment options. Tianshui Huatian Technology is recommended to Outperform, despite challenges in its Kunshan factory and FCI, due to its clear strategy and product optimization. Investors are advised to monitor market liquidity, credit expansion, and policy changes closely.

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