Summary of Industrial Securities Co., Ltd. Report
Core Content
Industrial Securities Co., Ltd. provided a comprehensive market review and analysis for October 22, 2015, highlighting the performance of Chinese and international indices, sector movements, key company news, and financial data for Lianhe Chemical Technology and Kingenta Ecological Engineering Group.
Market Indices
- SSE Composite Index: Closed at 3368.74, up 1.45% (↑ 48.06)
- SZSE Component Index: Closed at 11305.10, up 3.56% (↑ 389.11)
- ChiNext Index: Closed at 2458.14, up 4.84% (↑ 113.40)
- HSI (Hang Seng Index): Closed at 22845.37, down 0.63% (↓ 143.85)
- HSCEI (Hang Seng China Enterprises Index): Closed at 10600.52, down 0.46% (↓ 48.93)
- Total Market Volume: CNY 892 billion, down 23.8% from previous day
Investor Sentiment and News
- Investor confidence was boosted following the fifth plenary session of the 18th National Congress.
- China and the UK signed business deals worth GBP 40 billion, especially beneficial for infrastructure and industrial sectors.
- The PBOC supplied 105.5 billion yuan via MLF to stabilize the money market.
- A pilot program for overseas investment from the Shanghai Free Trade Zone was announced.
- China and the UK expanded their currency swap to 350 billion yuan/35 billion pounds.
Sector Performance
- Healthcare: Lepu Medical Technology (300003) and Kangmei Pharmaceutical Co. (600518) surged by 10.00% and 6.18% respectively.
- Commerce: Suning Commerce Group (002024) closed 9.78% higher.
- Aerospace: AVIC Aviation Engine Corporation (600893) and AVIC Aero-Engine Controls (000738) rose by 7.81% and 10.00% respectively.
- Telecom: Beijing Xinwei Telecom Technology Group (600485) gained 10.00%.
- Software & Internet: Hithink Royalflush Information Network (300033) jumped 8.80%.
- Downside: Banks saw corrections, notably Industrial and Commercial Bank of China (601398) declined 2.52%.
Key Company News
- BYD (002594.SZ): Signed a GBP660 million bus contract with ADL.
- China Construction Bank (601939.SH): Acquired a stake in metals floor dealer Metdist.
- China Merchants Bank (600036.SH): China Merchants Group purchased 25.3 million shares.
- Shanghai Electric (601727.SH): Plans to buy assets via share sale.
- Zhuhai Zhongfu (000659.SZ): Added 201.1 million yuan to its bond payment account.
- Zijin Mining (601899.SH): Glencore mine drew interest from Zijin Mining and OZ Minerals.
Daily Research Highlights
Alibaba's Acquisition of Youku Tudou
- Alibaba, listed on NYSE, announced a major all-cash acquisition of Youku Tudou.
- The deal values at USD 4.5 billion, with a price of US$26.60 per share, a 30% markup over the recent closing price of $20.43.
- The acquisition is expected to set a new pattern for the video industry, integrating content creation with e-commerce, entertainment, marketing, and financial services.
- Key highlights include:
- Video+E-commerce: Inserting ads in videos and using purchase buttons.
- Video+Entertainment: Promoting self-made content and understanding customer preferences.
- Video+Marketing: Using video themes to deliver targeted product information.
- Video+Finance: Leveraging high-income viewers for financial products.
Lianhe Chemical Technology (002250.SZ)
- Financial Performance (Jan-Sept 2015):
- Operating Revenue: CNY 2.98 billion, up 2.6% YoY.
- Operating Profit: CNY 509 million, up 15.3% YoY.
- Net Profit: CNY 433 million, up 17.5% YoY.
- EPS: CNY 0.52.
- Net Operating Cash Flow per Share: CNY 0.73.
- 15Q3 Performance:
- Operating Revenue: CNY 1.06 billion, down 6.0% YoY.
- Net Profit: CNY 130 million, up 2.6% YoY.
- EPS: CNY 0.16.
- Forecast:
- 2015 Net Profit: CNY 606-716 million, up 10-30% YoY.
- EPS Forecast: CNY 0.81 (2015), CNY 1.05 (2016), CNY 1.40 (2017).
- Recommendation: Maintain "BUY".
- Key Risks: Raw material price surges, slower business expansion.
Financial Data for Lianhe Chemical Technology
Balance Sheet (Mn/CNY)
| FY |
2014 |
2015E |
2016E |
2017E |
| Current Assets |
2144 |
3024 |
4142 |
5550 |
| Cash & Cash Equivalent |
492 |
1310 |
2027 |
3019 |
| Account Receivables |
691 |
720 |
947 |
1143 |
| Inventory |
710 |
711 |
834 |
989 |
| Total Assets |
5797 |
6574 |
7571 |
8824 |
Cash Flow Statement (Mn/CNY)
| FY |
2014 |
2015E |
2016E |
2017E |
| Net Profit |
559 |
683 |
889 |
1187 |
| Net Change in Cash |
360 |
818 |
717 |
992 |
Income Statement (Mn/CNY)
| FY |
2014 |
2015E |
2016E |
2017E |
| Operating Income |
3990 |
4300 |
5092 |
6144 |
| Operating Profit |
663 |
802 |
1044 |
1394 |
| Net Profit |
559 |
683 |
889 |
1187 |
Key Financial Ratios
| FY |
2014 |
2015E |
2016E |
2017E |
| Gross Margin |
33.6% |
36.4% |
37.0% |
38.1% |
| Net Profit Margin |
13.8% |
15.7% |
17.2% |
19.0% |
| ROE |
16.0% |
15.5% |
17.0% |
18.7% |
| PE |
27.4 |
22.9 |
17.6 |
13.2 |
| PB |
4.5 |
3.5 |
3.0 |
2.5 |
Financial Data for Kingenta Ecological Engineering Group (002470.SZ)
Key Financial Indicators
| FY |
2014 |
2015E |
2016E |
2017E |
| Revenue (Mn/CNY) |
13554 |
18255 |
23688 |
30465 |
| YoY (%) |
13.0% |
34.7% |
29.8% |
28.6% |
| Net Profit (Mn/CNY) |
866 |
1169 |
1540 |
2009 |
| YoY (%) |
30.5% |
35.0% |
31.6% |
30.5% |
| Gross Margin (%) |
17.6% |
16.6% |
16.7% |
16.5% |
| Net Profit Margin (%) |
6.4% |
6.4% |
6.5% |
6.6% |
| ROE (%) |
12.6% |
14.7% |
16.2% |
17.5% |
| EPS (CNY) |
0.55 |
0.75 |
0.99 |
1.29 |
| OCFPS (CNY) |
0.12 |
1.10 |
1.60 |
1.37 |
Revenue Breakdown (June 30, 2015)
| Revenue by Product |
Amount (Mn/CNY) |
% of Total |
| Controlled-release |
385,591.00 |
39.81% |
| Common Compound |
316,612.19 |
32.69% |
| Material Fertilizer |
161,841.04 |
16.71% |
| Nitro-compound Fertilizer |
91,139.35 |
9.40% |
| Water Soluble Fertilizer |
13,441.04 |
1.39% |
Key Financial Indicators (Jan-Sept 2015)
- Revenue: CNY 16.235 billion, up 46% YoY.
- Operating Profit: CNY 1.1 billion, up 34.82% YoY.
- Net Profit Attributable to Shareholders: CNY 1.1 billion, up 35.56% YoY.
- EPS: CNY 0.7.
- OCFPS: CNY 2.02.
Forecast and Recommendation
- EPS Forecast: CNY 0.75 (2015), CNY 0.99 (2016), CNY 1.29 (2017).
- Recommendation: Reiterate "BUY".
- Key Risks: Raw material price surges, slower-than-expected business expansion.
Analysts and Translators
