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Yum Cha 飲 茶 January 9, 2017 RESEARCH NOTES INDICES Hang Seng Index HSCEI Shanghai COMP Shenzhen COMP Gold BDIY Crude Oil, WTI(US$/BBL) Crude Oil, BRENT(US$/BBL) HIBOR, 3-M SHIBOR, 3-M RMB/USD Closing 22,503.0 9,611.1 3154.3 1,988.1 1,721.9 963.0 54.0 57.1 1.0 3.4 6.9 DoD% 0.2 0.1 (0.4) (0.9) (0.6) (2.0) 0.4 0.4 (0.1) 3.0 0.7
CHINA SECURITIES SECTOR 2017 OUTLOOK - We don’t expect a major re-rating of the securities sector in 2017, since the policy outlook is likely to remain stringent, while market liquidity will become tighter. Therefore, we believe a strong recovery in the brokerage and margin financing businesses seems unlikely this year. The investment banking and asset management businesses are less sensitive to trading volume and still posted decent revenue growth in 2016. Therefore, we believe investors should focus on companies with a diversified revenue mix and good ROE outlook. Taking the latest valuations into account, we reiterate our BUY rating on GF Securities (1776.HK) and HOLD ratings on CITIC Securities (6030.HK) and Haitong Securities (6837.HK). (Please refer to the full report issued today.) CHINA CEMENT WEEKLY - The average cement price (nationwide) went down 0.05% week on week to RMB318.50/tonne last week. Cement prices in parts of Jiangxi, Zhejiang and Yunnan were down RMB10-30/tonne. Prices in other regions remained at a relatively high level thanks to the well-controlled inventory levels. The average inventory level (nationwide) declined slightly to 60.25%. Market demand has weakened since last week on a national basis because of the upcoming Spring Festival and rainy weather in some regions. In 2016, newly added clinker capacity declined ~50% YoY to 25.6m tonnes, according to the latest statistics from the China Cement Association. We estimate net addition of only 13.3m tonnes, which shows progress in de-capacity.
DATA RELEASES DUE THIS WEEK Jan 10 Jan 13 Jan 13 Jan 13 Jan 13 Source: Bloomberg
Money supply M2 YoY New Yuan Loans CNY Trade Balance Exports YoY Imports YoY
SNIPPETS CHINA SECURITIES SECTOR - It seems that the regulatory environment is likely to remain stringent, at least in 1H17. In the first press conference in 2017, the spokesman of the China Securities Regulatory Commission (CSRC) focused mainly on four disciplinary actions, including four cases related to insider trading and frequent trading to mislead other investors. In a speech on January 7, Xuan Changneng, assistant chairman of the CSRC, reiterated the importance of learning a lesson from the abnormal market volatility in 2015. Following the spirit of the Central Economic Working Conference, the prevention of financial risks will receive higher priority, and more stringent, full-fledged supervision will be implemented.
Industry Note January 9, 2017
2017 Outlook: Limited Catalysts from Policy and Liquidity; Focus on Revenue Mix China Securities Sector Company CITICS HTS GFS Ticker 6030 HK 6837 HK 1776 HK Last Price (HK$) 16.1 13.84 16.56 FY2017E Company CITICS HTS GFS PER (x) 13.87 14.15 11.66 PBR
TP (HK$) 17.0 14.9 20.7
Rating HOLD HOLD BUY
ROAA (x) 1.17 1.23 1.37 2.21 1.73 2.46
ROAE (%) 8.68 8.95 12.22
We don’t expect a major re-rating of the securities sector in 2017, since the policy outlook is likely to remain stringent, while market liquidity will become tighter. Therefore, we believe a strong recovery in the brokerage and margin financing businesses seems unlikely this year. The investment banking and asset management businesses are less sensitive to trading volume and still posted decent revenue growth in 2016. Therefore, we believe investors should focus on companies with a diversified revenue mix and good ROE outlook. Taking the latest valuations into account, we reiterate our BUY rating on GF Securities (GFS) and HOLD ratings on CITIC Securities (CITICS) and Haitong Securities (HTS). Both policy and liquidity look unfavourable in 2017. Policy direction clearly changed after Liu Shiyu became chairman of the China Securities and Regulatory Commission (CSRC) in Feb 2016. Given that the authorities’ focus is on the long-term healthy development of the capital markets, we don’t believe there will be changes in stringent policy direction for at least the next six months. This suggests there will be limited room for financial innovations. In addition, the chief economist of our A-share research team expects to see tighter market liquidity this year because of inflation risk and interest rate hikes in the US. Mild rebound in ADT and margin financing balance. Based on a conservative outlook on policy and market liquidity, we expect average daily turnover (ADT) to rebound moderately from RMB519bn in 2016 to RMB560bn in 2017E. We also project an increase in margin financing from RMB940bn to RMB1.12trn in the same period. Taking the pressure on brokerage commission rates into consideration, the outlook for brokerage business will be unexciting in 2017. The investment banking and asset management businesses still maintained decent growth. Although brokerage revenue in the industry dropped 63% YoY in 9M2016, revenue from investment banking and asset management was less volatile, recording 52.5% and 12.3% growth YoY, respectively, in the same period. This suggests companies with a more diversified revenue base will see less impact from the lacklustre brokerage business. Waiting for an opportunity to re-enter. Following the share price rebound in the past two weeks, the valuation of the sector does not look very appealing based on PBR. We maintain our HOLD ratings on CITICS (TP: HK$17, based on 1.23x 2017E PBR) and HTS (TP: HK$14.90; based on 1.32x 2017E PBR). We reiterate our BUY rating for GFS (TP: HK$20.7; based on 1.71x 2017E PBR) because of its diversified revenue base and higher ROE. Its valuation premium narrowed in 2H16, which makes it looks more attractive. Valuation Table PER (x) Company China Galaxy Securities CITIC Securities Haitong Securities GF Securities Simple average Weighted average Ticker 6881 HK Equity 6030 HK Equity 6837 HK Equity 1776 HK Equity Rating Price (HK$) Market cap (US$m) NR 7.32 8,950 HOLD 16.10 27,293 HOLD 13.84 23,911 BUY 16.56 18,087 2015 5.9 8.1 8.3 7.9 7.6 7.9 2016E 12.8 16.3 16.0 13.4 14.6 15.1 2017E 13.1 13.9 14.2 11.7 13.2 13.4 2015 1.01 1.16 1.22 1.35 1.18 1.20 ROAE (%) 2015 22.9 16.6 18.0 22.5 20.0 19.1 2016E 8.2 7.4 7.9 10.5 8.5 8.4 2017E 8.3 8.7 9.0 12.2 9.5 9.5 2015 4.1 3.7 3.4 4.0 3.8 3.7
(x)
Sources: Company, CGIS Research Updated as of January 6, 2017
Wong Chi Man—Head of Research (852) 3698-6317 cmwong@chinastock.com.hk
PBR (x) 2016E 1.04 1.18 1.25 1.41 1.22 1.24 2017E 1.02 1.17 1.23 1.37 1.20 1.21
Dividend yield (%) 2015 5.4 3.8 3.9 5.8 4.7 4.5 2016E 2.3 1.8 1.9 3.0 2.3 2.2 2017E 2.3 2.2 2.1 3.4 2.5 2.5
Livy Lyu—Research Assistant (852) 3698-6393 livylyu@chinastock.com.hk
EPS Grow th (%) Company China Galaxy Securities CITIC Securities Haitong Securities GF Securities Simple average Weighted average Ticker 6881 HK Equity 6030 HK Equity 6837 HK Equity 1776 HK Equity 2016E (51.9) (47.4) (45.3) (38.0) (45.7) (45.1) 2017E 3.0 23.6 19.0 21.0 16.7 19.2
2015 -2017E CAGR (%) (29.6) (19.4) (19.3) (13.4) (20.4) (19.1)
ROAA (%) 2016E 1.7 1.8 1.5 2.1 1.8 1.8 2017E 1.9 2.2 1.7 2.5 2.1 2.1
Source: CGIS Research estimates
Stock Recommendation: Focus on Revenue Mix As we don’t expect to see a strong recovery in the brokerage and MFSL businesses this year, we believe investors should focus on stocks with a more diversified revenue mix. As shown in Figure 10, revenue from the brokerage business is highly sensitive to market trading volume. Brokerage revenue for the whole industry dropped 63% YoY in 9M2016. Revenue from investment banking and asset management, in contrast, is much less volatile and still recorded 52.5% and 12.3% growth YoY, respectively, in the corresponding period. Figure 10: Sub-segment revenue growth of the securities industry 250.0% 200.0% 150.0%
Figure 11: Average brokerage commission rate of the industry 0.0900% 0.0805% 0.0800% 0.0700% 0.0781% 0.0786%
0.0665%
100.0%
0.0600% 50.0% 0.0% 2012 2013 2014 2015 9M2016
0.0498% 0.0500% 0.0400% 0.0300% Brokerage IBD Asset management
0.0391%
-50.0% -100.0%
2011
2012
2013
2014
2015
9M2016
Sources: WIND Info, CGIS Research Figure 12: Peer comparison based on 1H16 data Ticker Revenue (RMB m) YoY change Recurring net profit (RMB m) YoY change Total assets (RMB m) Total equity (RMB m) Half-year ROE (%) Net commission rate (bps) Change HoH (b ps) Brokerage market share (1H16) Brokerage market share (2015) Net revenue breakdown Brokerage Investment banking Asset management Others Commission and fee income Net interest income Net investment gains Others CITIC Securities 6030 22,464 -39.5% 5,242 -58.0% 570,059 136,220 3.8% 3.97 (0.12) 5.68% 6.43% Haitong Securities 6837 17,395 -37.9% 4,264 -58.0% 542,332 105,087 4.0% 3.97 (0.57) 4.67% 4.98% GF Securities 1776 13,835 -42.0% 4,031 -52.1% 357,609 73,599 5.3% 3.87 (0.90) 4.88% 4.71%
Sources: WIND Info, CGIS Research
Huatai Securities 6886 11,448 -45.2% 2,841 -57.4% 402,679 78,802 3.6% 2.46 (0.17) 8.45% 8.35%
China Galaxy Securities 6881 9,218 -46.4% 2,255 -60.0% 256,289 54,730 4.0% 4.43 (0.70) 4.95% 5.09%
CICC 3908 3,168 -34.7% 574 -49.5% 107,572 17,037 3.4% 8.15 (0.72) 0.66% 0.50%
Everbright Securities 6178 6,474 -49.1% 1,515 -68.9% 173,734 38,412 3.8% 5.82 0.29 2.50% 2.81%
CMS 6099 8,688 -57.5% 2,242 -69.4% 245,264 47,812 4.7% 5.77 (0.62) 3.67% 4.11%
China Securities 6066 8,557 -27.2% 2,777 -34.8% 175,248 32,606 8.9% 4.9 (0.08) 2.93% 3.18%
28.7% 18.0% 19.1% 3.2% 69.0% 6.0% 25.4% -0.3%
29.7% 14.6% 2.4% 5.7% 52.4% 20.6% 28.3% -1.3%
28.1% 13.9% 19.8% 0.9% 62.6% 1.6% 35.3% 0.5%
40.6% 11.7% 0.7% 2.9% 55.9% 21.8% 24.9% -2.6%
47.6% 7.5% 3.3% 3.2% 61.7% 17.1% 21.2% 0.0%
30.9% 36.9% 11.7% 2.5% 82.0% -7.2% 25.2% 0.0%
40.0% 18.5% 6.9% 6.9% 72.2% 16.8% 9.9% 1.1%
47.3% 18.8% 10.5% 3.9% 80.5% 5.4% 14.0% 0.2%
33.4% 27.6% 7.8% 0.7% 69.4% 12.6% 18.0% 0.0%
Sources: Bloomberg, CGIS Research
The latest valuations of major securities companies do not look very attractive, as the PBR has been relatively stable recently, while trading velocity has been falling. We prefer to wait for better timing. On individual stock calls, we maintain our HOLD ratings for CITICS and HTS and BUY rating for GFS, on the back of its stronger ROE and diversified revenue base. We lowered our target PBR for GFS from 1.94x to 1.71x to reflect a more conservative medium-term ROE outlook (from about 13% to 12.3%), based on the latest conditions of the China equity market.
Figure 13: Stock recommendation
Company Ticker Rating Beta Cost of equity Medium-term ROE Growth rate PBR = (ROE-g)/(COE-g) Target price (HK$) Upside Source: CGIS Research Figure 14: Peer valuations PER (x) Com pany Ticker Rating Price (Local currency) HOLD HOLD NR BUY NR NR NR 16.10 13.84 7.32 16.56 15.28 10.90 12.52 12.08 Market cap (US$m ) 27,293 23,911 8,950 18,087 17,538 3,223 10,028 15,044 2015 2016E 2017E
HTS 6837.HK HOLD 1.36 9.7% 10.6% 7% 1.32 14.9 7.3%
CITICS 6030.HK HOLD 1.43 10.1% 10.8% 7% 1.23 17.0 5.5%
GFS 1776.HK BUY 1.43 10.1% 12.3% 7% 1.71 20.7 25.2%
PBR (x) 2015 2016E 2017E 2015
ROE (%) 2016E 2017E 2015
ROA (%) 2016E 2017E
China securities com panies CITIC Haitong China Galaxy Guangfa HTSC CICC Everbright China Merchants Sim ple average 6030 HK Equity 6837 HK Equity 6881 HK Equity 1776 HK Equity 6886 HK Equity 3908 HK Equity 6178 HK Equity 6099 HK Equity 8.1 8.3 5.9 7.9 7.5 7.9 4.7 5.2 7.0 16.3 16.0 12.8 13.4 14.1 15.6 13.7 12.2 14.3 13.9 14.2 13.1 11.7 11.3 12.9 11.5 10.1 12.3 1.16 1.22 1.01 1.35 1.13 1.28 n.a. n.a. 1.19 1.18 1.25 1.04 1.41 1.16 1.30 1.08 1.22 1.20 1.17 1.23 1.02 1.37 1.08 1.16 1.01 1.13 1.15 16.6 18.0 22.9 22.5 17.5 16.0 23.1 24.3 20.1 7.4 7.9 8.2 10.5 8.4 8.4 7.7 9.8 8.5 8.7 9.0 8.3 12.2 10.1 9.9 8.7 10.9 9.7 3.7 3.4 4.1 4.0 3.0 2.7 4.9 4.5 3.8 1.8 1.5 1.7 2.1 1.6 1.3 1.8 2.1 1.7 2.2 1.7 1.9 2.5 2.0 1.7 2.3 2.6 2.1
Sources: Bloomberg, CGIS Research
Figure 15: PBR range of CITICS 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9
Figure 16: PER range of CITICS 48.0 43.0 38.0 33.0 28.0 23.0 18.0 13.0
8.0
Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16
Rolling forward PBR (x)
Average
+1 Standard deviation
-1 Standard deviation
Sources: Bloomberg, CGIS Research Figure 17: PBR range of HTS 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8
Sources: Bloomberg, CGIS Research Figure 18: PER range of HTS 35.0 30.0 25.0 20.0
15.0 10.0 5.0
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Rolling forward PBR (x)
Average
+1 Standard deviation
-1 Standard deviation
Sources: Bloomberg, CGIS Research Figure 19: PBR range of GFS 3.0 2.5 2.0 1.5 1.0 0.5
Sources: Bloomberg, CGIS Research Figure 20: PER range of GFS 17.0 15.0
13.0 11.0 9.0 7.0 5.0
Dec-15
Feb-16
Aug-15
Aug-15
Aug-16
Rolling forward PBR (x) +1 Standard deviation
Average -1 Standard deviation
Rolling forward PER (x) +1 Standard deviation
Average -1 Standard deviation
Sources: Bloomberg, CGIS Research
Sources: Bloomberg, CGIS Research
Aug-16
Dec-15
Dec-16
Dec-16
Apr-15
Apr-16
Jun-15
Oct-15
Jun-16
Feb-16
Apr-15
Apr-16
Oct-15
Oct-16
Oct-16
Jun-15
Jun-16
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Rolling forward PER (x) Average
Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Rolling forward PER (x) Average
+1 Standard deviation
-1 Standard deviation
+1 Standard deviation
-1 Standard deviation
China Cement Weekly January 9, 2017 Weakening Demand but Stable Prices before Chinese New Year; De-capacity Process Improving China Cement Sector Cement prices declined slightly last week. The average cement price (nationwide) went down 0.05% week on week to RMB318.50/tonne last week. Cement prices in parts of Jiangxi, Zhejiang and Yunnan were down RMB10-30/tonne. Prices in other regions remained at a relatively high level thanks to well-controlled inventory levels. The average inventory level (nationwide) declined slightly to 60.25%. Market demand has weakened since last week on a national basis because of the upcoming Spring Festival and rainy weather in some regions. Daily shipment volume was down ~10% week on week owing to both Lunar New Year and rainfall in the southern areas. The slight drop in coal prices continued during the last two weeks of 2016. The comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) went down RMB2/tonne to RMB593/tonne after mid-December. The index was still up 59.8% on a year-on-year (YoY) basis though. In 2016 newly-added clinker capacity declined ~50% YoY to 25.6m tonnes, according to the latest statistics from the China Cement Association. National clinker capacity totalled 1.85bn tonnes at the end of 2016, which is only 13.3m tonnes higher than that of 2015. This suggests 12.3m tonnes of obsolete clinker capacity was eliminated in 2016, based on simple calculation. The newly added clinker lines in 2016 were located mainly in the Hubei, Guangdong and Yunnan areas, while Yunnan, Anhui and Henan saw a capacity decline of more than 700,000 tonnes. We believe these capacity exits were the result of both weak industry profitability in early-2016 and higher market concentration led by major cement players in those areas. Looking forward, we expect even less newly added capacity in 2017, since the government has already suspended the approval of new clinker line construction. New capacity addition will no longer be a major concern in the next two to three years. Instead, the demand side will become the focus of investors, as infrastructure investment will play a key role this year, offsetting potential weakness in demand from the property sector. Cement stocks under coverage up 2.0% on average last week. Market sentiment has stabilized after profit-taking in December. Best performer Anhui Conch [0914.HK; BUY] went up 3.1%. CR Cement [1313.HK; BUY], the weakest among our coverage stocks, also rose 0.3%. Valuation Table
Wong Chi Man—Head of Research (852) 3698-6317 cmwong@chinastock.com.hk
PER (x) Company Anhui Conch CNBM BBMG CR Cement Simple average Weighted average Ticker 914 HK Equity 3323 HK Equity 2009 HK Equity 1313 HK Equity Rating Price (HK$) Market cap (US$m) 2015 BUY 21.75 13,638 15.2 HOLD 3.85 2,665 27.3 BUY 2.75 6,068 12.6 BUY 3.02 2,529 9.6 16.2 15.3 2016E 11.0 11.0 8.6 11.8 10.6 10.5 2017E 9.9 8.6 7.5 8.8 8.7 9.1 2015 1.32 0.40 0.62 0.74 0.77 0.99
PBR (x) 2016E 1.27 0.41 0.61 0.71 0.75 0.96 2017E 1.21 0.41 0.58 0.67 0.72 0.92 2015 8.1 10.0 9.2 8.4 8.9 8.6
EV/EBITDA(x) 2016E 6.1 10.0 9.1 6.8 8.0 7.3 2017E 5.4 9.5 7.9 5.9 7.2 6.5
Net debt/equity (%) 2017E (7) 210 54 67 81 39
EPS Growth (%)
2015 -2017E CAGR (%) 30.7 87.0 4.3 36.3 39.6 35.4
PEG(x) 2017E 0.3 0.1 1.8 0.2 0.6 0.4 2015 8.93 1.49 7.51 5.41 5.84 7.13
ROE (%) 2016E 12.01 3.78 6.14 7.33 7.32 9.39 2017E 12.87 4.90 7.84 8.20 8.45 10.37
Dividend yield (%) 2015 2.5 1.2 2.7 1.6 2.0 2.1 2016E 2.8 1.1 1.9 1.4 1.8 2.2 2017E 3.0 1.7 2.6 1.5 2.2 2.5
Livy Lyu—Research Assistant (852) 3698-6393 livylyu@chinastock.com.hk
Company Anhui Conch CNBM CR Cement BBMG Simple average Weighted average
Ticker 914 HK Equity 3323 HK Equity 1313 HK Equity 2009 HK Equity
2016E 45.3 160.4 (18.9) 54.4 60.3 53.3
2017E 17.6 34.2 34.0 20.2 26.5 21.7
Sources: Company, Bloomberg, CGIS Research estimates
Peer Comparison Com pany Anhui Conch CNBM BBMG CR Cement TCC International China National Materials Asia Cement West China Cement Tianrui Cement Sim ple average Weighted average Ticker 914 HK Equity 3323 HK Equity 2009 HK Equity 1313 HK Equity 1136 HK Equity 1893 HK Equity 743 HK Equity 2233 HK Equity 1252 HK Equity Rating Price (LC) BUY 21.75 HOLD 3.85 BUY 2.75 BUY 3.02 NR 1.81 NR 1.82 NR 1.83 NR 0.89 NR 2.00 Market cap (US$m ) 13,638 2,665 6,068 2,529 1,147 833 368 619 616 PER (x) 2015 15.2 27.3 12.6 9.6 9.2 18.2 5.5 14.0 2016E 2017E 11.0 9.9 11.0 8.6 8.6 7.5 11.8 8.8 226.3 36.9 6.7 5.3 18.2 10.2 66.2 18.9 n.a. n.a. 45.0 13.3 20.2 10.1 2015 1.32 0.40 0.62 0.74 0.47 0.37 0.28 0.75 0.56 0.49 0.93 PBR (x) 2016E 2017E 1.27 1.21 0.41 0.41 0.61 0.58 0.71 0.67 0.46 0.45 0.37 0.33 0.28 0.27 0.76 0.73 n.a. n.a. 0.61 0.58 0.89 0.85 2015 8.1 10.0 9.2 8.4 9.6 5.7 6.8 9.1 8.3 7.9 8.5 EV/EBITDA(x) 2016E 2017E 6.1 5.4 10.0 9.5 9.1 7.9 6.8 5.9 11.2 9.9 5.3 4.8 7.7 6.9 6.9 5.4 n.a. n.a. 7.9 7.0 7.3 6.4
Sources: Bloomberg, CGIS Research 1-Year Relative Performance
Sources: Capital IQ, CGIS Research
Figure 1: Regional Cement Price
National Average (P.O. 42.5) 400 350 300 250 250 200 Jan Feb Mar Apr May 2014
North China 350
300
200 Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
2013
Northeast China 500 450 400 300 350 300 250 Jan Feb Mar Apr May 2014
East China 400 350
250 200 Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
2013
South Central China 440 400 360 320 280 240 200 Jan Feb Mar Apr May 2013
Southwest China 400 360 320 280 240 200
Jun Jul
Aug Sep 2015
Oct Nov Dec 2016 2017
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2014
2013
Northwest China 340 320 300 280 260 240 220 200 Jan Feb Mar Apr May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
Sources: Digital Cement, CGIS Research
Disclaimer This research report is not directed at, or intended for distribution to or used by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject China Galaxy International Securities (Hong Kong) Co., Limited (“Galaxy International Securities”) and/or its group companies to any registration or licensing requirement within such jurisdiction. This report (including any information attached) is issued by Galaxy International Securities, one of the subsidiaries of the China Galaxy International Financial Holdings Limited, to the institutional clients from the information sources believed to be reliable, but no representation or warranty (expressly or implied) is made as to their accuracy, correctness and/or completeness. 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China Galaxy International may have served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the last 12 months, significant advice or investment services in relation to the investment concerned or a related investment or investment banking services to the company(ies) mentioned in this report. Furthermore, China Galaxy International may have received compensation for investment banking services from the company(ies) mentioned in this report within the preceding 12 months and may currently seeking investment banking mandate from the subject company(ies). Analyst Certification The analyst who is primarily responsible for the content of this report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the securities covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the securities covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong-listed companies covered in this report; and (4) have any financial interests in the Hong Kong-listed companies covered in this report. Explanation on Equity Ratings
BUY SELL HOLD
: share price will increase by >20% within 12 months in absolute terms : share price will decrease by >20% within 12 months in absolute terms : no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL
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银河国际饮茶

发布机构:银河国际
报告类型:外行报告 发布日期:2017/1/11
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Yum Cha 飲 茶 January 9, 2017 RESEARCH NOTES INDICES Hang Seng Index HSCEI Shanghai COMP Shenzhen COMP Gold BDIY Crude Oil, WTI(US$/BBL) Crude Oil, BRENT(US$/BBL) HIBOR, 3-M SHIBOR, 3-M RMB/USD Closing 22,503.0 9,611.1 3154.3 1,988.1 1,721.9 963.0 54.0 57.1 1.0 3.4 6.9 DoD% 0.2 0.1 (0.4) (0.9) (0.6) (2.0) 0.4 0.4 (0.1) 3.0 0.7
CHINA SECURITIES SECTOR 2017 OUTLOOK - We don’t expect a major re-rating of the securities sector in 2017, since the policy outlook is likely to remain stringent, while market liquidity will become tighter. Therefore, we believe a strong recovery in the brokerage and margin financing businesses seems unlikely this year. The investment banking and asset management businesses are less sensitive to trading volume and still posted decent revenue growth in 2016. Therefore, we believe investors should focus on companies with a diversified revenue mix and good ROE outlook. Taking the latest valuations into account, we reiterate our BUY rating on GF Securities (1776.HK) and HOLD ratings on CITIC Securities (6030.HK) and Haitong Securities (6837.HK). (Please refer to the full report issued today.) CHINA CEMENT WEEKLY - The average cement price (nationwide) went down 0.05% week on week to RMB318.50/tonne last week. Cement prices in parts of Jiangxi, Zhejiang and Yunnan were down RMB10-30/tonne. Prices in other regions remained at a relatively high level thanks to the well-controlled inventory levels. The average inventory level (nationwide) declined slightly to 60.25%. Market demand has weakened since last week on a national basis because of the upcoming Spring Festival and rainy weather in some regions. In 2016, newly added clinker capacity declined ~50% YoY to 25.6m tonnes, according to the latest statistics from the China Cement Association. We estimate net addition of only 13.3m tonnes, which shows progress in de-capacity.
DATA RELEASES DUE THIS WEEK Jan 10 Jan 13 Jan 13 Jan 13 Jan 13 Source: Bloomberg
Money supply M2 YoY New Yuan Loans CNY Trade Balance Exports YoY Imports YoY
SNIPPETS CHINA SECURITIES SECTOR - It seems that the regulatory environment is likely to remain stringent, at least in 1H17. In the first press conference in 2017, the spokesman of the China Securities Regulatory Commission (CSRC) focused mainly on four disciplinary actions, including four cases related to insider trading and frequent trading to mislead other investors. In a speech on January 7, Xuan Changneng, assistant chairman of the CSRC, reiterated the importance of learning a lesson from the abnormal market volatility in 2015. Following the spirit of the Central Economic Working Conference, the prevention of financial risks will receive higher priority, and more stringent, full-fledged supervision will be implemented.
Industry Note January 9, 2017
2017 Outlook: Limited Catalysts from Policy and Liquidity; Focus on Revenue Mix China Securities Sector Company CITICS HTS GFS Ticker 6030 HK 6837 HK 1776 HK Last Price (HK$) 16.1 13.84 16.56 FY2017E Company CITICS HTS GFS PER (x) 13.87 14.15 11.66 PBR
TP (HK$) 17.0 14.9 20.7
Rating HOLD HOLD BUY
ROAA (x) 1.17 1.23 1.37 2.21 1.73 2.46
ROAE (%) 8.68 8.95 12.22
We don’t expect a major re-rating of the securities sector in 2017, since the policy outlook is likely to remain stringent, while market liquidity will become tighter. Therefore, we believe a strong recovery in the brokerage and margin financing businesses seems unlikely this year. The investment banking and asset management businesses are less sensitive to trading volume and still posted decent revenue growth in 2016. Therefore, we believe investors should focus on companies with a diversified revenue mix and good ROE outlook. Taking the latest valuations into account, we reiterate our BUY rating on GF Securities (GFS) and HOLD ratings on CITIC Securities (CITICS) and Haitong Securities (HTS). Both policy and liquidity look unfavourable in 2017. Policy direction clearly changed after Liu Shiyu became chairman of the China Securities and Regulatory Commission (CSRC) in Feb 2016. Given that the authorities’ focus is on the long-term healthy development of the capital markets, we don’t believe there will be changes in stringent policy direction for at least the next six months. This suggests there will be limited room for financial innovations. In addition, the chief economist of our A-share research team expects to see tighter market liquidity this year because of inflation risk and interest rate hikes in the US. Mild rebound in ADT and margin financing balance. Based on a conservative outlook on policy and market liquidity, we expect average daily turnover (ADT) to rebound moderately from RMB519bn in 2016 to RMB560bn in 2017E. We also project an increase in margin financing from RMB940bn to RMB1.12trn in the same period. Taking the pressure on brokerage commission rates into consideration, the outlook for brokerage business will be unexciting in 2017. The investment banking and asset management businesses still maintained decent growth. Although brokerage revenue in the industry dropped 63% YoY in 9M2016, revenue from investment banking and asset management was less volatile, recording 52.5% and 12.3% growth YoY, respectively, in the same period. This suggests companies with a more diversified revenue base will see less impact from the lacklustre brokerage business. Waiting for an opportunity to re-enter. Following the share price rebound in the past two weeks, the valuation of the sector does not look very appealing based on PBR. We maintain our HOLD ratings on CITICS (TP: HK$17, based on 1.23x 2017E PBR) and HTS (TP: HK$14.90; based on 1.32x 2017E PBR). We reiterate our BUY rating for GFS (TP: HK$20.7; based on 1.71x 2017E PBR) because of its diversified revenue base and higher ROE. Its valuation premium narrowed in 2H16, which makes it looks more attractive. Valuation Table PER (x) Company China Galaxy Securities CITIC Securities Haitong Securities GF Securities Simple average Weighted average Ticker 6881 HK Equity 6030 HK Equity 6837 HK Equity 1776 HK Equity Rating Price (HK$) Market cap (US$m) NR 7.32 8,950 HOLD 16.10 27,293 HOLD 13.84 23,911 BUY 16.56 18,087 2015 5.9 8.1 8.3 7.9 7.6 7.9 2016E 12.8 16.3 16.0 13.4 14.6 15.1 2017E 13.1 13.9 14.2 11.7 13.2 13.4 2015 1.01 1.16 1.22 1.35 1.18 1.20 ROAE (%) 2015 22.9 16.6 18.0 22.5 20.0 19.1 2016E 8.2 7.4 7.9 10.5 8.5 8.4 2017E 8.3 8.7 9.0 12.2 9.5 9.5 2015 4.1 3.7 3.4 4.0 3.8 3.7
(x)
Sources: Company, CGIS Research Updated as of January 6, 2017
Wong Chi Man—Head of Research (852) 3698-6317 cmwong@chinastock.com.hk
PBR (x) 2016E 1.04 1.18 1.25 1.41 1.22 1.24 2017E 1.02 1.17 1.23 1.37 1.20 1.21
Dividend yield (%) 2015 5.4 3.8 3.9 5.8 4.7 4.5 2016E 2.3 1.8 1.9 3.0 2.3 2.2 2017E 2.3 2.2 2.1 3.4 2.5 2.5
Livy Lyu—Research Assistant (852) 3698-6393 livylyu@chinastock.com.hk
EPS Grow th (%) Company China Galaxy Securities CITIC Securities Haitong Securities GF Securities Simple average Weighted average Ticker 6881 HK Equity 6030 HK Equity 6837 HK Equity 1776 HK Equity 2016E (51.9) (47.4) (45.3) (38.0) (45.7) (45.1) 2017E 3.0 23.6 19.0 21.0 16.7 19.2
2015 -2017E CAGR (%) (29.6) (19.4) (19.3) (13.4) (20.4) (19.1)
ROAA (%) 2016E 1.7 1.8 1.5 2.1 1.8 1.8 2017E 1.9 2.2 1.7 2.5 2.1 2.1
Source: CGIS Research estimates
Stock Recommendation: Focus on Revenue Mix As we don’t expect to see a strong recovery in the brokerage and MFSL businesses this year, we believe investors should focus on stocks with a more diversified revenue mix. As shown in Figure 10, revenue from the brokerage business is highly sensitive to market trading volume. Brokerage revenue for the whole industry dropped 63% YoY in 9M2016. Revenue from investment banking and asset management, in contrast, is much less volatile and still recorded 52.5% and 12.3% growth YoY, respectively, in the corresponding period. Figure 10: Sub-segment revenue growth of the securities industry 250.0% 200.0% 150.0%
Figure 11: Average brokerage commission rate of the industry 0.0900% 0.0805% 0.0800% 0.0700% 0.0781% 0.0786%
0.0665%
100.0%
0.0600% 50.0% 0.0% 2012 2013 2014 2015 9M2016
0.0498% 0.0500% 0.0400% 0.0300% Brokerage IBD Asset management
0.0391%
-50.0% -100.0%
2011
2012
2013
2014
2015
9M2016
Sources: WIND Info, CGIS Research Figure 12: Peer comparison based on 1H16 data Ticker Revenue (RMB m) YoY change Recurring net profit (RMB m) YoY change Total assets (RMB m) Total equity (RMB m) Half-year ROE (%) Net commission rate (bps) Change HoH (b ps) Brokerage market share (1H16) Brokerage market share (2015) Net revenue breakdown Brokerage Investment banking Asset management Others Commission and fee income Net interest income Net investment gains Others CITIC Securities 6030 22,464 -39.5% 5,242 -58.0% 570,059 136,220 3.8% 3.97 (0.12) 5.68% 6.43% Haitong Securities 6837 17,395 -37.9% 4,264 -58.0% 542,332 105,087 4.0% 3.97 (0.57) 4.67% 4.98% GF Securities 1776 13,835 -42.0% 4,031 -52.1% 357,609 73,599 5.3% 3.87 (0.90) 4.88% 4.71%
Sources: WIND Info, CGIS Research
Huatai Securities 6886 11,448 -45.2% 2,841 -57.4% 402,679 78,802 3.6% 2.46 (0.17) 8.45% 8.35%
China Galaxy Securities 6881 9,218 -46.4% 2,255 -60.0% 256,289 54,730 4.0% 4.43 (0.70) 4.95% 5.09%
CICC 3908 3,168 -34.7% 574 -49.5% 107,572 17,037 3.4% 8.15 (0.72) 0.66% 0.50%
Everbright Securities 6178 6,474 -49.1% 1,515 -68.9% 173,734 38,412 3.8% 5.82 0.29 2.50% 2.81%
CMS 6099 8,688 -57.5% 2,242 -69.4% 245,264 47,812 4.7% 5.77 (0.62) 3.67% 4.11%
China Securities 6066 8,557 -27.2% 2,777 -34.8% 175,248 32,606 8.9% 4.9 (0.08) 2.93% 3.18%
28.7% 18.0% 19.1% 3.2% 69.0% 6.0% 25.4% -0.3%
29.7% 14.6% 2.4% 5.7% 52.4% 20.6% 28.3% -1.3%
28.1% 13.9% 19.8% 0.9% 62.6% 1.6% 35.3% 0.5%
40.6% 11.7% 0.7% 2.9% 55.9% 21.8% 24.9% -2.6%
47.6% 7.5% 3.3% 3.2% 61.7% 17.1% 21.2% 0.0%
30.9% 36.9% 11.7% 2.5% 82.0% -7.2% 25.2% 0.0%
40.0% 18.5% 6.9% 6.9% 72.2% 16.8% 9.9% 1.1%
47.3% 18.8% 10.5% 3.9% 80.5% 5.4% 14.0% 0.2%
33.4% 27.6% 7.8% 0.7% 69.4% 12.6% 18.0% 0.0%
Sources: Bloomberg, CGIS Research
The latest valuations of major securities companies do not look very attractive, as the PBR has been relatively stable recently, while trading velocity has been falling. We prefer to wait for better timing. On individual stock calls, we maintain our HOLD ratings for CITICS and HTS and BUY rating for GFS, on the back of its stronger ROE and diversified revenue base. We lowered our target PBR for GFS from 1.94x to 1.71x to reflect a more conservative medium-term ROE outlook (from about 13% to 12.3%), based on the latest conditions of the China equity market.
Figure 13: Stock recommendation
Company Ticker Rating Beta Cost of equity Medium-term ROE Growth rate PBR = (ROE-g)/(COE-g) Target price (HK$) Upside Source: CGIS Research Figure 14: Peer valuations PER (x) Com pany Ticker Rating Price (Local currency) HOLD HOLD NR BUY NR NR NR 16.10 13.84 7.32 16.56 15.28 10.90 12.52 12.08 Market cap (US$m ) 27,293 23,911 8,950 18,087 17,538 3,223 10,028 15,044 2015 2016E 2017E
HTS 6837.HK HOLD 1.36 9.7% 10.6% 7% 1.32 14.9 7.3%
CITICS 6030.HK HOLD 1.43 10.1% 10.8% 7% 1.23 17.0 5.5%
GFS 1776.HK BUY 1.43 10.1% 12.3% 7% 1.71 20.7 25.2%
PBR (x) 2015 2016E 2017E 2015
ROE (%) 2016E 2017E 2015
ROA (%) 2016E 2017E
China securities com panies CITIC Haitong China Galaxy Guangfa HTSC CICC Everbright China Merchants Sim ple average 6030 HK Equity 6837 HK Equity 6881 HK Equity 1776 HK Equity 6886 HK Equity 3908 HK Equity 6178 HK Equity 6099 HK Equity 8.1 8.3 5.9 7.9 7.5 7.9 4.7 5.2 7.0 16.3 16.0 12.8 13.4 14.1 15.6 13.7 12.2 14.3 13.9 14.2 13.1 11.7 11.3 12.9 11.5 10.1 12.3 1.16 1.22 1.01 1.35 1.13 1.28 n.a. n.a. 1.19 1.18 1.25 1.04 1.41 1.16 1.30 1.08 1.22 1.20 1.17 1.23 1.02 1.37 1.08 1.16 1.01 1.13 1.15 16.6 18.0 22.9 22.5 17.5 16.0 23.1 24.3 20.1 7.4 7.9 8.2 10.5 8.4 8.4 7.7 9.8 8.5 8.7 9.0 8.3 12.2 10.1 9.9 8.7 10.9 9.7 3.7 3.4 4.1 4.0 3.0 2.7 4.9 4.5 3.8 1.8 1.5 1.7 2.1 1.6 1.3 1.8 2.1 1.7 2.2 1.7 1.9 2.5 2.0 1.7 2.3 2.6 2.1
Sources: Bloomberg, CGIS Research
Figure 15: PBR range of CITICS 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9
Figure 16: PER range of CITICS 48.0 43.0 38.0 33.0 28.0 23.0 18.0 13.0
8.0
Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16
Rolling forward PBR (x)
Average
+1 Standard deviation
-1 Standard deviation
Sources: Bloomberg, CGIS Research Figure 17: PBR range of HTS 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8
Sources: Bloomberg, CGIS Research Figure 18: PER range of HTS 35.0 30.0 25.0 20.0
15.0 10.0 5.0
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Rolling forward PBR (x)
Average
+1 Standard deviation
-1 Standard deviation
Sources: Bloomberg, CGIS Research Figure 19: PBR range of GFS 3.0 2.5 2.0 1.5 1.0 0.5
Sources: Bloomberg, CGIS Research Figure 20: PER range of GFS 17.0 15.0
13.0 11.0 9.0 7.0 5.0
Dec-15
Feb-16
Aug-15
Aug-15
Aug-16
Rolling forward PBR (x) +1 Standard deviation
Average -1 Standard deviation
Rolling forward PER (x) +1 Standard deviation
Average -1 Standard deviation
Sources: Bloomberg, CGIS Research
Sources: Bloomberg, CGIS Research
Aug-16
Dec-15
Dec-16
Dec-16
Apr-15
Apr-16
Jun-15
Oct-15
Jun-16
Feb-16
Apr-15
Apr-16
Oct-15
Oct-16
Oct-16
Jun-15
Jun-16
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Rolling forward PER (x) Average
Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Rolling forward PER (x) Average
+1 Standard deviation
-1 Standard deviation
+1 Standard deviation
-1 Standard deviation
China Cement Weekly January 9, 2017 Weakening Demand but Stable Prices before Chinese New Year; De-capacity Process Improving China Cement Sector Cement prices declined slightly last week. The average cement price (nationwide) went down 0.05% week on week to RMB318.50/tonne last week. Cement prices in parts of Jiangxi, Zhejiang and Yunnan were down RMB10-30/tonne. Prices in other regions remained at a relatively high level thanks to well-controlled inventory levels. The average inventory level (nationwide) declined slightly to 60.25%. Market demand has weakened since last week on a national basis because of the upcoming Spring Festival and rainy weather in some regions. Daily shipment volume was down ~10% week on week owing to both Lunar New Year and rainfall in the southern areas. The slight drop in coal prices continued during the last two weeks of 2016. The comprehensive average price index for Bohai-Rim Steam Coal (Q5500K) went down RMB2/tonne to RMB593/tonne after mid-December. The index was still up 59.8% on a year-on-year (YoY) basis though. In 2016 newly-added clinker capacity declined ~50% YoY to 25.6m tonnes, according to the latest statistics from the China Cement Association. National clinker capacity totalled 1.85bn tonnes at the end of 2016, which is only 13.3m tonnes higher than that of 2015. This suggests 12.3m tonnes of obsolete clinker capacity was eliminated in 2016, based on simple calculation. The newly added clinker lines in 2016 were located mainly in the Hubei, Guangdong and Yunnan areas, while Yunnan, Anhui and Henan saw a capacity decline of more than 700,000 tonnes. We believe these capacity exits were the result of both weak industry profitability in early-2016 and higher market concentration led by major cement players in those areas. Looking forward, we expect even less newly added capacity in 2017, since the government has already suspended the approval of new clinker line construction. New capacity addition will no longer be a major concern in the next two to three years. Instead, the demand side will become the focus of investors, as infrastructure investment will play a key role this year, offsetting potential weakness in demand from the property sector. Cement stocks under coverage up 2.0% on average last week. Market sentiment has stabilized after profit-taking in December. Best performer Anhui Conch [0914.HK; BUY] went up 3.1%. CR Cement [1313.HK; BUY], the weakest among our coverage stocks, also rose 0.3%. Valuation Table
Wong Chi Man—Head of Research (852) 3698-6317 cmwong@chinastock.com.hk
PER (x) Company Anhui Conch CNBM BBMG CR Cement Simple average Weighted average Ticker 914 HK Equity 3323 HK Equity 2009 HK Equity 1313 HK Equity Rating Price (HK$) Market cap (US$m) 2015 BUY 21.75 13,638 15.2 HOLD 3.85 2,665 27.3 BUY 2.75 6,068 12.6 BUY 3.02 2,529 9.6 16.2 15.3 2016E 11.0 11.0 8.6 11.8 10.6 10.5 2017E 9.9 8.6 7.5 8.8 8.7 9.1 2015 1.32 0.40 0.62 0.74 0.77 0.99
PBR (x) 2016E 1.27 0.41 0.61 0.71 0.75 0.96 2017E 1.21 0.41 0.58 0.67 0.72 0.92 2015 8.1 10.0 9.2 8.4 8.9 8.6
EV/EBITDA(x) 2016E 6.1 10.0 9.1 6.8 8.0 7.3 2017E 5.4 9.5 7.9 5.9 7.2 6.5
Net debt/equity (%) 2017E (7) 210 54 67 81 39
EPS Growth (%)
2015 -2017E CAGR (%) 30.7 87.0 4.3 36.3 39.6 35.4
PEG(x) 2017E 0.3 0.1 1.8 0.2 0.6 0.4 2015 8.93 1.49 7.51 5.41 5.84 7.13
ROE (%) 2016E 12.01 3.78 6.14 7.33 7.32 9.39 2017E 12.87 4.90 7.84 8.20 8.45 10.37
Dividend yield (%) 2015 2.5 1.2 2.7 1.6 2.0 2.1 2016E 2.8 1.1 1.9 1.4 1.8 2.2 2017E 3.0 1.7 2.6 1.5 2.2 2.5
Livy Lyu—Research Assistant (852) 3698-6393 livylyu@chinastock.com.hk
Company Anhui Conch CNBM CR Cement BBMG Simple average Weighted average
Ticker 914 HK Equity 3323 HK Equity 1313 HK Equity 2009 HK Equity
2016E 45.3 160.4 (18.9) 54.4 60.3 53.3
2017E 17.6 34.2 34.0 20.2 26.5 21.7
Sources: Company, Bloomberg, CGIS Research estimates
Peer Comparison Com pany Anhui Conch CNBM BBMG CR Cement TCC International China National Materials Asia Cement West China Cement Tianrui Cement Sim ple average Weighted average Ticker 914 HK Equity 3323 HK Equity 2009 HK Equity 1313 HK Equity 1136 HK Equity 1893 HK Equity 743 HK Equity 2233 HK Equity 1252 HK Equity Rating Price (LC) BUY 21.75 HOLD 3.85 BUY 2.75 BUY 3.02 NR 1.81 NR 1.82 NR 1.83 NR 0.89 NR 2.00 Market cap (US$m ) 13,638 2,665 6,068 2,529 1,147 833 368 619 616 PER (x) 2015 15.2 27.3 12.6 9.6 9.2 18.2 5.5 14.0 2016E 2017E 11.0 9.9 11.0 8.6 8.6 7.5 11.8 8.8 226.3 36.9 6.7 5.3 18.2 10.2 66.2 18.9 n.a. n.a. 45.0 13.3 20.2 10.1 2015 1.32 0.40 0.62 0.74 0.47 0.37 0.28 0.75 0.56 0.49 0.93 PBR (x) 2016E 2017E 1.27 1.21 0.41 0.41 0.61 0.58 0.71 0.67 0.46 0.45 0.37 0.33 0.28 0.27 0.76 0.73 n.a. n.a. 0.61 0.58 0.89 0.85 2015 8.1 10.0 9.2 8.4 9.6 5.7 6.8 9.1 8.3 7.9 8.5 EV/EBITDA(x) 2016E 2017E 6.1 5.4 10.0 9.5 9.1 7.9 6.8 5.9 11.2 9.9 5.3 4.8 7.7 6.9 6.9 5.4 n.a. n.a. 7.9 7.0 7.3 6.4
Sources: Bloomberg, CGIS Research 1-Year Relative Performance
Sources: Capital IQ, CGIS Research
Figure 1: Regional Cement Price
National Average (P.O. 42.5) 400 350 300 250 250 200 Jan Feb Mar Apr May 2014
North China 350
300
200 Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
2013
Northeast China 500 450 400 300 350 300 250 Jan Feb Mar Apr May 2014
East China 400 350
250 200 Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
2013
South Central China 440 400 360 320 280 240 200 Jan Feb Mar Apr May 2013
Southwest China 400 360 320 280 240 200
Jun Jul
Aug Sep 2015
Oct Nov Dec 2016 2017
Jan
Feb
Mar
Apr
May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2014
2013
Northwest China 340 320 300 280 260 240 220 200 Jan Feb Mar Apr May 2014
Jun Jul 2015
Aug
Sep 2016
Oct
Nov 2017
Dec
2013
Sources: Digital Cement, CGIS Research
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Analyst Certification The analyst who is primarily responsible for the content of this report, in whole or in part, certifies that with respect to the securities or issuer covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject, securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by the analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the securities covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the securities covered in this research report three business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong-listed companies covered in this report; and (4) have any financial interests in the Hong Kong-listed companies covered in this report. Explanation on Equity Ratings
BUY SELL HOLD
: share price will increase by >20% within 12 months in absolute terms : share price will decrease by >20% within 12 months in absolute terms : no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL
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