Strategy. October 10, 2018

Transcription

1 Strategy October 10, 2018 Following a correction of more than 20% YTD, the valuation of the large cap A-shares has dropped to about 10x rolling forward PER, largely in line with the level of the Hang Seng Index. As with the exercise we did yesterday for the Hong Kong market, we note that the share price trend of 12 stocks in the CSI 100 Index remains intact, i.e. they are not beta plays following the overall market. Among these 12 stocks, Ping An Insurance ( CH), Shannxi Coal Industry ( CH), CRCC ( CH) and Conch Cement ( CH) are included in CGS s model portfolio for October or recommended by the CGIS Research Team. A-share large caps have dropped >20% YTD on a currency-adjusted basis. The CSI 300 Index, a benchmark tracking large caps in the A-share market, has already dropped 23.1% YTD if measured based on the HKD, much weaker than the decline of 12.5% recorded by the Hang Seng Index (Figure 3). As a result, the Hang Seng AH Premium Index has fallen to 122.6, near the low end of the range since the launch of the Stock Connect in November 2014 (Figure 4). Valuation in line with the Hang Seng Index after the correction. The CSI 300 is trading at 10x rolling forward PER. Although this is not the lowest level, compared with the level of about 8x recorded in 2014, it is lower than the level in during the market collapse (Figure 1). In addition, 10x is in line with the level of the Hang Seng Index. The latest PBR of 1.61x is also near the low end of the 7-year range (Figure 2). Overall, this implies that the valuation of large cap A-share companies is undemanding, but market confidence is weak. But some A-shares have not followed the market and their share price trend remains intact. Although the A-share market is near a 2-year low, the share price trend of 12 stocks in the CSI 100 Index remains intact: Industrial Bank ( CH), Agricultural Bank of China ( CH), Bank of Shanghai ( CH), China Merchants Bank ( CH), Ping An Insurance, Huaneng Power ( CH), Shaanxi Coal Industry, Ping An Bank ( CH), PetroChina ( CH), CRCC, Conch Cement and Foshan Haitian Flavouring and Food ( CH) (Figure 5-16). Wong Chi Man Head of Research (852) cmwong@chinastock.com.hk A-share financials supporting the market. Relatively speaking, the performance of A- share financials has been stronger than the China financial plays listed in Hong Kong in recent months. Therefore, among the 12 stocks listed above, we have 6 financials stocks, including Industrial Bank, Agricultural Bank of China, Bank of Shanghai, China Merchants Bank, Ping An Insurance, and Ping An Bank. They have played an important role in supporting the A-share market. Preferred stocks. Among the 12 stocks we mentioned, Ping An Insurance, Shannxi Coal Industry, CRCC and Conch Cement are included in CGS s model portfolio for October or recommended by the CGIS Research Team. Currently, Conch Cement-A is stilling trading at a discount of 11.2% to Conch Cement-H (0914.HK). Mark Lau Research Analyst (852) marklau@chinastock.com.hk 1

2 Figure 1: Rolling forward PER of CSI 300 Figure 2: PBR range of CSI 300 2

3 Figure 3: YTD performance of CSI300 and Hang Seng Index (currency adjusted) Figure 4: Hang Seng AH Premium Index 3

4 Figure 5: Share price of Foshan Haitian Flavouring and Food Figure 6: Share price of Conch Cement Figure 7: Share price of CRCC Figure 8: Share price of PetroChina Figure 9: Share price of Ping An Bank Figure 10: Share price of Shaanxi Coal Industry

5 Figure 11: Share price of Huaneng Power Figure 12: Share price of Ping An Insurance Figure 13: Share price of China Merchants Bank Figure 14: Share price of Bank of Shanghai Figure 15: Share price of Agricultural Bank of China Figure 16: Share price of Industrial Bank

6 Figure 17a: Valuation of stocks in CSI 100 Index Ticker Company name Price 52-week Difference from 52- (RMB) low (RMB) week low Market cap (RMB m) 2018E PER (x) 2019E PER (x) PBR (x) 2018E dividend yield (%) CH Equity 360 Security Technology Inc % 162, CH Equity Foshan Haitian Flavouring & Food Co Ltd % 202, CH Equity Anhui Conch Cement Co Ltd % 188, CH Equity Shanghai International Airport Co Ltd % 103, CH Equity ZTE Corp % 65, n.a CH Equity China Railway Construction Corp Ltd % 144, CH Equity Kweichow Moutai Co Ltd % 873, CH Equity PetroChina Co Ltd % 1,608, CH Equity BYD Co Ltd % 126, CH Equity Jiangsu Hengrui Medicine Co Ltd % 216, CH Equity Ping An Bank Co Ltd % 181, CH Equity Shaanxi Coal Industry Co Ltd % 87, CH Equity Huaneng Power International Inc % 95, CH Equity China Shenhua Energy Co Ltd % 390, CH Equity Jiangsu Yanghe Brewery Joint-Stock Co Ltd % 182, CH Equity Ping An Insurance Group Co of China Ltd % 1,195, CH Equity Henan Shuanghui Investment & Development Co Ltd % 82, CH Equity New China Life Insurance Co Ltd % 134, CH Equity China Merchants Bank Co Ltd % 727, CH Equity CRRC Corp Ltd % 232, CH Equity China Communications Construction Co Ltd % 176, CH Equity China Pacific Insurance Group Co Ltd % 281, CH Equity Bank of Shanghai Co Ltd % 127, CH Equity Yonghui Superstores Co Ltd % 76, CH Equity China Petroleum & Chemical Corp % 791, CH Equity Agricultural Bank of China Ltd % 1,295, CH Equity China United Network Communications Ltd % 165, CH Equity Inner Mongolia BaoTou Steel Union Co Ltd % 75, n.a. n.a. 1.5 n.a CH Equity Metallurgical Corp of China Ltd % 67, CH Equity Industrial Bank Co Ltd % 322, CH Equity Kangmei Pharmaceutical Co Ltd % 108, CH Equity AECC Aviation Power Co Ltd % 51, CH Equity China Railway Group Ltd % 173, CH Equity Suning.com Co Ltd % 119, CH Equity Inner Mongolia Yili Industrial Group Co Ltd % 151, CH Equity Great Wall Motor Co Ltd % 59, CH Equity Luzhou Laojiao Co Ltd % 65, CH Equity Qingdao Haier Co Ltd % 96, CH Equity Zijin Mining Group Co Ltd % 76, CH Equity Bank of Ningbo Co Ltd % 88, CH Equity Wanhua Chemical Group Co Ltd % 107, CH Equity Wuliangye Yibin Co Ltd % 245, CH Equity Shanghai Pudong Development Bank Co Ltd % 297, CH Equity Poly Real Estate Group Co Ltd % 133, CH Equity Huaxia Bank Co Ltd % 100, CH Equity China Minsheng Banking Corp Ltd % 258, CH Equity China Everbright Bank Co Ltd % 188, CH Equity Industrial & Commercial Bank of China Ltd % 1,898, CH Equity China Merchants Shekou Industrial Zone Holdings Co Ltd % 137, CH Equity SAIC Motor Corp Ltd % 351, CH Equity Gree Electric Appliances Inc of Zhuhai % 233, CH Equity Focus Media Information Technology Co Ltd % 114, CH Equity China National Nuclear Power Co Ltd % 91, CH Equity Guangzhou Automobile Group Co Ltd % 99, CH Equity Zhejiang Zheneng Electric Power Co Ltd % 65, CH Equity Huatai Securities Co Ltd % 114, CH Equity GF Securities Co Ltd % 94, CH Equity SF Holding Co Ltd % 180, CH Equity China Shipbuilding Industry Co Ltd % 93, CH Equity Sanan Optoelectronics Co Ltd % 63, CH Equity China State Construction Engineering Corp Ltd % 222, CH Equity Air China Ltd % 100, CH Equity China Fortune Land Development Co Ltd % 72, CH Equity China Vanke Co Ltd % 238, CH Equity Shanghai International Port Group Co Ltd % 121, CH Equity Orient Securities Co Ltd/China % 55, CH Equity Huaneng Lancang River Hydropower Inc % 49, n.a. n.a. 1.3 n.a CH Equity Giant Network Group Co Ltd % 38, n.a. n.a. 4.3 n.a. 6

7 Figure 17b: Valuation of stocks in CSI 100 Index Ticker Company name Price 52-week Difference from 52- (RMB) low (RMB) week low Market cap (RMB m) 2018E PER (x) 2019E PER (x) PBR (x) 2018E dividend yield (%) CH Equity Shanghai Electric Group Co Ltd % 67, CH Equity East Money Information Co Ltd % 54, CH Equity Baoshan Iron & Steel Co Ltd % 164, CH Equity Bank of Communications Co Ltd % 397, CH Equity Bank of Nanjing Co Ltd % 62, CH Equity China Yangtze Power Co Ltd % 349, CH Equity China Life Insurance Co Ltd % 564, CH Equity Bank of China Ltd % 1,002, CH Equity Bank of Beijing Co Ltd % 123, CH Equity CITIC Securities Co Ltd % 184, CH Equity Bank of Jiangsu Co Ltd % 72, CH Equity Greenland Holdings Corp Ltd % 75, CH Equity China Molybdenum Co Ltd % 87, CH Equity China CITIC Bank Corp Ltd % 261, CH Equity Guotai Junan Securities Co Ltd % 124, CH Equity China Merchants Securities Co Ltd % 80, CH Equity Shenwan Hongyuan Group Co Ltd % 98, CH Equity Haitong Securities Co Ltd % 89, CH Equity Shenzhen Overseas Chinese Town Co Ltd % 49, CH Equity Daqin Railway Co Ltd % 117, CH Equity Yunnan Baiyao Group Co Ltd % 73, CH Equity Power Construction Corp of China Ltd % 79, CH Equity China Eastern Airlines Corp Ltd % 69, CH Equity Shanghai RAAS Blood Products Co Ltd % 97, CH Equity Ningbo Zhoushan Port Co Ltd % 52, CH Equity Hangzhou Hikvision Digital Technology Co Ltd % 230, CH Equity Midea Group Co Ltd % 267, CH Equity GD Power Development Co Ltd % 48, CH Equity Guosen Securities Co Ltd % 65, CH Equity BOE Technology Group Co Ltd % 104, CH Equity China Galaxy Securities Co Ltd % 55, CH Equity Kangde Xin Composite Material Group Co Ltd % 60,

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