China Shipping Container Lines (Hong Kong Stock Code 02866) rose 5.2% to HK$2, after it announced that its 3Q12 net profit amounted to RMB991 million. That compared to a loss of RMB951 million in 3Q11. Earnings per share in 3Q12 equaled 8.48 fen. Turnover jumped 28.9% to RMB9.279 billion. 1Q – 3Q loss amounted to RMB290 million with loss per share 2.48 fen.
UOB Kay Hian lifted its target price for CSCL to HK$3.2 from HK$2.58, and maintained its “buy” call. Compared with NOL and OOIL (00316), CSCL has the lowest exposure to Transpacific (TP) contractual cargo, where rates are substantially lower than spot rates, and therefore benefits the most from the TP spot rates rally, the research house said. Moreover, it adde dthat CSCL’s bunker fuel management capability has improved over time. It has locked in about 25% of full-year bunker fuel consumption at less than US$600/tonne, and the cost savings would take effect from 3Q 2013 onwards. UOBKH said Asia-Europe (AE) rates surged 22% wow, confirming capacity discipline remains intact. AE weekly capacity is expected to drop by 18% at end-November compared with September. This drop is likely support AE rates during slack seasons. In addition, TP profitability will improve significantly in 2013 on higher contractual rates. The turnaround in 2013 is highly visible now.
Chalco (ADR: ACH, Hong Kong stock code 2600) drops 2% to HK$3.31 after swinging a 3Q12 net loss of CNY1.08 billion, vs a 3Q11 net profit of CNY555 million, hurt by sluggish global demand and lower aluminum and alumina prices. Barclays says Chalco’s 3Q loss is 5% higher vs its estimate for a loss of CNY1.02 billion, and marks the fourth consecutive quarter of loss for Chalco eroding its book value by a cumulative 10% over that time period. “We do not expect any significant improvement in 4Q12 and expect it to incur a loss once again,” Barclays says and adds that Chalco’s business model is likely to remain challenged by low aluminium prices, and its recent investment into the Simandou iron ore project is also threatened by declines in iron ore prices since then and, potential postponement of Vale’s adjacent iron ore project. “This is something worth watching out for and could lead to further impairments on the book.” It keeps Chalco at Underweight with an unchanged target price of HK$3.
PetroChina (ADR:PTR, Hong Kong code 0857) plunges 3.7% to HK$10.40 and is the worst-performing blue chip, after reporting its 3Q12 net profit declined 33% on year to CNY24.9 billion, below the average CNY28.9 billion forecast of six analysts polled earlier by WSJ.
Barclays says the earnings miss is mainly driven by lower marketing and upstream profitability, offset by higher-than-expected profitability from refining and chemicals.
Citi group says while weakness in other parts of PetroChina’s business in 3Q was to be expected, the 55% on-quarter and 60% on-year decline in marketing EBIT “came as a surprise to us.” It says COSL (2883) is its top pick in the China oil sector and it continues to prefer Sinopec (0386) to PetroChina. “We view PetroChina’s valuation as high at current levels and we believe the roll-out of natural gas pricing reform in China may be slower than the market expects.”
JP Morgan cut its target price for PetroChina to HK$8.25 from HK$8.75, and maintained its “underweight” rating. The research house said it has been negative on PetroChina for quite some time, and 3Q results support the negative thesis of declining ROEs. JPM said Sinopec (00386) is maintaining stable fuel marketing profits. Sinopec recognized the risk to this as refining turns profitable. PetroChina is not coping well in this environment and is seeing sharp reduction in marketing profits.
Nomura raised its target price for PetroChina to HK$12 from HK$10 reflecting 2013-14 earnings revision by 18% and 9% on higher crude price assumptions, and maintained its “neutral” rating. The research house said the 3Q results were lacklustre compared with Sinopec’s (00386). Refining and Chemical losses were reduced by a similar magnitude to Sinopec’s but remained in the red due to PetroChina’s high cost base and relatively small inventory write-backs. Nomura views the ultimate stock catalyst is natural gas price reforms, but the signal is not positive given that the latest 12th FYP lowered 2015 China natural gas demand estimate to 230bcm (from 260bcm).
Credit Suisse says China Merchants Bank’s (Hong Kong Stock Code 3968) 3Q12 net profit of CNY11.4 billion is 2% ahead of its forecast due to better cost savings and lower credit cost. “However, we judge the real underlying business operations of the bank are much weaker than our expectations.” The house says CMB’s 3Q margin disappointed with another 9 bps on-quarter contraction, and believes that asset yield has come down but funding cost pressure persisted at CMB after the two rate cuts. It adds, deposits came in with another negative surprise, contracting by 1.8% on-quarter despite that CMB has been generally perceived as the best deposit franchise among JSBs, and asset quality continued to deteriorate due to debt repayment difficulty seen at some SMEs. Overall, CS keeps CMB at Neutral with an unchanged target price of HK$17.22. The stock ended the session down 4.8% to HK$14.20.
Jefferies says the drop was likely due to investors taking the beat as “low-quality”, as a better-than-expected provision was offset by worse-than-expected net interest income and non-interest income. Still, the house says key positives from the results include a resilient NIM (despite falling 11 bps in 3Q) and stable asset quality; it also notes core CAR rose 15 bps on quarter to 8.47% at end-3Q, almost at CBRC’s end-2018 target of 8.5%, even before its rights issue. The house raises CMB’s target price to HK$17.50 from HK$16.10 and keeps the stock at Buy.
Yanzhou Coal Mining (Hong Kong Stock Code 1171) drops 5.8% to HK$11.36, after the coal miner swung to a 3Q12 net loss of CNY76.59 million, vs a 3Q11 net profit of CNY1.08 billion, due to mounting expenses. Barclays says this is only the second loss reported by the company since 2002 (the only other loss was in 4Q08); while the coal sales volume and realizations were marginally better than its expectations, costs have taken their toll on earnings. Barclays says the disadvantages of operational and financial leverage are emphasized in a weak coal price environment, and “we flag that Yanzhou might see consensus earnings being lowered for 2013, where we are already 40% lower than the Bloomberg consensus of CNY1.24/share.” The house reiterates its preference for China Shenhua (1088) with low operational leverage, better cost control and volume growth. Shenhua is up 1.1% at HK$32.55.
China Pacific Insurance (Group) (CPIC) (Hong Kong Stock Code 02601) is down 1% to HK$24.05. The insurer said its net profit attributable to equity holders of the parent dropped 58.7% year-on-year to Rmb497 million for the three months ended 30 September 2012. Its basic and diluted earnings per share were Rmb6 cents. For the first three quarters of 2012, net profit dropped 55.3% to Rmb3.14 billion. The gross written premiums amounted to Rmb127.05 billion, up 4.7% year-on-year.