Goldman Sachs trimmed its target price for Great Wall Motor (Hong Kong Stock Code 02333) to HK$20.39 from HK$19.37, but downgraded the stock to “neutral” from “buy”. The research house believes the company’s continuous market share gain, strong margin and returns profile has been reflected in its share price. It currently trades at 2013 P/E and P/B of 9.1x/2.1x versus H share average (excluding BYD) at 8.5x/1.2x. But Goldman twealed its EPS forecasts by 1%/4%/4% in 2012/2013/2014 due to continuously strong SUV sales and high margin SUV mix increase in the product portfolio in 2012-2014 from 44.0% to 50.6%.
Category Archive: September
According to HKEx filing, Blackrock Inc. sold 12.01 mllion shares of China Pacific Insurance (Hong Kong Stock Code 2601) at HK$22.855 apiece, amounting HK$274 million. Blackrock had tahen reduced its stake in China Pacific Insurance by 0.52% to 6.67%.
HSBC keeps its positive view on Macau stocks; “the sector should rerate in 2013 as investors start to ascribe value to the new resort developments.” The house tips that catalysts include the release of further information on new resort opening timetables, with a key event being the opening of Galaxy Macau Phase II, which it believes will be in 2014. The house reiterates its Overweight calls on all Macau casino operators, with its preferred pick being Galaxy Entertainment (Hong Kong stock code 0027) due to the size and clarity of its new resort development program on Cotai. “Macau gaming stocks are trading at an average 33% discount to our target prices… We believe the current market prices reflect no value for future resort developments.” Galaxy edged up 0.2% to HK$24.90 Tuesday.
Nine Dragons Paper (Hong Kong stock code 2689) takes a 8.5% beating to HK$3.57 after posting a weaker-than-expected 28% on-year decline in its FY (ended June) net profit to CNY1.42 billion, in part weighed by higher finance costs (+56% on-year at CNY1.21 billion).
KGI says NDP’s revenue rose 11% on-year to CNY27.2 billion but its sales volume rose 17%, indicating a decline on ASP (especially in 2H); looking ahead, since raw material costs rose again recently, NDP’s profitability is likely to remain under pressure. Trading at 10.5X historical P/E and given the high gearing, “the counter is not attractive,” KGI says.
Bank of America – Merrill Lynch cuts Nine Dragons Paper’s target price to HK$5.00 from HK$5.90, as it lowers its FY13 profit forecast by 14.6% to CNY1.72 billion; it keeps the stock at Neutral. The house believes the Chinese paper manufacturing industry will continue to face challenges in 2013, as demand growth is unlikely to recover strongly due to extended economic weakness and the supply will keep growing strongly as a result of ongoing new capacity addition. “Recent containerboard price weakness in the traditional demand high season reflected the weak industry demand/supply dynamics, in our view. We don’t expect the industry can have a strong recovery in 2013.”
JPMorgan says accelerating output cuts and destocking along with pro-growth policy announcements have triggered a steel price rebound in China in recent weeks. While this should not reverse weak upcoming 3Q12 results (JPM cuts earnings forecasts by about 20%), “the recent steel price rally provides us with greater confidence that the ‘breakeven point’ is near, likely by 4Q12.” With valuations near trough-cycle lows and well below replacement costs, JPM believes the risk-reward trade in the Chinese steel sector remains favorable, with Angang Steel (Hong Kong stock code 0347) remaining its top pick. Angang is down 1.0% at HK$4.04.
JPMorgan says structurally, the upper mid-end segment where Japanese brands focus face not only competition from local Chinese brands aiming to upgrade their quality and hence selling prices, but more importantly, a number of entry-level luxury cars (e.g. BMW 3-series and Audi A4) taking market share and pressuring margins. The house notes that the market share of domestically-made Japanese sedans in China has collectively fallen to 23%, from a peak of 31% in 2008, and Toyota and Honda have been losing the most share. It advises investors to buy Brilliance China (Hong Kong stock code 1114), Zhengtong Auto (1728), Baoxin Auto (1293), Great Wall Motor (2333) and Geely Auto (0175), but avoid Dongfeng Motor (0489) and Guangzhou Auto (2038) for now. Brilliance China is up 2.3% at HK$8.10, while Dongfeng slips 0.3% to HK$9.37.