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  Phillip Investor Notes

27-05-2016(Fri) 26-05-2016(Thu) 25-05-2016(Wed) 24-05-2016(Tue) 23-05-2016(Mon)
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27 May, 2016 (Friday)

CRSC’s main business is providing “Design and Integration”, “Equipment Manufacturing” and “System Implementation” for rail transportation control system in China. In FY 2015, benefited from the rapid development in the rail transportation industry in China, the total value of newly signed contracts amounted to RMB37.82 billion, increased 24.4% YoY, including: RMB14.6 billion railway-related contracts (a YoY increase of 6.8%), RMB9.92 billion contracts in urban rail transportation sector (a YoY increase of 209.1%) . Its overseas business also grew rapidly. Its annual export contracts amounting to US185.2 million, an increase of 57.6% as compared to that of 2014. (I do not hold the above stock)
Buy-in Price: $4.50, Target Price: $4.95, Cut Loss Price: $4.30

In 2015, CRSC recorded the revenue of RMB23.95 billion, up 38.2% year-on-year. The net profit was RMB2.5 billion, an increase of 22.8%.With leading technology, oligopoly status, sufficient funds and lower debt ratio, CRSC not only maintains a steady growth in the field of railway, but will also expand rapidly in emerging areas such as PPP. In addition, the company will maintain an explosive growth on urban rail transit market. Meanwhile, the company will continue relying on reducing cost and increasing efficiency, bulk procurement and lean management, thus maintaining the gross profit margin at 25%. Therefore, the company is still expected to experience a promising prospect in rapid growth.
Buy-in Price: $4.57, Target Price: $5.56, Cut Loss Price: $4.10

Xinhua Winshare (811.HK) - Excellent Operating Results and Robust Finance

Steadily Increasing Profit

Xinhua Winshare is mainly engaged in publishing and distribution of publication and relative products in mainland China. In 2015, the company recorded sales revenue of RMB5.583 billion, and the profit for the year of RMB620 million, up 5.76% and 0.55% Y-o-Y, respectively.

In terms of profitability, the consolidated gross profit margin was 38.1%, representing a slight decrease as compared with 38.4% in FY2014. The proportion of selling and distribution expenses and administrative expenses in revenues increased by 0.12% to 25.15%, mainly due to the increase in labor costs, the increase in logistics and the relevant expenses as a result of the growth of sales revenue and the increase in expenses caused by newly-added subsidiaries. EPS was RMB0.57. The dividends won`t be declared until it is listed on A Shares.

Financial Soundness

The company operates three main business segments, including publication, distribution and other business. The revenue of publication segment increased by 7.5%, and the gross profit margin jumped by 2.3% to 31.8%, to which the greatest contribution came from educating products that was up by 17.5%. The revenue of distribution segment rose by 10%, in which, the scale of Internet sales developed enormously and soared by 72.1% Y-o-Y, accounting for 16.8% of the total revenue.

In 2015, the current ratio of the company remained at 1.3. Inventory turnover days dropped by about 6 days. Cash and deposits were RMB1.902 billion, representing about HKD2.01 per share. Available-for-sale investments reached RMB2.98 billion. The debt to assets ratio decreased by 1.5% to 33.1%. The figures showed that the company improved its efficiency in operations and the overall financial status was safe comparatively.

Development of New Businesses to Accelerate Transformation

Xinhua Winshare is the sole publisher of primary and secondary school textbooks in Sichuan Province, with almost monopolistic resources in regional offline channels. At present, the company is exerting itself in strategic transformation and building itself into a comprehensive cultural media group offering modern service in all industrial chains. On one hand, it will take advantage of its capital to enhance M&A and cooperation, expand the business area, strengthen the major publication and distribution businesses and increase the marketing share. On the other hand, the company put much effort in developing digital publication and e-commerce, and implementing the “double-channel” strategy of combining the offline channels with the online platform. At present, Online-Winshare, in which Xinhua Winshare holds 75% of equity, is the 4th largest online bookstore in China. With the synergetic development of traditional major businesses and emerging businesses, and the driver of physical and online operations, its profitability and sustainable developing ability will be strengthened a lot.

The listing of the company on A shares is advancing steadily. The proceeds will be mainly used in the physical network building, the digital educating publishing projects, the public publishing projects and the informatization projects. By then the company will become the only one publishing company listed both on A and H shares. The price of its undervalued H-share stock will be re-valued. On the basis of robust fundamentals and sustainable dividends distribution ability, we give the Company an estimation of 12x PE in 2016, and the target price is HKD8.4. Besides, “Accumulate” is given. (Closing price as at 25 May2016)

Risk Warnings

Risk of changing national preferential tax policy;

Risk of policy obstacles in cross-regional business;

Risk of technology of digital publication;

Risk of non-standardized competition;


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Recommendation on 27-5-2016
Price on Recommendation Date$ 7.420
Suggested purchase priceN/A
Target Price$ 8.400
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Phillip Research - Hong Kong 輝立研究部 – 香港及中國
Company Stock Code Last Update Suggestion Target Price Price on Recom
Mainland Financial Xingyu Chen (86)
Guangdong Land Holdings12418/04/2016Buy 3.152.3
China Merchants Bank396816/03/2016Buy 2215.96
Transportation and Automobiles Zhang Jing (86)
Air China75326/05/2016BUY7.095.36
Air China75325/05/2016BUY7.095.36
Mainland Property Geng Chen (86)
KERRY LOG NET63618/05/2016No Rating10.78
MAPLELEAF EDU131706/05/2016Accumulate6.245.93
Insurance Xingyu Chen (86)
Media & Publishing Research Department (+ 86 21 51699400-107)
Xinhua Winshare81127/05/2016Accumulate8.400.000
FORTUNE REIT77814/10/2014Accumulate7.326.92
Local Financials Xingyu Chen (86)
HSBC Holdings PLC000509/05/2013Accumulate9587.7
Health & Personal Care Fan Guohe  (+ 86 21 51699400-110)
Fosun Pharma219616/05/2016Accumulate22.8619.4
Hengrui Medicine60027610/05/2016BUY56.546.92
Hotels and Entertainment Geng Chen (86)
Poly Culture363618/03/2016Accumulate 19.517.1
New Energy  
Yunnan Water683923/05/2016Buy5.73.94
Grandblue ENV60032320/04/2016Buy 17.513.11
Food, Beverage and Retail  
Peak Sport196813/05/2016Buy2.251.83
Kweichow Moutai60051922/03/2016Buy 280226
Cowell e Holdings141509/05/2016Buy3.72.78
Oil and Gas Geng Chen (86)
TSC GROUP20628/07/2015Buy2.82.11
SPT Energy125124/02/2015Reduce1.51.74
Software & Service  
Goldpac Group331518/02/2015N/A4.77

Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited and/or its affiliates ( the “Group”) believe to be accurate. The Group does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The Group (or its employees) may have interests in relevant investment products. For details of different products’ risks, please view the Risk Disclosures Statement on

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