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24 Apr, 2017 (Monday)


BGE(603588)
Analysis¡G
Beijing GeoEnviron Engineering & Technology (BGE), one of the leading companies in soil remediation industry, specializes in three core businesses, environmental remediation, hazardous waste disposal and waste incineration, covering such key areas as industrial wastewater, medical waste and sludge, and operates via engineering contracting and investment. The issuance of "the 10-Chapter Soil Pollution Action Plan" in 2016 opened up new space for development of soil remediation. With the gradual implementation of relevant rules and regulations during the "13th Five Year Plan" period and establishment of industry standards and regulatory system, the industry will be further promoted and boom, with a-trillion market size to be released. Meanwhile, massive policy and financial support have facilitated the inflow of extensive social capital, resulting in even intensive competition. The tightened industry standards and supervision will be in favour of leading companies rich with advantageous technologies and experience. BGE enters soil remediation market from controlling heavy metal and has obvious edge in technical reserves and regulating experience. It is now a leading company in the soil remediation industry. With abundant order backlog and outstanding order-taking capability, BGE acquired soil remediation orders worth up to RMB1.3 billion in 2016, taking the lead in remediation business. Accelerated industry policy improvement and great demand for investment are expected to contribute to the above-expectation growth in soil remediation for 2017, with new orders worth RMB2.1 to 3 billion. We believe BGE is capable of fulfilling its RMB1 billion revenue target of remediation business upon the completion of newly-signed orders.
Strategy¡G
Buy-in Price: $33.89, Target Price: $36.70, Cut Loss Price: $32.50


BAIC (1958.HK) - Mixed future continued

90% Increase in Yearly Results

The 2016 revenue of BAIC Motor increased 38% yoy to RMB116.12 billion, exceeding RMB100 billion for the first time. Net profit attributable to equity holders reached RMB6.367 billion, up 91.9% yoy, mainly contributed by Beijing Benz Automotive Co., Ltd. and Beijing brands. The company's proposed final dividend per share was RMB0.29, with the dividend payout ratio of 34.5%.

Gross Margin Conversion of Self-owned Brands

Led by the hot sale of SUV, sales of Beijing Brand increased to 457,000 units, up 35.6% yoy; sales income from Beijing brands increased to RMB30.89 billion, up 73% yoy. The fact that the sales income is much higher than sales reflected the rise of average unit price, with the gross margin raised from -8% of last year to 2.8%. Distribution and administration expenses ratio decreased by 3.5 ppts and 1.7 ppts to 6.7% and 4.3%, respectively.

Beijing Benz Maintained Robust Growth Momentum

Stimulated by the strong product circle, the annual sales of Beijing Benz increased by 26.7% yoy to 317,000 units, and 28.7% yoy to RMB85.312 billion; sales income Beijing Benz increased to RMB85.312 billion, up 28.7% yoy. Thanks to the improvement of localization rate and sales structure, the gross margin of Beijing Benz increased 4.5 ppts to 29.7%; net profit margin increased by 3 ppts yoy.

Ordinary Performance of Beijing Hyundai

As a result of the more fierce competition of market segments and updating of some products, Beijing Hyundai sold 1.142 million cars, up 7.5% yoy. To be specific, the proportion of D-level and SUV increased to 50%; the increase of promotion expenses however damaged profitability, with the return on investment decreased 4.1% to RMB3.907 billion yoy.

Sales update in the First Two Months

The total sales volume of Beijing Auto reached 110,300 units in the first two months, representing an increase of 5.2% yoy. To be specific, the sales volume of Beijing Benz witnessed a yoy increase of 58% to 73,500 units; that of Beijing brands decreased 43% yoy to 34,500 units; that of Beijing Hyundai increased to 1.4 million units, up 9% yoy. We believe that besides base effect, the conversion of vehicle types is the main reason. Looking into the future, we expect that Korean vehicles and Beijing brands will face fierce competition, but Beijing Benz and new-energy EV will keep the trend of increase.

Investment Thesis

We believe that consumers are becoming more rational, and even in accordance with a conservative estimate of Korean cars this year that the contribution of 20% backward, the EPS for 2017/2018 is expected to be 0.91, 1.12 yuan, the market is too worried about the political factors influences recently. We reclaim the target price to HKD9.8 with 9.7/8.0x P/E in 2017/2018 and maintain the rating to "Buy".

Financials

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Recommendation on 24-4-2017
RecommendationBUY
Price on Recommendation Date$ 7.730
Suggested purchase priceN/A
Target Price$ 9.800
Writer Info
Zhang Jing
(Research Analyst)
Tel: (+ 86 51699400-103)
Email:
zhangjing@phillip.com.cn

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Phillip Research - Hong Kong ½÷¥ß¬ã¨s³¡ ¡V ­»´ä¤Î¤¤°ê
Company Stock Code Last Update Suggestion Target Price Price on Recom
Information Techology Research Department N/A+852 2277 6527research@phillip.com.hk
Goldpac Group331527/03/2017Buy32.4
O-Net Technologies87727/09/2016No Rating4.02
Transportation and Automobiles Zhang Jing (86) 2151699200-103zhangjing@phillip.com.cn
BAIC195824/04/2017BUY9.800.000
BYD121112/04/2017Accumulate51.945.1
Insurance Research Department (86) 21 51699400-110research@phillip.com.cn
Media & Publishing Research Department (+ 86 21 51699400-107)research@phillip.com.cn
Wisdom Sports Group166111/07/2016Buy3.32.18
NetDragon77716/06/2016Buy28.422.9
Pharmaceutical Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Huadong Medicine000963.CH20/04/2017BUY11393.03
3SBio Inc.153029/03/2017Buy11.69.3
Industrial Goods Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
TK Group228320/03/2017Accumulate2.82.38
TK Group228310/01/2017Buy2.82.18
Health & Personal Care Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Luye Pharma218622/03/2017Buy6.34.95
Harmonicare150917/01/2017Buy5.534.45
New Energy Wang Yannan 86 21 51699400-107wangyannan@phillip.com.cn
HN RENEWABLES95827/02/2017Buy3.52.72
CONCORD NE18224/10/2016Buy0.60.39
Food, Beverage and Retail Research Department (86) 21 51699400-110research@phillip.com.cn
La Chapelle611628/02/2017Accumulate9.88.9
Ajisen (China) Holdings53823/02/2017Accumulate3.413.09
Textiles & Clothing Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
JNBY330613/04/2017Accumulate6.65.95
CECEP COSTIN New Materials Group222818/10/2013Buy5.64.23
Telecommunications Fan Guohe + (86) 21 51699400-110fanguohe@phillip.com.cn
Chinasoft International Ltd35410/04/2017Buy5.84.61
Chinasoft International35426/10/2016Buy4.863.72
Mainland Property John Wong +852 2277 6527johnycwong@phillip.com.hk
Logan Property338019/04/2017Accumulate5.54.64
KWG Property181307/04/2017Accumulate6.555.68
Basic Materials Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
ND Paper268905/04/2017Accumulate9.58.35
ND Paper268909/03/2017Accumulate11.6510.02
Utilities Tim Wong +852 2277 6516timwong@phillip.com.hk
China Resources Power83621/04/2017Accumulate16.413.8
Xingrong Environment000598.SZ18/04/2017Buy7.316.04
Properties John Wong +852 2277 6527johnycwong@phillip.com.hk
Swire Properties197228/03/2017Neutral25.5524.6
K. Wah International17313/03/2017Buy5.34.41
Software & Service Research Department (86) 21 51699400-110research@phillip.com.cn
IGG800221/11/2014Accumulate3.953.44
HC INTERNATIONAL228006/11/2014Buy14.928.8
Hotels and Entertainment John Wong (+ 852 2277 6527)johnycwong@phillip.com.hk
Hongkong & Shanghai Hotels4505/01/2017Accumulate9.78.46
Great Eagle Holdings Ltd4129/12/2016Accumulate38.633.65

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 http://www.phillip.com.hk.

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