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31-03-2020(Tue) 30-03-2020(Mon) 27-03-2020(Fri) 26-03-2020(Thu) 25-03-2020(Wed)
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30 Jan, 2020 (Thursday)

            
SSY GROUP(2005)
Analysis¡G
SSY Group (2005) announced that its antiviral drug, Abidol Capsule, has been admitted to either Catalogs of Products for Epidemic Prevention and Control or Green Channels for Preventive and Control Drugs in 18 provinces, and another 11 provinces will complete the admission work by the same way. As a broad-spectrum antiviral drug, Abidol was included in China`s National Medical Insurance Catalog and the list of clinically recommended drugs for antiviral influenza issued by China`s National Health Commission for the first time in year 2019. Regarding the research and development of new products, the Group will adhere to the new products development idea of¡§combining generic drugs and innovative drugs¡¨with injection as the basis, reinforcing the Group`s technological and product advantages in the intravenous infusion solutions industry of China. Besides, it will comprehensively promote the development of new products for therapeutic injections and focus on various fields including new anti-infective therapy, treatment of chronic disease, circulatory systems, emergency anaesthesia drugs, antipyretic and analgesic drugs. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $7.70, Target Price: $9.00, Cut Loss Price: $7.10


CHINA WATER(855)
Analysis¡G
In February 2019, the company with Orix and Toray formed Jiangxi Yinli Direct Drinking Water Equipment Co., Ltd. to actively expand the direct drinking water business. During the period, the company added more than 140 direct drinking water projects and realized revenue of 27.27 million HKD, of which water sales income was 5.68 million HKD and connection income was 17.05 million HKD. As of September, the total population of direct drinking water services was close to 500,000. We believe that the company focuses on the development of core water supply business, and develops two core strategies around the integration of urban and rural water supply and supply and drainage integration. It promotes the growth of its main business through acquisition of high-quality projects and upgrading of existing projects. At the same time, it will accelerate the expansion of value-added services such as secondary water supply and direct drinking water, and pilot intelligent water services to deploy an intelligent pipe network system to seize future strong performance growth points.
Strategy¡G
Buy-in Price: $6.38, Target Price: $6.70, Cut Loss Price: $6.20



GWM (2333.HK) - Inventory Reduction Led to Considerable Sales Decline in the End Month

Investment Summary

Inventory Reduction Led to Considerable Sales Decline in the End Month

GWM (Great Wall Motor) released the sales data of December, with wholesale sales of 106,000 vehicles, decreasing 21% yoy and 8% mom. The total annual sales volume was 1.06 million vehicles, up 0.7% yoy.

The main reasons for the yoy decline in sales in December: 1) according to the usual practice, the company needs create a more favourable inventory environment for the coming year and actively control the pace of wholesale; 2) at the same time, as the spring festival comes earlier this year, the timing for inventory reduction will also be moved up. Seeing from the terminal retail, the demand for the company's products is still relatively strong, with retail sales of about 112,000 vehicles in December, up 7.5% yoy and a strong mom growth of 47.7%, which is far better than the decrease of 5.4% yoy and 35% mom growth of the industry as a whole.

Key Models Remained Robust

Key models continued to maintain steady growth, with sales of H6/M6/F7 of about 42,000/19,000/10,000, respectively, up -17%/26%/-6.4% yoy. Since the launch of the 2019 M6 in the third quarter, its sales volume has continued to rise, approaching 20,000 vehicles at the end of the year. 770,000 Haval models were sold in the whole year, the same as that of the previous year. 9,394 vehicles WEY models were sold, with cumulative sales of 100,000 vehicles for the year, down 28%. Great Wall Pao, the high-end pickup truck brand that was launched in October continued to climb steadily, with sales of 6,259/7,020 vehicles in the following two months after launch, driving the sales of pickup trucks up by 7.85% to 149,000 vehicles throughout the year. We believe that the pressure on the downward movement of the vehicle structure in the cold cycle environment of the car market will be partially offset by the scale benefit of stabilizing sales volume. It is expected that the company's bicycle profit will show a yoy flat trend in the fourth quarter and a slight decline from the previous quarter.

Products and Channels Enhanced to Promote Domestic and Overseas Market Footprint

At the beginning of 2019, GWM released Haval µì" globalized strategy. It planned to spend five years to achieve annual sales of 2 million vehicles, making Haval the world's leading professional SUV brand. At present, the annual sales volume of 770,000 Haval models means that the compound annual growth rate in the next five years will reach 21%. Considering that the domestic SUV industry has entered the red ocean market, the process of overseas market footprint is expected to accelerate. Haval already has established overseas KD assembly plants in Malaysia, Ecuador, Tunisia and Bulgaria. Besides, a complete vehicle manufacturing plant in Tula, Russia has been completed, with an annual output of 80,000 vehicles in the first phase and 150,000 vehicles in the second phase. This will expand Haval's sales in Russia as well as the eastern European market. Recently, GWM signed an agreement with General Motors to acquire the latter's Tarigan plant in India that has an annual output of 165,000 complete vehicles and 160,000 power assemblies. India's auto market is still in its growing phase, with a total sales volume of 4.4 million vehicles in 2018, a CAGR of about 8% in the past decade and a population of only 22 vehicles per 1,000 inhabitants. There is huge room for future development.

In addition, the Spotlight Automotive, a joint venture with BMW, is nearly built and is expected to commission in 2022. The brand will be producing MINI fuel-fired cars for export and engaging in research and development of pure electric cars.

In terms of new products, when the new platform of GWM is put into production in the second half of 2020, it will make up for the weaknesses of the company's lightweight products and provide a stronger engine power distribution system. We are looking forward to the launch of two new SUV models built on this platform. New energy brand Ora will also launch a new electric vehicle R2. The first hydrogen fuel cell vehicle is expected to be officially launched in 2022.

Investment Thesis

In terms of valuation, we adjust our target price to HK$6.45, equivalent to 11.7/10.3/8.7x P/E and 1.0/0.9/0.9x P/B ratio in 2019/2020/2021. We give the rating of ¡§Accumulate¡¨. (Closing price as at 20 January)

Risk

New vehicle sales fall short of expectations

The SUV market dramatically worsens

The progress of new energy vehicle project is poorer than expectations

Financials

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Recommendation on 30-1-2020
RecommendationAccumulate
Price on Recommendation Date$ 5.970
Suggested purchase priceN/A
Target Price$ 6.450
Writer Info
Zhang Jing
(Research Analyst)
Tel: (+86 21 51699400-103)
Email:
zhangjing@phillip.com.cn

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