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1 Apr, 2020 (Wednesday)

            
SHINEWAY PHARM(2877)
Analysis¡G
China Shineway Pharmaceutical Group (2877) is principally engaged in the development, manufacturing and sales of injection products, capsule and TCM formula granules. China`s pharmaceutical policy is now in the direction of favoring the Chinese medicine industry, prompting medical reimbursements to cover more Chinese medications. On the other hand, as the outbreak of coronavirus continues, various provinces and cities across the country have issued a number of diagnostic and treatment plans. A total of eight medications of the Group have been included in the recommended medicine lists of the¡§Coronavirus Infected Pneumonia Diagnosis and Treatment Scheme¡¨issued by various provinces and cities. The Group`s total sales for the first two months of 2020 increased by 8.7% as compared to the same period last year. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $5.70, Target Price: $6.50, Cut Loss Price: $5.30


SUNART RETAIL(6808)
Analysis¡G
Sun Art Retail is a leading retail with hypermarket and fast-growing e-commerce businesses in China. Sun Art Retail operates its hypermarket business under two recognized banners ¡V ¡§Auchan¡¨ and ¡§RT-Mart¡¨. As of 31 December 2019, Sun Art Retail had a total of 486 outlets in China, covering 232 cities across 29 provinces, autonomous regions and municipalities. In 2019, the company`s same-store growth rate was -1.01%, which was narrower than that in 2018 (-1.72%). Among them, RT-Mart`s same-store growth rate has returned to positive. In 2019, the company`s same-store growth rate was -1.01%, which was narrower than that in 2018 (-1.72%). Among them, RT-Mart`s same-store growth rate has returned to positive. The company`s B2C business is leading among peers and continues to grow rapidly, and its profitability is expected to continue to increase in the future.
Strategy¡G
Buy-in Price: $11.00, Target Price: $13.20, Cut Loss Price: $9.40


Nintendo Co., Ltd. (7974)
After its founding in 1889 as a manufacturer of hanafuda, the company was inaugurated in 1947 under the manufacture and retail of Karuta and playing cards. Its main products are ¡§dedicated video game consoles¡¨ that utilise the computer. The Pokémon Company is an equity method affiliated company with a shareholding ratio of 32%.For 3Q (Apr-Dec) results of FY2020/3 announced on 30/1, net sales increased by 2.5% to 1.226 trillion yen compared to the same period the previous year and operating income increased by 19.5% to 262.93 billion yen. In addition to the year-long contribution from the pay-to-use online service (Nintendo Switch Online), there has been a steady increase with the 22.5% increase in hardware retail units for the Nintendo Switch and the 30.1% increase in software retail titles.Company revised its full year plan upwards. Net sales remain unchanged, which is expected to increase by 4.1% to 1.25 trillion yen compared to the previous year, however, operating income is to increase by 20.1% to 300 billion yen (before revision: 260 billion yen). With production delays for the Nintendo Switch exercise game, ¡§Ring Fit Adventure¡¨, due to effects of COVID-19, a worldwide surge in its demand is predicted as an easy means of fitness for those who are forced to isolate themselves at home and cannot exercise at the gym.Target Price : 39,590 yenBuy Price : 35,627 yenCut-Loss : 32,333 yen



Report Review of March. 2020

Sectors:

Air & Automobiles (Zhang Jing),

Environment (Leon Duan)

Automobile & Air (ZhangJing)

This month I released 4 updated reports of Minth (425.HK), GAC (2238.HK), Sanhua (002050.CH), and Jonjee (600872.CH), which got success by their unique Competitive edge. Among them, we highly recommend Jonjee (600872.CH).

Jonjee Hi-Tech reported revenues of RMB4675 million in 2019, an increase of 12.20% yoy; a net profit attributable to the shareholders of the listed company of RMB718 million, an increase of 18.19% yoy, and an EPS of RMB0.9 compared with an EPS of RMB0.76 last year. The result was basically in line with our expectations at the beginning of last year. The result of company's condiment sector maintained a fast growth, the annual revenue of Meiweixian in 2019 was RMB4468 million, up by 15.98% yoy, an 6% increase in growth rate compared with last year; the company reported a net profit of RMB796 million, up 27.6% yoy.

The Company mentioned the 5-Year Goal of Double Hundred, which was to reach 1 million tons of output and RMB10 billion in revenue by 2023. In order to achieve this objective, the Company has not only steadily promoted the second-phase expansion project of the Yangxi Plant, but also planned to invest RMB1275 million to upgrade and expand the Zhongshan Plant to increase the production capacity from the current 314,300 tons to 584,200 tons. It is estimated that the project will bring in a revenue increase of RMB1575 million and net profit of RMB355 million. On the other hand, channel sinking and employee incentives will be enhanced. The development rate of prefecture-level cities will be increased to 87.83%, and the development rate at district and county level will reach 46.23%. We-Media and online advertising will continue to be strengthened.

After Baoneng taking over the company, the improvement of the incentive mechanism and management efficiency will lay a foundation for the Company's long-term development. The narrowing of the gap with the first-tier companies is also expected to open up space for the company's growth.

Environment (Leon Duan)

I released update reports on CEB WATER (1857.HK). In 2019, the company recorded revenue of HKD 5.55 billion, a year-on-year increase of 16%, an increase of 2.4 percentage points from the first three quarters of 2019. The increase in revenue was mainly due to an increase of HKD 300 million in construction revenue, an increase of HKD 300 million in operating income, an increase of HKD 76 million in financial revenue, and an increase of HKD 99 million in technical services revenue, representing year-on-year growth of 11%, 25%, 10% and 98%. The above-mentioned increase in revenue was mainly due to the increase in new projects, the operation of some new projects and the increase in water prices of some projects. The company's gross profit was HKD 1.89 billion, a year-on-year increase of 17%, which was 2.1 percentage points lower than the growth rate of gross profit in the first three quarters of 2019. The gross profit margin was maintained at 34% because the revenue share of construction business (about 24% gross profit margin) and operating services (about 47% gross profit margin) was similar to the previous year. Among them, construction revenue, construction contract revenue and technical service revenue totaled approximately 58%.

Profit attributable to equity holders of the company was HKD 830 million, an increase of 23% year-on-year, and an increase of 5.9 percentage points from the first three quarters of 2019. The company's various operating indicators exceeded our expectations, reflecting the company's good project growth and cost management capabilities.

We believe that the impact of the new pneumonia epidemic on the company is relatively limited. Although the shutdown of some industrial enterprises has affected the wastewater treatment capacity of the company's industrial park, a slight increase in municipal domestic sewage offsets this impact, and the industrial wastewater treatment capacity is expected to gradually recover in the near future, and I believe that it will soon return to normal levels. In terms of construction projects, the company's resumption of work after the holiday this year has been delayed compared to previous years, but it has gradually resumed work. I believe the government's encouragement of resumption of production will gradually ease the shutdown happening. In addition, the company's liability ratio increased slightly in 2019, an increase of 2.1 percentage points from last year to 57.9%. However, the return on shareholders` equity also increased by 1.4 percentage points to 9.9%, reflecting the improvement of the company's profitability. The dividend payout ratio increased slightly by 2 percentage points to 25%. The company's management believes that there is still room for improvement in the future dividend payout ratio. In addition, the company expects capital expenditure of approximately HKD 3 billion in 2020, which will maintain approximately the same growth rate as in 2019.

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