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1、,Ben Bei,January 31,2013China A-share StrategyReaffirm pro-cyclical bias;CSI300 target up 9%to 3,000Portfolio Strategy Research,CSI300 target up to 3,000,driven by 11%EPS and 5%valuationWe reiterate our positive stance on A-shares and raise our CSI300 2013yearend target to 3,000(prior 2,750),implyin
2、g 16%potential upside,despite possible higher volatility ahead and the 21%gains since our 2013strategy outlook report dated Nov.29,2012.We expect earnings to play amore important role ahead and the 16%implied return will be driven by11%(prior 9%)EPS growth and another 5%P/E expansion to 11.2X(prior,
3、Jason Sun+86(10)6627-3187 Beijing Gao Hua Securities Company LimitedHelen Zhu+852-2978-0048 Goldman Sachs(Asia)L.L.C.,10.7X),still well below the 13.6X average since the 2008 trough.Timothy Moe,CFA,Macro,earnings,valuation,and liquidity still favorable to equitiesRecent macro indicators(including PM
4、Is,IPs and exports)have generallytrended positively,enhancing our more upbeat than consensus 2013E GDPforecast(8.2%vs.8.0%).Looking ahead,further improvement of GDP yoygrowth to 8.1%/8.2%/8.4%in 1Q-3Q 2013 should continue to translate intoincrementally more positive earnings surprises,particularly f
5、or selectivecyclical sectors.Still-reasonable mutual fund positions,a close-to-troughlevel of retail accounts opening and QFIII/RQFII additions continue toprovide liquidity support.In the meantime,CPI concerns should not beimminent given the mild macro recovery with persisting overcapacity.Reaffirm
6、pro-cyclical bias;U/G Capital Goods to replace PropertyWe continue to favor pro-cyclical sectors in 1H2013 on a macro recoveryand consumption players in 2H2013 given the approaching reform agenda.We suggest a gradual shift from earlier-cyclical sectors to selective latercyclical sectors in 1H2013,an
7、d we take profit on property(30%alphasince 2012),replaced with capital goods on potential fundamentalsimprovement.We now overweight Capital Goods,Construction Materials(Cement),Securities,Insurance,Media and F&B,and continue tounderweight Coal,Steel,and Chemicals due to weaker fundamentals.Our forec
8、asted CSI300 index path in 2013E,+852-2978-1328 Goldman Sachs(Asia)L.L.C.+852-2978-1220 Goldman Sachs(Asia)L.L.C.Chenjie Liu+86(10)6627-3324 Beijing Gao Hua Securities Company Limited,3,100,CSI300 Index Path Forecasts,2,9002,7002,500,2,750(+6%,1Q13),2,900(+12%,1H 2013),3,000(+16%,end-2013),2,3002,10
9、0,Dec-11,Mar-12,Jun-12,Sep-12,Dec-12,Mar-13,Jun-13,Sep-13,Dec-13,Source:Gao Hua Securities Research,Goldman Sachs Global ECS ResearchGoldman Sachs does and seeks to do business with companies covered in its research reports.As a result,investorsshould be aware that the firm may have a conflict of in
10、terest that could affect the objectivity of this report.Investorsshould consider this report as only a single factor in making their investment decision.For Reg AC certification and otherimportant disclosures,see the Disclosure Appendix,or go to Analysts employed bynon-US affiliates are not register
11、ed/qualified as research analysts with FINRA in the U.S.,The Goldman Sachs Group,Inc.,Goldman Sachs,2,January 31,2013Stay positive on favorable macro,earnings,valuation,and liquidityOverview:CSI300 to 3,000,driven by 11%EPS and 5%valuationWe are raising our CSI300 2013 yearend target to 3,000,up 9%f
12、rom our previous target at2,750,implying 16%potential upside.We expect 11%EPS growth(prior 9%)for the CSI300index in 2013E and our yearend target 3,000 is based on 11.2X 2013E P/E(5%expansionfrom current 10.7X),well below the average 13.8X since the 2008 trough level.We note theA-share market may ha
13、ve already partially priced in Chinas macro recovery and slightlylifted hopes(but the market remains very skeptical as a whole)on Chinas potentialeconomic reforms,given the 21%gains for the CSI300 index since our 2013 strategyoutlook report,Recovering mildly,with hopes on reform,dated November 29,20
14、12.However,we believe the market has not fully priced in the economic recovery and has notbeen overly bullish on Chinas reform process.Despite potentially higher index volatility,we expect further upside potential in 2013E,on the back of:1)continuing improvingmacro/earnings improvement with more bul
15、lish views than consensus;2)still-attractivevaluations;3)continued favorable liquidity support;and 4)any meaningful progress oneconomic reforms.We continue to favor pro-cyclical sectors that benefit more from a cyclical recovery thandefensive sectors,and we suggest a gradual shift from earlier-cycli
16、cal sectors(such asproperty)to selective later-cyclical sectors(such as mid-stream manufacturing industrieslike capital goods or construction materials like Cement)in 1H2013.Here we lock in thealpha generated for Property(10%since Nov 29,2012,and 30%since early 2012),anddowngrade to market weight.We
17、 upgrade Capital Goods to overweight from marketweight given potential improving fundamentals(details on page 10).Currently we suggestoverweight Capital Goods(Machinery,Railway Equipment),Construction Materials(Cement),Securities,Insurance,Media and F and 4)lack of reformprogress.Exhibit 1:We foreca
18、st CSI300 index yearend target at 3,000,16%potential upside,CSI300 IndexCurrent index levelBull caseBase caseBear case,Index Target2013E Year-end2,5833,3303,0002,413,Potentialupside/downside(%)2013E Year-endas of Jan.24,201329%16%-7%,Earnings growth(%)2013E Year-end15%11%0%,Target PE(12-mforward)(x)
19、2013E Year-end12.0X11.2X10.0X,Source:WIND,Gao Hua Securities Research,Goldman Sachs Global ECS ResearchGoldman Sachs Global Economics,Commodities and Strategy Research,(%),(%),8.2,8.1,0,3,January 31,2013Macro:Recovery well on track,still favorable to equitiesWe have been holding the view that the ma
20、cro backdrop is the most critical factor drivingthe equity markets.Since we published our 2013E strategy outlook on September 29,2012,the key macro indicators(including PMIs,CPIs,IPs,exports,etc)have been generallytrending positively,in line or slightly better than previously expected.Our ChinaEcono
21、mists slightly upgraded 2013E GDP growth to 8.2%from 8.1%on December 18,2012,which is more upbeat than current consensus estimates at 8.0%.Looking forward,we expect a continued favorable macro backdrop,such as furtherimprovement of quarterly yoy GDP growth from 7.9%in 4Q2012 to 8.1%/8.2%/8.4%in 1-3Q
22、2013 per our economists estimates,will continue to provide fundamental support to theequity market in terms of both earnings and valuation.In the meantime,CPI still looks manageable at an estimated c.3%in 2013E,despite recentCPI acceleration in December 2012(at 2.5%)on the back of rising vegetable p
23、rices due tocold weather.We do not expect inflation to become a major concern in 1H2013(partiallybecause of the overcapacity issue)as we believe inflation can be contained below thethreshold of 3.5%-4%,above which we think it could potentially hurt economic growth andtrigger potential policy tighten
24、ing.,Exhibit 2:We expect a modest GDP recovery ahead andmore upbeat than consensusChina-Real GDP(%chg yoy)1413.8,Exhibit 3:In the meantime,CPI situation seems stillunder control below 3.5%at 2013 yearendChina-CPI(%chg yoy)98.0,8137,1211,11.9,654,6.3,GSForecast,10,10.2,3.2,3.4,98,7.9,GSForecast8.48.2
25、,321,1.2,2.01.9,2.82.5WINDConsensus,WIND7.4 Consensus7-16.5,6,-2,-1.5,2005,2006,2007,2008,2009,2010,2011,2012,2013,2005,2006,2007,2008,2009,2010,2011,2012,2013,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.Goldman Sachs Global Economics,Commodities and Strategy Research,So
26、urce:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.,GLIacceleration,Sep-09,Sep-10,Sep-11,Mar-10,Mar-11,Mar-09,Mar-12,Nov-09,Nov-10,Nov-11,Sep-12,Jan-10,Jul-10,Jan-11,Jan-12,Jul-09,Jul-11,Jan-09,Jul-12,May-09,May-10,May-11,Mar-05,Jun-05,Sep-05,Dec-05,Mar-06,Jun-06,Sep-06,Dec-06,Ma
27、r-07,Jun-07,Sep-07,Dec-07,Mar-08,Jun-08,Sep-08,Dec-08,Mar-09,Jun-09,Sep-09,Dec-09,Mar-10,Jun-10,Sep-10,Dec-10,Mar-11,Jun-11,Sep-11,Dec-11,Mar-12,Jun-12,Sep-12,Dec-12,Mar-13,May-12,Nov-12,-5,6,4,January 31,2013,Exhibit 4:GS Global Leading Indicator still impliesfavorable global backdrop,Exhibit 5:Chi
28、nas inventory situation continues toimprove,0.15,Recovery,Expansion,25,Rmb bn,Upstream,Downstream,0.10,July 2012,Aug 2012,Sept 2012,20,0.050.00-0.05,Jun 2012May 2012,Oct 2012Nov 2012Dec 2012,Jan 2013,15105,-0.10,April 2012,Feb 2012,0-0.15March 2012,-0.20,Contraction,Slowdown,-0.2,-0.1,0.0,0.1,0.2,0.
29、3,0.4,GLI growth,Source:Gao Hua Securities Research,Goldman Sachs Global ECS Research.Exhibit 6:We expect better export outlook in 2013E,onback of global GDP recovery,Source:NBS,CEIC,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.Exhibit 7:Our Macro Bridge Index still points to positiv
30、eterritory,despite a moderating pace,(%)5040,China-Exports of Goods/Services(%chg yoy)World-Real GDP(%chg yoy,RHS),(%)GS Forecast,5,(%)70,SHCOMP Index return(3-m return)Macro Bridge Index(2-m leadning),Correlation coefficient=77%,3020,43,5030,210,0,10,10-10,-10,-1,-20-30,2000 2001 2002 2003 2004 200
31、5 2006 2007 2008 2009 2010 2011 2012 2013,-2-3,-30-50,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.Goldman Sachs Global Economics,Commodities and Strategy Research,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.,Oct-08,Dec-08,Feb-09,Apr-09,Jun-09
32、,Aug-09,Oct-09,Dec-09,Feb-10,Apr-10,Jun-10,Aug-10,Oct-10,Dec-10,Feb-11,Apr-11,Jun-11,Aug-11,Oct-11,Dec-11,Feb-12,Apr-12,Jun-12,Aug-12,Oct-12,Dec-12,Feb-13,Apr-13,Jun-13,Aug-13,Oct-13,Dec-13,Oil,gas&petrochemical,Textile&Apparel,Utilities,TransportationInfratructure,Overall(ex.Financials),Non-ferrous
33、metal&Others,ConsumerDurables,ConstructionMaterials&Others,IT&equipment/components,Auto&parts,Food&beverage,Shipping&Othertransportation,Hotel&tourism&Others,CapitalGoods,Securities&Others,Telecom,Construction&OtherIndustrialServices,Insurance,Property,Banks,Overall,Coal,HealthCare,Retailing,Airline
34、s,Chemical,Steel,Media,28,35%,30%,5,January 31,2013Valuation:Still attractive vs.historical levels or global peersUsing 2013E I/B/E/S EPS,our CSI300 index target of 3,000 implies a P/E of 11.2X(14.3X ex-banks),up from the current level of 10.7X(13.7X),which is a rebound from the Decembertrough of 9.
35、0X(11.8X).However,our target P/E is still well below the average since the2008 trough of 13.8X(16.5X)and just slightly above the average minus one STD level of9.7X(12.1X).Globally,the CSI 300 index also looks attractive at a 1.6X 2013E P/B and a 16%ROE vs.theglobal averages of 1.8X and 14%.,Exhibit
36、8:We expect currently undemanding valuationswill continue expansion with macro improvement,Exhibit 9:Global comparison also suggests favorablevaluations in China,(X)302624,IBES CSI300 12m fP/EIBES CSI300 12m fP/E exl banksIBES CSI300 12m fP/B(RHS),(X)3.53.0,2013EP/B3.02.5,PhilippinesIndia,Thailand,2
37、220,2.5,2.0,Malaysia,U.S,Australia,18,Taiwan,16,+1 Stdev,2.0,1.5,Singapore EuropeHong Kong,China,14,CSI300 avg.13.6X,13.7X,12,1.6X,1.5,Japan,10,-1 Stdev,10.7XGS yearend,1.0,Korea,target:11.2X,8,1.0,0.5,Attractive,2013EROE(%),5,7,9,11,13,15,17,19,21,23,25,Source:IBES,Gao Hua Securities Research,Goldm
38、an Sachs Global ECSResearch.,Source:IBES,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.,Exhibit 10:The CSI300 return since November seems mostly driven by valuation reversionrather than earningsCSI300 2012 performance decomposition by sector(from outlook publication to date)25%20%15%1
39、0%5%0%-5%-10%Earnings changeValuation changePrice performanceSource:WIND,Gao Hua Securities Research,Goldman Sachs Global ECS ResearchGoldman Sachs Global Economics,Commodities and Strategy Research,Aug-11,Aug-12,Nov-10,Aug-10,May-11,May-12,Sep-12,Jan-11,Feb-11,Sep-11,Jan-12,Feb-12,Dec-10,Jun-11,Jul
40、-10,Apr-11,Jun-12,Jun-10,Sep-10,Mar-11,Nov-11,Dec-11,Mar-12,Apr-12,Oct-10,Jul-11,Jul-12,Nov-12,Oct-11,Oct-12,80,20,(Rmb bn),6,January 31,2013Earnings:Early signs of positive improvementFollowing our economists 2012E/2013E GDP revision to 7.8%/8.2%(from 7.6%/8.1%),wehave modestly revised our 2012E/20
41、13E EPS growth to 3%/11%(from prior 1%/9%)basedon the GS top-down earnings model.The recent more frequent monthly industrial profitdata points to a positive direction for the earnings trend in 4Q2012.And the past fewweeks WIND consensus estimates have shown signs of positive earnings revisions.Along
42、with quarterly strengthening yoy GDP growth until 3Q2013,we expect upcoming earningsrevisions are likely to be on the positive side.,Exhibit 11:We expect 3.0%/11.0%/12.5%for 2012-14EEPS growth from a top-down perspective,Exhibit 12:CSI300 profit growth may revise up,indicatedby SOE profit/NBS indust
43、rial profit growth,Top-down Estimates2011A2012E,Non-FinancialRevenue Growth(%)24.86.0,Non-FinancialMargin(%)5.14.3,EPS Growth(%)14.63.0,Previous EPSgrowth(Nov.29,2012)1.0,7060,SASAC SOE Profit growthCSI300 profit growth exl financials,NBS industrial sectors profit growth,50,2013E2014E,9.29.6,4.74.9,
44、11.012.5,9.012.5,4030,Bottom-up Estimates(Wind Consensus)10,2011A,24.8,5.1,14.6,0,-10,2012E,4.3,4.4,5.0,-20,2013E2014E,10.68.2,4.95.3,13.414.9,-30,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearchExhibit 13:CSI300 consensus earnings appears to bebottoming outCSI300 earnings fo
45、recast based on WIND consensus,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearchExhibit 14:CSI300 earnings forecast revision sentimentjust turned positive in January 2013CSI300 Index earnings revision sentiment,3,000CSI300 Index(RHS),2,500,2006E2011E,2007E2012E,2008E2013E,2009
46、E2014E,2010E,30%,6,000,20%,5,000,2,0001,500,10%0%,4,000,3,000-10%1,0002,000-20%500,-30%,1,000,0Jan-06,Jan-07,Jan-08,Jan-09,Jan-10,Jan-11,Jan-12,Jan-13,-40%Jan-07,Jan-08,Jan-09,Jan-10,Jan-11,Jan-12,0Jan-13,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.Goldman Sachs Global E
47、conomics,Commodities and Strategy Research,Source:Wind,Gao Hua Securities Research,Goldman Sachs Global ECSResearch.,Jun-07,Sep-07,Sep-08,Sep-09,Sep-10,Sep-11,Mar-07,Mar-08,Mar-09,Jun-09,Mar-10,Dec-10,Mar-11,Mar-12,Sep-12,Dec-12,Jun-08,Jun-10,Jun-11,Jun-12,Dec-07,Dec-08,Dec-09,Dec-11,120,(%),7,Janua
48、ry 31,2013,Exhibit 15:CSI300 earnings forecast changes by sector(2013YTD)CSI300 Index earnings forecast changes(2013E)_Wind consensus(2013YTD),Exhibit 16:CSI300 may record improvement of earningsin 4Q2012E per WIND consensusEarnings growth YTD YoY(%)Overall,SteelConstruction Materials&Others,0.6%,2.
49、6%,100,Overall(ex.Financials),IT&equipment/components,0.6%,BanksTransportation InfratructureOverallHealth CarePropertyOverall(ex.Financials)Oil,gas&petrochemicalInsuranceShipping&Other transportation,0.4%0.2%0.2%0.2%0.1%0.0%0.0%0.0%0.0%,806040,TelecomRetailingMediaHotel&tourism&OthersTextile&Apparel
50、AirlinesSecurities&OthersChemical,0.0%0.0%,0.0%0.0%0.0%0.0%0.0%0.0%,200-20,2%-16%,5%-7%,Food&beverage,0.0%,Auto&partsUtilitiesCapital GoodsCoalConsumer DurablesNon-ferrous metal&OthersConstruction&Other Industrial Services,0.0%-0.1%-0.1%-0.1%-0.2%-0.2%-0.2%,-40,-1%,0%,1%,1%,2%,2%,3%,3%,Source:Wind,G
