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1、Deutsche BankMarkets Research,AsiaChinaStrategy,PeriodicalMade in China,Date29 August 2012Jun Ma,Ph.DChief Economist(+852)2203 8308,Hui Miao,Ph.DStrategist(+852)2203 5934,Probability distribution of RMBforecastsKEY POINTS,Michael Tong,CFAResearch Analyst(+852)2203,Sinopec-Yin and Yang(0386.HK,Hold,T
2、arget Price:HKD 8.21,ClosingPrice:HKD 7.40,David Hurd),Daily Market StatisticsPerformance Price,28/08/20121D%chg 1M%chg,Air China-1H12 miss due to weak cargo;staying upbeat for 2H12E;Buy(0753.HK,Buy,Target Price:HKD 6.70,Closing Price:HKD 4.84,Vincent Ha)THEME OF THE DAYAsia Economics Special-Probab
3、ility distribution of RMB forecasts(Jun Ma)Since May,the RMB has depreciated by 0.9%against the USD.In Q2,Chinascapital and financial account recorded the largest net outflow in history.Investors and corporations have felt increasingly uncertain about the direction,HSIH-shareA300VolumeHSIH-shareA300
4、Indexes,19,8129,5222,238Price1,0771,2793,377,0.1-0.20.51D%chg-12.5-10.1-10.7,2.71.3-4.91M%chg-45.8-38.07.913/08/2012,of the RMB in the future.In this note,we present a RMB forecasting model,HSI,CY2011,CY2012,CY2013,and estimate the probability distribution of RMB movement against the USD inthe comin
5、g four quarters.Our model found that the RMB exchange rate canbe explained largely by four macro factors:Chinas GDP growth,its currentaccount to GDP ratio,the strength of the USD,and the PBOCs FXintervention.(Jun Ma 852 2203 8308),EPSgPERPBRHSCEIEPSgPER,4.5%5.9%11.5 10.91.4 1.3CY2011 CY201212.1%0.4%
6、8.4 8.3,9.0%10.01.2CY20139.1%7.6,http:/pull.db-Pharmaceuticals-NDR takeaways:Re-emergence of confidence,PBRMSCI HKEPSg,1.4CY201110.7%,1.2CY2012-2.0%,1.1CY201311.6%,(2607.HK,Hold,Target Price:HKD 15.00,Closing Price:HKD 13.48,Jack Hu)We believe SPH will deliver 10-15%profit growth for 2013,thoughmana
7、gement did not quantify the 2013 growth outlook.Other key takeawaysinclude:1)distribution business is likely to grow inline with market growth of,PERPBRMSCI ChinaEPSgPER,13.9 15.71.1 1.2CY2011 CY201214.4%5.3%9.7 9.3,14.01.2CY201311.4%8.3,20%in the mid/long term,and 2)growth for manufacturing busines
8、s may,PBR,1.6,1.6,1.3,improve due to the continuing product mixture optimization.Retain Hold rating(on balanced risk/reward)and HKD15 target price.(Jack Hu 852 2203 6208)http:/pull.db-,Data for 2011 are calculated using members,weights and prices frothe 31st of December of that year(NLF_EPSFooterDB
9、Economic forecasts,China Life-1H12 superior EV growth and a cleaner book(2628.HK,Buy,Target Price:HKD 22.80,Closing Price:HKD 20.30,Esther Chwei)China Life reported 1H12 EV of Rmb334,326mn(+14.2%hoh)and VNB ofRmb12,494mn(+2.5%yoy),both ahead of our expectation by 6.9%and 0.9%,Hong KongGDP(%)Merch.Ex
10、p.(%)CPI(%)China,2011F5.011.25.32011F,2012F 2013F1.5 2.83.3 8.54.9 2.32012F 2013F,respectively.Net profits was down 25.7%yoy to Rmb9,635mn,2.7%below ourforecast which we see as a non-issue.Solvency margin ratio improved to 231%(from 170%in 2H11)thanks to sub-debt issuance.Overall,we see this as a so
11、lidset of results with superior EV growth of 14.2%hoh(vs.Ping Ans 8.2%and,GDP(%)9.2Merch.Exp.(%)20.3CPI(%)5.4FX rate(eop)CNY/USD 6.30Source:Deutsche Bank AG estimates,7.610.02.86.23,8.214.03.56.00,CPICs 10.7%)and a cleaner book with minimal unrealized losses of Rmb846mn in1H12(vs.Ping Ans Rmb8.4bn a
12、nd CPICs Rmb5.6bn),which should make it moreresilient amidst market weakness in 2H12.We maintain our Buy rating on ChinaLife.(Esther Chwei 852 2203 6200)http:/pull.db-Bank AG/Hong KongAll prices are those current at the end of the previous trading session unless otherwise indicated.Prices are source
13、dfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest that could aff
14、ect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,29 August 2012Made in ChinaDB EQUITY RESEARCHChina Southern Airlines-We still expec
15、t QoQ recovery in 3Q,but to a lesser extent(1055.HK,Buy,Target Price:HKD 4.15,Closing Price:HKD 3.50,Vincent Ha)While we still expect China Southern Airlines(CSA)to stage a solid 3Q QoQ earningsrecovery on peak season tourist traffic,we now believe that core earnings growth willbe skewed more toward
16、s CSAs 51%-owned Xiamen Airlines considering its betterregional macroeconomic backdrop.Meanwhile,CSAs core operation is subject to near-term earnings risk from opening new long-haul international routes and increasingcapacity on big aircraft.Nonetheless,we maintain our Buy rating on what we see asap
17、pealing valuation(0.9x FY12E P/BV with 3%FY12E yield).(Vincent Ha 852 22036247)http:/pull.db-Pacific-1H12 in-line;core businesses robust;maintaining Buy(1199.HK,Buy,Target Price:HKD 13.50,Closing Price:HKD 10.44,Michael Lee)Despite a tough Chinese export/import environment in 1H12,the 23%net profit
18、growthfrom the core businesses of Cosco Pacific that accounts for 85%of net profit hasshown the companys terminal portfolio and container leasing business are wellpositioned to withstand an uncertain global economic outlook.We expect CPs corebusinesses to maintain the positive momentum going into 2H
19、12 as our economistsexpect double-digit Chinese export growth recovery in 2H12.Maintaining Buy with atarget price of HK$13.5.(Michael Lee 852 2203 6136)http:/pull.db-Overseas Intl-Trading conditions not great(0316.HK,Buy,Target Price:HKD69.00,Closing Price:HKD 44.25,Joe Liew)We recently had a conver
20、sation with the company and management say that tradingconditions have not been great with some slowdown in the TP and AE routes for theindustry.Their AE rates have returned back to April levels while TP rates have beenpretty stable.However,3Q results should still be pretty strong for the whole indu
21、stry.0.8x 2012E P/B is below most regional peers and forecast 2012 dividend yield of 2.9%is decent.(Joe Liew 852 2203 6198)http:/pull.db-Biopharmaceutical-Growth momentum continues(1177.HK,Buy,Target Price:HKD 3.30,Closing Price:HKD 2.85,Jack Hu)Sino Biopharm reported 2Q12 revenue/non-GAAP EPS of HK
22、$1,943m/HK$0.029,+32%and-4%YOY respectively,vs.consensus HK$1,939m/HK$0.042,and our forecast ofHK$2,017m/HK$0.042.The bottom-line miss was due to retrospective tax payments.Management reaffirmed its full year revenue/EPS guidance of 30%/20%growth.Wereiterate Buy(on valuation)and raise our target pri
23、ce to HK$3.30.(Jack Hu 852 22036208)http:/pull.db-China-1H12 review:Weak first half with lower margins(2789.HK,Buy,TargetPrice:HKD 1.20,Closing Price:HKD 0.70,Eugene Yeoh)Yuanda reported an interim net profit of RMB263m,which is 37%YoY below our andconsensus estimates.Management attributed the weak
24、results to project delays andcost overruns.Cash flow and working capital also deteriorated during the period.Withimproved liquidity conditions,management is cautiously optimistic about 2H earningsand cash flow performance.Given a still-healthy backlog,we believe the 4x PEvaluation is too modest;henc
25、e,we maintain our Buy rating.(Eugene Yeoh 852 22036248)http:/pull.db-Yin and Yang(0386.HK,Hold,Target Price:HKD 8.21,Closing Price:HKD7.40,David Hurd)SNP reported 1H12 eps of Rmb 0.28/shr,40%lower year-on-year.Consensus wasRmb 0.27/shr;we were at Rmb 0.24/share.We have lowered our 2012 eps to Rmb0.6
26、5/shr from 0.72/shr and continue to see downside risk to our 2012 estimate.End-Dec.2011 consensus was Rmb 0.98/share.We maintain our Hold rating on SNP on theback of additional downside risk to 2012 numbers and no visible progress on refinedproduct price reforms.(David Hurd 852 2203 6242)http:/pull.
27、db-,Page2,Deutsche Bank AG/Hong Kong,29 August 2012Made in ChinaSUN ART RETAIL GROUP-Proven ability in cost control;maintaining Hold(6808.HK,Hold,Target Price:HKD 10.13,Closing Price:HKD 9.75,Anne Ling)Sun Art posted respectable 1H12 results given tough SSSg.We are impressed by thecompanys ability t
28、o control opex ratio.Management maintains its store opening planand has turned more bullish on EBITM.Its strategy to reinvest margins for market shareremains intact.We fine-tuned FY12-14E EPS by 0-3%.to reflect higher interest income;retain Hold on balanced risk/reward.(Anne Ling 852 2203 6177)http:
29、/pull.db-Mengniu Dairy-1H12 earnings miss,a bumpy road to recovery;Hold(2319.HK,Hold,Target Price:HKD 22.60,Closing Price:HKD 23.10,Mabel Wong)Mengnius road to recovery has been bumpy year-to-date,as it hit a few rough patchesin the form of quality issues.We expect sales/NPAT growth to improve in 2H
30、12 but notenough for 2012 NPAT growth to move into positive territory.The new managementteam appears determined to turn Mengniu around,but execution is key,in our view.We await concrete signs of a silver lining.We cut our 2012-14 NPAT forecasts by 7-9%on lower sales and higher SG Hold(0220.HK,Hold,T
31、arget Price:HKD 7.00,Closing Price:HKD 7.46,Mabel Wong)UPCs 1H12 NPAT came in 4%above our forecast on a lower-than-expected tax rate.Looking at 2H12,while input cost pressure looks tame(except palm oil),we areconcerned that slowing noodles sales growth(intense competition)and an increase indepreciat
32、ion expense(back-end loaded capex)could dampen yoy earnings growth.Weraise our 2012-14 NPAT forecasts by 7-9%mainly on lower taxation and finance costs,and lift our target price from HKD6.6 to HKD7.0.We maintain our Hold rating on faircurrent valuations.(Mabel Wong 852 2203 6178)http:/pull.db-Games
33、Limited-Softening growth outlook(GAME.OQ,Hold,Target Price:USD4.04,Closing Price:USD 3.45,Alex Yao)Managements weak 3Q guidance(11%below our estimate)indicates the aging of coregames could be more severe than we initially expected.Although content updates incoming quarters are likely to help recover
34、 core game usage to a certain degree,weexpect Woool and Mir 2 to gradually lose gamer base in the near future.Margins willlikely be under pressure as revenue growth slows or declines despite stricter costcontrols.However,the contribution from new games in the pipeline should mitigate thepressure on
35、sales and margins.(Alex Yao 86 21 3896 2831)http:/pull.db-Unicom-Further post-interim tweaks(0762.HK,Buy,Target Price:HKD 19.30,Closing Price:HKD 13.00,Alan Hellawell III)CU mgmt discussions post-results reinforce our view that CU is tracking to achieve 3m2G net adds and 36m 3G net adds in 2012.3G A
36、RPU however declined more than weexpected in 2Q12,falling 24%YoY to RMB90.1(and from RMB93.9 in 1Q12).We cutour 3G ARPU from 2H12E onwards.Rev from sales of telecom products was higherthan what we expected,increasing by 75%YoY to RMB19.3b(RMB11.2b in 1Q12 andRMB8.1b in 2Q12)in 1H12 due to strong sal
37、es of the iPhone 4S in 1Q12.According tomgmt,iPhone sales slowed in 2Q12.We increase telco product sales in 2H12E onsmartphone promotions,clustered increasingly around a RMB1,000 pricepoint.Theweighting of WCDMA smartphones with a price of RMB2,000 or below increased by14pp to 67.9%in 1H12.(Alan Hel
38、lawell III 852 2203 6240)http:/pull.db-Comms Construct-1H12 results below expectation on lower sales and higherfinancial costs(1800.HK,Buy,Target Price:HKD 9.31,Closing Price:HKD 6.67,PhyllisWang)CCC reported that its 1H12 net profit decreased 14%yoy to Rmb5,016m,accountingfor 40%of our and the mark
39、ets full-year earnings forecasts.If we strip out the gain ondebt restructuring of Iraq loans worth Rmb930m(in 1H11),net profit in 1H12 fell 11%.The results are below our and market expectations due to lower-than-expected salesand higher finance expenses.(Phyllis Wang 86 21 3896 2839)http:/pull.db-,D
40、eutsche Bank AG/Hong Kong,Page3,29 August 2012Made in ChinaHaitong Securities-Key takeaways from 1H12 analyst briefing(6837.HK,Buy,TargetPrice:HKD 13.20,Closing Price:HKD 8.90,Judy Zhang)Haitong Securities(HTS)proposed to buy the convertible bond of HKD4.85bn issued byHaitong Intl Holdings,a wholly
41、owned subsidiary and the holding company of HaitongIntl(665.HK),in order to strengthen the capital base of Haitong Intl Holdings forpotential overseas expansion opportunities.The money to invest in the CB equals 34%of HTS IPO proceeds,and it is largely in line with the companys plan to allocate 35%o
42、f its H-shr IPO proceeds into overseas expansion.Upon regulatory approval,themanagement expects the return of the proceeds will be improved from current 3%to6%,which would increase HTS FY13 EPS by 2.6%and ROE by 0.2%.Despitemanagement having said HTS would not do any overseas M Buy(3808.HK,Buy,Targe
43、t Price:HKD 5.20,Closing Price:HKD 4.33,Vincent Ha)Sinotruk reported a 82%YoY 1H12 net profit decline to RMB182m,34%below ourestimate.The companys 1H12 revenue dropped by 32%YoY to RMB15.0bn on 38%YoY fall in heavy-duty truck(HDT)sales volume and 40%YoY fall in engine salesvolume,partially offset by
44、 sales from medium and light duty trucks(up by 41%).Thediscrepancies between Sinotruks actual net profit and our estimate are attributable toweaker-than-expected revenue and earnings contributions from the medium and light,Page4,Deutsche Bank AG/Hong Kong,29 August 2012Made in Chinaduty truck segmen
45、ts.Indeed,with weakening sales in 1H12 offset by easing materialcosts,we probably have seen the end of negative earnings momentum with a HoHsurge in 1H12 net profit.(Vincent Ha 852 2203 6247)http:/pull.db-Fushan-1H12 results ahead of DB estimates-Buy maintained(0639.HK,Buy,Target Price:HKD 3.10,Clos
46、ing Price:HKD 2.09,James Kan)Fushan has reported its 1H12 results.Its revenue at HK$3,339m implies a 14%YoYdecline and achieves 52%of 2012FY DBe and 49%of 2012FY Bloomberg consensus.Fushans GP achieves 58%of 2012FY DBe and OP achieves 59%of 2012FY DBe.ItsNPAT at HK$1,006m declines 11%YoY but achieve
47、s 55%of 2012FY DBe and 51%ofconsensus estimates respectively.Fushans NPAT is 7%ahead of DBe 1H12 estimate.(James Kan 852 2203 6146)http:/pull.db-Disappointing 1H12 results-Margin contraction across all segments(1893.HK,Buy,Target Price:HKD 3.15,Closing Price:HKD 1.95,Johnson Wan)Sinoma reported its
48、1H12 results at noon on Aug 28,with bottom line of RMB182m(EPS of RMB0.05/sh),down 76%YoY and top line of RMB23b,up 3%YoY.Theearnings were 21%below DB estimates(achieving 26%and 16%of FY12 DB and(Johnson Wan 852 2203 6163)http:/pull.db-ART RETAIL GROUP-1H12 NP beats while EBIT in line(6808.HK,Hold,T
49、argetPrice:HKD 9.95,Closing Price:HKD 9.50,Anne Ling)Sun Art announced 75%rise in net profit to RMB1.37bn on 14%rise in sales toRMB39bn for 1H12.Sales growth is below our expectation of 18%but NP growth washigher than our expectation of 63%to HK$1.28bn.Total margin improved to 21.3%from 20.8%in 1H12
50、,mainly from improvement on merchandise margin.Opex ratio was16%vs last years 15.7%on increase in depreciation(0.2ppt),staff cost ratio(0.6pt to6.6%)and rental cost ratio(0.1ppt to 2.2%)but was partially offset by decline in otherexpenses.EBIT growth was thus up 21%to RMB1.96bn with EBITM improved f
