ChinaOutlook Higher Ground.doc

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1、China 2011 Outlook Higher GroundStrategyStrategy ChinaNOMURA INTERNATIONAL (HK) LIMITEDChina 2011 OutlookHigher GroundHenry Wu, CFA+852 2252 2122henry.wunomura January 2011Any authors named on this report are research analysts unless otherwise indicated. See the important disclosures and analyst cer

2、tifications on pages 35 to 39.Strategy ChinaPositive outlook on China 2011Forecast both MSCEI China and HSCEI to offer >20% upside in 2011Implied PE (x)Historical average PE (x)Historical range (past 5 yrs)% diff. vs targetTargetCurrent index levelUpside potential20112012TrailingForwardHighLowHig

3、hLowMSCI China 8 3 6 725% 14.4 12.1 1 4.6 12.6 104.18 2 7.23-20%205%HSCEI 1 6,000 1 2,69226% 13.6 11.4 1 3.5 11.7 20,400 4 ,990-22%221%Note: Pricing as of 31 December 2010, historical average is for the period from January 2002 2010Source: Bloomberg, Nomura researchNomura China coverage 13x earnings

4、, 21% EPS growth and 20% ROE for 2011F MkPerformanceEPS growth %ROEPE (x)PB (x)t capUSD bn1M3MYTD20092010E2011E2012E20092010E2011E2012E20092010E2011E2012E20092010E2011E2012EGaming, Hotels & Leisure 4 6.44%28%110%13%389%18%31%29%38%33%29% 5 9.9 23.9 20.5 15.6 9 .9 9.3 6.1 4.6Health Care & Pha

5、rmaceuticals 1 0.0-6%-10%98%59%33%25%24%20%20%20%22% 3 8.2 27.5 21.7 17.2 5 .6 4.5 4.0 3.5Media & Internet 1 08.9-2%-1%43%21%48%42%29%41%42%39%34% 7 4.9 39.5 26.2 19.9 25.2 14.9 9 .1 6.1Transport/Logistics 8 9.0-1%6%29%-53%9364%11%-13%5%22%16%14% 2 6.5 15.3 13.6 9 .7 4.1 2.0 1.7 1.2Industrials 1

6、 51.0-3%4%23%68%26%19%16%16%22%23%22% 2 3.2 17.0 12.3 10.1 3 .1 3.1 2.5 2.0Oil & Gas/Chemicals 456.36%15%20%-9%40%20%16%14%19%19%20% 1 7.4 12.3 10.1 8 .7 2.5 2.1 1.9 1.6Consumer Related 1 26.6-4%-7%15%128%29%29%28%22%24%24%25% 3 5.7 30.2 23.4 18.6 7 .1 5.9 4.9 4.1Telecoms 2 92.41%-3%9%4%3%8%7%19

7、%17%17%16% 1 5.7 16.6 14.0 11.9 2 .3 2.1 1.9 1.7Solar 1 3.77%-3%2%-99%11600%15%11%-1%9%10%9% 4 .2 9.6 8.5 11.2 0 .8 1.9 1.5 1.3Conglomerates 1 .42%-2%0%380%-71%86%123%22%4%6%12% 8 .7 28.5 16.0 7 .1 0.7 0.7 0.7 0.7Financials 1 ,182.8-3%2%-2%37%13%23%27%20%20%20%22% 1 6.7 13.5 10.8 8 .4 2.9 2.4 1.9 1.

8、6Basic Materials 1 41.41%0%-10%18%16%14%7%15%18%18%16% 2 5.1 15.0 12.5 10.9 2 .7 2.4 2.0 1.7Property 6 0.31%-2%-11%64%61%33%20%12%15%17%17% 1 8.1 17.8 13.2 11.2 1 .8 2.2 1.5 1.4Power & Utilities 6 3.9-1%-8%-12%56%16%15%13%12%12%12%12% 2 4.8 17.1 14.3 13.0 2 .4 1.8 1.5 1.4Technology 2 1.2-8%-20%-

9、28%120%20%18%15%13%17%19%18% 1 4.0 27.2 17.9 14.9 4 .2 3.7 3.1 2.5China - Total 2,765.30%3%9%16%24%21%19%18%20%20%21% 2 1.9 16.3 12.8 10.4 4 .0 3.1 2.4 2.0Note: Pricing as of 31 December 2010Source: Bloomberg, Nomura research2?Nomura International (Hong Kong) LimitedStrategy ChinaSector allocationsO

10、verweight on Consumer, Financial, Property, Media & Internet, Oil & Gas sectorsSector weightingNomura commentPotential catalystsInvestment risksConsumerOverweightFavour F&B and department storesUpstream price weakness due to price controlsInflationFinancialOverweightFavour banks and life

11、 insuranceInterest rate hikeMacro tighteningMedia & internetOverweightPositive on on-line gamingNew game launchDelay of new game launchOil & OverweightPositive on oil and petrochemicalRising oil prices, oil pricing mechanism changes, and Government regulatory risks and resource Gas/Chemicals

12、natural gas price hikestaxPropertyOverweightPositive on property developers with sound balance sheet and Transaction volume pickupUnfavourable polices include a property niche exposuresgain tax, LAT, and price wars in the sectorGaming, Hotels & NeutraFavourable supply demand dynamics, strong ear

13、ning visibility and More land approved on Cotai; foreign labour issue Commission war in junket operation; policy lcertainty. Supply capped at 13% for the next three years (7% for 2011); demand to be driven by high margin mass market business which was banking on structural change from Leisureinfrast

14、ructure upgrades (18% for 2011)resolved; strong gaming numbersrisk: visa restrictionHealthcareNeutraVolume will drive sector earnings growthGrowing income to drive healthcare consumptionProduct price cut; regulatory riskslIndustrialNeutraFavour railway equipment/infrastructure, cautious on autoGrowi

15、ng investment in railway infrastructure and Railway infrastructure investment is lsensitive to government policy changes, equipmentauto sales growth slowdownPower & utilitiesNeutraPositive on water and gas, Neutral on power12th FYP implementation; natural gas supply Interest rate hikelshortageTe

16、lecomNeutraPositive on China Unicom, and telecom equipmentMobile data usage, revenue and 3G take-up may Irrational tariff competition and change in lsurprise on upside, network convergenceregulatory environment.TransportationNeutraPositive on Jiangsu Expressway and Cosco PacificRmb appreciation, tar

17、iff hikeRailway competitionlBasic materialsUnderweightFavour coal and cement; negative on steel Fixed asset investment growthPrice controls, property sector slowdownSolarUnderweightIndustry oversupply in 2011F will favour companies with better Continued policy support and faster-than-expected Weaker

18、 demand from new centres, further utility adoption of solar are potential key catalysts for cost control. Pure-play makers unable to increase integration are demand, which could soak up the excess supply, subsidy cuts, faster than expected ASP although we caution competition could change with likely

19、 to underperform. Prefer Trina, Yingli and Suntechnew stronger playersdeclineSource: Nomura research3?Nomura International (Hong Kong) LimitedStrategy ChinaTop picksStocks to watch: valuation snapshotEPS - NomuraEPS Growth (%)EPS - ConsensusPE (x) - NomuraRoE - Nomura (%)Net debt/equity - Nomura (%)

20、Ticker20092010E2011E20092010E2011E2010E2011E20092010E2011E20092010E2011E20092010E2011EAgile Properties3383 HK 0 .48 1.01 1.27 ( 67.2) 110.4 2 5.7 0 .79 0.97 20.0 9 .5 7.6 13.8 36.0 20.9 4 2.3 53.0 56.1Agricultural Bank of China1288 HK 0 .25 0.32 0.38n.a. 2 8.0 18.8 0 .30 0.37 14.2 10.9 8 .5 20.5 21.

21、1 21.3n.a.n.a.n.a.China Everbright International257 HK 0 .11 0.16 0.21 1 .9 45.5 31.3 0 .15 0.20 40.7 26.8 20.8 10.1 12.3 14.2 2 3.6 41.0 60.8China Life Insurance2628 HK 1 .16 1.23 1.38 5 4.7 6 .0 12.2 1 .21 1.45 25.2 23.3 20.0 17.1 16.3 17.0n.a.n.a.n.a.China Mengniu Dairy2319 HK 0 .68 0.70 1.03 (21

22、6.4) 2 .9 47.1 0 .76 0.97 28.5 27.2 17.7 17.1 13.5 17.5net cashnet cashnet cashChina Railway Construction Corp1186 HK 0 .53 0.37 0.82 6 8.1 (30.2) 121.6 0 .51 0.78 14.4 20.9 9 .4 13.1 8 .3 1 6.8net cashnet cashnet cashGome Electrical Appliances493 HK 0 .09 0.13 0.16 2 3.5 44.4 23.1 0 .12 0.14 29.4 1

23、9.5 15.8 13.8 16.2 16.3net cashnet cashnet cashPerfect World *PWRD US 3 .06 2.81 3.58 7 1.3 (8.2) 27.4 2 .71 3.05 7.7 8.4 6.6 52.3 32.8 29.1net cashnet cashnet cashSinopec386 HK 0 .71 0.87 1.00 1 15.5 2 2.5 14.9 0 .80 0.86 9.0 7.3 6.4 17.6 18.6 18.6 5 5.8 49.0 42.5ZTE Corp763 HK 0 .89 1.01 1.29 4 1.

24、1 13.5 27.7 1 .08 1.32 27.9 23.3 17.3 15.8 16.1 18.0net cashnet cashnet cashNote: Pricing as of 31 December 2010 Source: Bloomberg, Nomura researchStock performanceMarket capNomuraConsensusNomuraShare performance (%)2-yearTickerPriceUS$bnRatingBuysHoldsSellsBuy %TPUpside to TP1M3MYTDbetaAgile Proper

25、ties3383 HK 1 1.4 5 .1Buy 2 1 5 1 77.8 1 5.736.9% 6 .9 19.9 (4.4) 1 .8Agricultural Bank of China1288 HK 3 .9 163.0Buy 1 3 1 8 - 41.9 4 .720.5% (1.0) 15.1n.a.n.a.China Everbright International257 HK 4 .1 1.9Buy 1 2 1 - 92.3 6 .149.5% 5.6 24.0 8 .5 0.8China Life Insurance2628 HK 3 1.8 115.5Buy 1 5 2 0

26、 2 40.5 4 0.026.0% (1.8) 12.3 (13.0) 0 .9China Mengniu Dairy2319 HK 2 0.6 4 .6Buy 2 3 5 2 76.7 3 2.055.3% (0.2) 3 .0 (20.2) 0 .8China Railway Construction Corp1186 HK 9 .4 12.6Buy 1 2 8 3 52.2 1 1.826.1% (4.9) (7.1) (7.3) 0 .6Gome Electrical Appliances493 HK 2 .8 5.4Buy 1 3 3 1 76.5 4 .353.6% 17.2 2

27、9.7 8 .5 0.6Perfect World *PWRD US 2 3.7 1 .2Buy 1 3 6 3 59.1 3 7.056.4% (24.1) ( 5.2) (39.9)n.a.Sinopec386 HK 7 .4 83.0Buy 2 1 8 1 70.0 9 .629.0% (1.1) 17.4 4 .6 0.9ZTE Corp763 HK 3 0.9 11.4Buy 1 9 9 2 63.3 3 6.016.5% (0.9) (1.2) (10.8) 0 .8Note: Pricing as of 31 December 2010; Ratings and Price Ta

28、rgets are as of the date of the most recently published report(/.Nomura4) rather than the date of this documentSource: Bloomberg, Nomura research4?Nomura International (Hong Kong) LimitedStrategy ChinaFinancial and property sectorsJanuary return of MSCI China and HSCEI indexMSCI financial relative p

29、erformance against indexMSCI China price (RHS)MSCI China Financial index relative to index performanceHSCEI IndexMSCI China Index15%3%740%705%-3%66-5%-6%62-15%-9%58-25%-12%54-15%50-35%Source: Bloomberg, Nomura researchSource: Bloomberg, Nomura researchProperty price vs food CPI and SHSZ300 indexProp

30、erty volume vs food CPIPY=100Transactions Volume in 11 cities (LHS)China Food CPI (RHS) Property Price Index: 70 City: BldgTurnaround of property price 200%25%1256000China Food CPIhappened same time to CPI SHSZ300 Index (RHS)150%20%surge and market rally1205000100%15%115400050%10%11030000%5%1052000-

31、50%0%1001000-100%-5%950Source: WIND, CEIC, Bloomberg, Nomura researchSource: WIND, CEIC, Bloomberg, Nomura research7?Nomura International (Hong Kong) LimitedOct-05Jan-94Feb-06Jan-95Jun-06Jan-96Oct-06Jan-97Feb-07Jan-98Jun-07Jan-99Oct-07Jan-00Feb-08Jan-01Jun-08Jan-02Jan-03Oct-08Jan-04Feb-09Jan-05Jun-0

32、9Jan-06Oct-09Jan-07Feb-10Jan-08Jun-10Jan-09Oct-10Jan-10Jul-09Jan-08Aug-09Mar-08Sep-09May-08Oct-09Jul-08Nov-09Sep-08Dec-09Nov-08Jan-10Jan-09Feb-10Mar-09Mar-10May-09Apr-10Jul-09May-10Sep-09Jun-10Nov-09Jul-10Jan-10Aug-10Mar-10Sep-10May-10Oct-10Jul-10Nov-10Sep-10Strategy ChinaSector outlook 2011F earnin

33、gs growth drivers SECTOR Sub-sector Volume Price Upside risks Downside risks Basic Materials Cement 1,940mnt Up 0-3% y-y 1. Rapid FAI growth; 2. Favourable government 1. Rapid increase in local cement capacities leading policies (such as building materials subsidies etc.); to oversupply; 2. Slowing

34、FAI growth; 3. Property 3. Big drop in raw material costs development slowing down (+11% y-y) Basic Materials Steel 685mnt (+6% y-y) RMB5306/t 1. Big drop in raw material costs; 2. Favourable 1. Deteriorating supply-demand balance; 2. Big government policies; 3. Stronger ASP hikes in raw material co

35、sts; 3 Property development slowing down (up 3-5%) Basic Materials Coal We estimate volume will We estimate coal ASP will Higher-than-expected contract price and spot price 1) Higher-than-expected cost hikes, mainly driven rise by 3%; around 40% increase by 6% in 2011 for coal, driven by: 1) stronge

36、r-than-expected coal-by policy-related cost increase; 2) Weaker than of EPS growth driven by fired power generation; 2) tightened transportation expected coal demand growth due to lower GDP volume caused by bad weather; and 3) higher-than-growth or power / steel industry production growth; expected

37、global coal prices and 3) Higher coal imports boosted by a strengthening RMB Consumer Related Department store 16%, including new GFA Average SSS in mid-teens Better-than-expected SSS on healthy underlying Higher-than-expected operating expense, more growth and acquisition consumption, margin expans

38、ion, store acquisition intensive competition Consumer Related F & B Average volume growth ASP growth of 4% y-y Product price hikes, EPS upgrades by the Street, Larger-than-expected cost hikes, fierce competition, of 22% y-y M&A, positive updates on the macro side (ie, food safety issues mini

39、mum wage increase and urbanisation) Consumer Related Foot & Sportswear 11%, including Lining: 8%, including footwear Better-than-expected SSS, margin expansion Greater-than-expected slowdown in order book (for +760 stores pa; Belle: SSS in high teens; sportswear), margin compression on extensive

40、 +1,200 stores pa; Ports: sportswear SSS in mid-promotion activities and rising labour costs +30 stores pa high single digits Consumer Related Supermarket 10%, including Wumart: Low-single digit SSS, in Better-than-expected SSS on CPI inflation, margin Rising competition and margin compression +65 s

41、tores pa; Lianhua: line with the CPI expansion +165 stores pa Consumer Related Consumer Ctrip: volume +30% y-y; Ctrip ASP flat; EDU ASP EDU: faster-than-expected enrollment growth; Ctrip: EDU: margin compression, rising competition; Ctrip: services & EDU: enrolment +20% +single digit higher-than

42、-expected volume growth in air tickets commission rate decline, slowdown in volume distribution y-y; Gome: weighted % y-y and hotel rooms; Gome: better-than-expected SSS growth, rising competition; Gome: lower-than-sales area +12.5% y-y and margin expansion expected SSS and margin compression Financ

43、ials Banking Forecast RMB8trn new Four symmetric times - Smaller-than-expected equity amount raised - A more severe-than-expected macro tightening loan interest rate hike with total could result in a sharp rise in bad debt 100bps - Strong NIM rebound amid an interest rte hiking - A slowing economy would have negative cycle implications for loan