Sectors:

Air, Automobiles (ZhangJing),

Environmental protection (Wang Yannan),

Healthcare & Consuming (Eurus Zhou)

Automobile & Air (ZhangJing)

This month I released updated reports of Shanghai International Airport(SIA) (600009 CH) and SAIC (600104 CH), which got success by their unique Competitive edge.

Benefiting from the expansion of commercial space and the increase of the proportion of passengers of international airways after the full commissioning of the Terminal Building T1 Reconstruction Project, the revenue from the non-aeronautical business of SIA soared to be more than that of aeronautical business in 2017at one go. The duty-free business contract of the Company will expire in March 2018, and it is expected that the new commission percentage in the new round of bidding will rise from 25% to about 45%, greatly enhancing the revenue of non-aeronautical business. Moreover, after the S1/S2 satellite hall is completed and put into operation in 2019, the total covered area of terminal building will rise by 69%, the passenger throughput will exceed 80 million, and the resulting expansion of commercial space and increase of the number of consumers will be solid support for the next round of result growth of the Company.

Environmental protection (Wang Yannan)

In this month I released 3 equity reports, including Mapleleaf Edu(1317.HK) ,Longma（603686.SH），MAN WAH（1999.HK）. There is still huge room for rise of the continuous increase of the number of enrolled students and tuition brought by educational consumption upgrading, providing the result growth with a strong driving force. Moreover, share allotment financing will accelerate the school expansion of the Company around the globe, resulting in share dilution. But the influence will be small. We expect the net profit of the Company in year 2018-2019 attributable to the parent company will be RMB515 million and RMB652 million, respectively, equivalent to EPS of RMB0.35/share, RMB0.44/share, respectively, and PE of 22/17times, respectively. Target price 11.3HKD and rating Accumulate is given.

Healthcare & Consuming (Eurus Zhou)

This month I released 3 equity reports, including Shanghai Pharma (2607.HK), Netdragon (777.HK) and CSPC (1093.HK). We tend to highly recommend CSPC (1093.HK) and Netdragon (777.HK). For CSPC, we highlight that it recorded notable revenue growth in 17Q3 (+24.9% YoY in RMB terms), and GPM increased by 8.3ppts (17Q3 58.46%, 16Q3 50.17%) due to rising share of innovative drugs which enjoyed higher profit margin. We are positive on bright outlook of innovative drug business. The management expect bottom line to maintain 20%-30% growth in 17E/18E. Besides, I initiate the report of Netdragon, the leading game developer, operator and publisher with education business to take off. We expect its game business to maintain stable growth, considering new mobile apps to be launched soon and continuously increasing ARPU. In terms of education segment, majority of education segment revenue is currently from international education business, of which consist of hardware sales while software do not create much cash until now. We predict that in short run, hardware distribution business will still serve as the cash cow; in long run, developed software products will cultivate a social e-commerce platform, after absorbing enough users and building high customer loyalty. We expect potential revenue of this platform to come from students, parents and resource suppliers and other users.

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