Investor Notes - Phillip Securities (HK) Ltd

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3 May, 2018 (Thursday)

YUHUA EDU(6169)
Analysis：
China Yuhua Education Corporation (6169) operates private schools in Henan province. The Group`s K-12 schools provide education from kindergarten to high school. As at 28 February 2018, the Group had 26 schools located in Henan province and one school located in Hunan province. For the six months ended 28 February 2018, the Group recorded an adjusted revenue of RMB528 million and an adjusted net profit of RMB248 million, representing an increase of 25.3% and 33.8% respectively from the corresponding period in 2017. The Group will continue to explore potential acquisition targets or cooperation opportunities in China to supplement its school network. (I do not hold the above stock)
Strategy：
Buy-in Price: $4.25, Target Price: $4.65, Cut Loss Price: $4.05

WEICHAI POWER(2338)
Analysis：
Weichai 2018Q1 net profit attributable to the parent company is RMB 1.92 billion, an increase of 63% yoy. Revenue stood 39.2 billion RMB, up 12% yoy. Benefit to the enlarge of market shares and utilization rate, Weichai’s gross profit margin increased by 2.5ppts to 23.1%. We expected the momentum of growth continued under the recovery of infrastructure market and engineering machinery extension.
Strategy：
Buy-in Price: $8.98, Target Price: $10.88, Cut Loss Price: $8.00

Report Review of April 2018

Sectors:

Air, Automobiles (Zhang Jing)

Environmental protection (Wang Yannan)

Healthcare, Consuming (Eurus Zhou)

Automobile & Air (Zhang Jing)

This month I released updated reports of Air China (AC) (753HK) and Yutong (600066CH), which got success by their unique Competitive edge. The Chinese government is studying and formulating a new civil aviation pricing policy. First-tier cities will soon implement marketized fares for air routes and most large-scale air routes, which will be conducive to the restoration of the industry economy. Air China is expected to benefit deeply. According to the latest result, we revised our estimate 2018/2019 net profit of AC to be 10.17/13.865 billion RMB. “Accumulate” rating is given. Among the headwind, Yutong enlarged its market share and the bad debts will be partially reversed, which is helpful to the bottom-up of the FY2018 result. We forecast that the company's EPS in 2018/2019 will be RMB1.72 and RMB1.9. We give “Accumulate” rating.

Environmental protection (Wang Yannan )

In this month I released 3equity reports, including Dongjiang (002672SZ),Tus-sound (000826SZ), Luenmei (600167SH). The development prospect of sanitation business of the Tus-sound company and cooperative development under the industry chain are optimistic. The company is now equipped with abundant funds and strengthened operation duration ability after the completion of directional private placement. We estimate, from 2018 to 2019, the net profit of the company will reach RMB1586/1980mn, respectively, EPS of 1.55/1.94, equivalent to a PE of 18.9/15.1. We give a target price of RMB37.2 and the Buy rating.

Healthcare & Consuming (Eurus Zhou)

This month I released 3 equity reports, including CMS (867HK), Yunnan Baiyao (000538SZ) and Jumpcan (600566SH). We tend to highly recommend CMS (867HK) and Jumpcan (600566SH). For CMS, we highlight that CMS reported strong 2017 results with decreasing expense ratios. Going forward, we highlight that current core products will grow stably in addition that expected progresses in pipeline may become possible explosive catalyst for stock price. For Jumpcan, we highlight that FY17 & 18Q1growth is very strong, PAOL and SGYX pill entered into Shandong PDRL in Mar. And sales network is intensified and R&D is going well. Meanwhile, the company issued convertible bonds to fund capacity expansion, which is believed to pave way for future growth.

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