[Today’s Guide]
> Shanghai SASAC reform conference to convene Friday, SASAC-operated platform to establish.
> RMB exchange rate hits two-year low, textile and clothing export to benefit.
> Ministry of Agriculture to foster agricultural products processing leaders, price of potash fertilizer might surge continuously.
> Shuangcheng Phar. to fully control Ausia BioTech, Huatian Technology to develop integrated circuit
[XFA Focus]
○ Shanghai SASAC reform conference to convene Friday, SASAC-operated platform to establish
------
The 2015 Work Conference on State-owned Enterprises Reform of the State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government (Shanghai SASAC) is proposed to be convened this Friday (Feb. 6), which will further specify the reform work of the Shanghai SASAC. It will also announce the official establishment of the Shanghai SASAC operation platform and the list of groups and companies on the platform. It is also reported that Shanghai Huayi (Group) Company has prepared the framework for its overall listing plan and started to sort out its core assets. It is expected to be listed this year.
Comment: Xu Yibo, director of the Shanghai SASAC, indicated at the “two sessions” of Shanghai convened recently that it will inject the state-owned equities into the mobile platform for state-owned capitals in stages and promote the substantive operation of the mobile platform for state-owned capitals when appropriate. It is analyzed that competitive state-owned enterprises, including group companies with merchandise, food, chemical engineering and other industries as main businesses, will be given priorities for the operation on the platform. Currently, Shanghai Huayi and Bright Food (Group) Co., Ltd. have various unlisted assets. Listed companies under the two groups include Shanghai Chlor-Alkali Chemical Co., Ltd. (600618.SH), Shanghai 3F New Materials Company Limited (600636.SH), Shanghai Maling Aquarius Co., Ltd. (600073.SH) and Shanghai JinFeng Wine Company Limited (600616.SH).
[XFA Selection]
○ The proportion of ordinary fiscal transfer payment will be gradually improved to above 60 percent and special transfer payments in competitive areas will be cancelled gradually.
○ Various domestic airline companies will no longer charge the bunker adjustment factor (BAF) from Feb. 5, which is expected to attract more travellers.
○ The National Tourism Administration will assist transportation authorities in fully promoting traveling vehicles to install satellite-guided positioning equipment with driving recording functions and implementing network controlling.
○ The construction of the Yangtze River Golden Waterway will speed up. 10,000-ton vessels can arrive at Wuhan City from the Yangtze River estuary directly during the flooding period.
○ Eight securities companies, namely Gf Securities Co., Ltd. (000776.SZ), CITIC Securities Company Limited (06030.HK; 600030.SH), Haitong Securities Company Limited (06837.HK; 600837.HK), Guotai Junan Securities Co., Ltd., Huatai Securities Co., Ltd., Orient Securities Co., Ltd., China Merchants Securities Co., Ltd. (600999.HK) and Qilu Securities Co., Ltd., will become the first batch of market makers for the SSE 50 ETF options.
[Industry Information]
○ RMB exchange rate closes at two-year low, textile and clothing export to benefit
------
The spot exchange rate of U.S. dollars against RMB closed at 6.2597 on Feb. 2, hitting a new low on closing in more than two years and depreciating 3 percent from the corresponding period of last year. Institutional investors believe that the depreciation is mainly attributed to the domestic economic slowdown and the appreciation of U.S. dollars. However, to promote the internationalization of RMB, it is unlikely to depreciate significantly or for a long term.
Comment: The depreciation of RMB will benefit clothing and other foreign trade and export-oriented industries. When RMB depreciated 1 percent, the return on the sales of the textile and clothing industries will increase 2 to 6 percent. The proportion of overseas business of Lu Thai Textile Co., Ltd. (000726.SZ) and Sunvim Group Co., Ltd. (002083.SZ) is nearly 70 percent. The export proportion of Henan Rebecca Hair Products Co., Ltd. (600439.SH), a manufacturer of hair products, is above 80 percent.
○ Ministry of Agriculture to implement No. 1 Central Document and foster agricultural products processing leaders
------
The Ministry of Agriculture issued a notice on Feb. 2 and planned the key work in the agricultural products processing industry in 2015 to implement the No. 1 Central Document. It will actively promote the effective implementation of taxation and credit policies on the agricultural products processing and strengthen the preparation of new policies to make breakthroughs in the preliminary processing of agricultural products, the processing of staple food and the comprehensive utilization.
Comment: It is estimated that the proportion of deep processing of agricultural products in China is below 10 percent, lagging behind developed countries by 20 to 25 years. The development of the processing industry will reduce energy consumption, extend industrial chains and boost agricultural incomes. In terms of companies, Dalian Refrigeration Co., Ltd. (000530.SZ) actively develops the refrigeration equipment for agricultural products. Nanfang Black Sesame Group Co., Ltd. (000716.SZ) and Haixin Foods Co., Ltd. (002702.SZ) are leading enterprises in domestic paste products and fish products.
○ Price of potash fertilizer might surge continuously after Spring Festival
------
XFA learns that most of the muriate production devices of potash enterprises have stopped production. The market inventory is relatively low, and producers have strong will to lift the price around the Spring Festival. Moreover, the negotiation of big import contracts for the first half of 2015 has started. Foreign distributors insist on raising the contract price by 10 percent, which will also boost the market. Institutions predict that the potash fertilizer market has ushered in periodical opportunity and the prosperity tendency is almost for certain.
As for companies, Qinghai Salt Lake Industry Co., Ltd. (000792.SZ) was bought by institutions after announcing unexpected annual performance forecast and its stock price continued to surge recently; SDIC Xinjiang Lop Nor Sylvine Limited Liability Company, whose shares were acquired by Xinjiang Guannong Fruit & Antler Group Co., Ltd. (600251.SH), will see 300,000 tons capacity to be newly put into operation.
[Announcement Interpretation]
○ Shuangcheng Phar. to fully control freeze-dried injection processing enterprise
------
Hainan Shuangcheng Pharmaceuticals Co., Ltd. (002693.SZ) plans to purchase 100 percent equities of Hangzhou Aopeng Investment Management Co., Ltd. and 46 percent equities of Ausia BioTech Company with a total of 1,467 million yuan. Hangzhou Aopeng holds 54 percent equities of Ausia BioTech. Therefore, the company will fully control Ausia BioTech after the transaction. At the meantime, the company plans to issue 74.32 million shares at no less than 12.11 yuan per share to raise a total of 900 million yuan through private placement, among which, 300 million yuan will be used to pay part of the fees needed to purchase 46 percent equities of Ausia BioTech and the rest 600 million yuan will be used to pay part of the fees needed to purchase 100 equities of Hangzhou Aopeng.
Comment: After the issuance, it newly adds freeze-dried injection processing CMO business. Ausia BioTech is the largest freeze-dried injection processing outsourcing enterprise nationally. The counterparty promised that its net profit from 2015 to 2017 will be no less than 110 million yuan, 120 million yuan and 130 million yuan, respectively. The net profit of Hangzhou Aopeng in 2014 was 100 million yuan.
○ Huatian Technology to develop integrated circuit package with RMB2 bln
------
Tianshui Huatian Technology Co., Ltd. (002185.SZ) plans to issue 172 million shares at no less than 11.65 yuan per share through private placement to raise 2 billion yuan. For the raised money, 580 million yuan will be invested in the high density package of integrated circuit, 610 million yuan will be invested in smart mobile terminal package industrialization, 510 million yuan will be invested in the development and industrialization of wafer level package and the rest 300 million yuan will be used to supplement working capital. After reaching the designed capacity, the total after-tax net profit of above three projects will reach 197 million yuan. The net profit of Huatian Technology in 2013 was 199 million yuan.
○ Xiamen Xinde to purchase Anni Digital Technology to develop Internet of Things
------
Xiamen Xinde Co., Ltd. (000701.SZ) acquires 51 percent equities of Shenzhen Anni Digital Technology Co., Ltd. with 92.11 million yuan. Anni Digital Technology is a unified video solution provider of high-end monitoring products and platform software. The cloud service mode of its E-video platform has gradually formed the application of the Internet of Things and video big data. The operation revenue and net profit of Anni Digital Technology in 2014 recorded 230 million yuan and 14.11 million yuan, respectively. Its original shareholder promised that its net profit from 2015 to 2017 will be no less than 30 million yuan, 40 million yuan and 50 million yuan respectively. Xiamen Xinde, principally engaged in commerce, continuously invests in the direction of Internet of Things and LED in recent years to explore new profit growth points.
○ Tonghua Grape Wine to control liquor e-commerce company Jiurunyuan
------
Tonghua Grape Wine Co., Ltd. (600365.SH) plans to purchase 51 percent equities of Beijing Jiurunyuan E-commerce Co., Ltd. by capital increase and equity transfer. The transaction is priced at 66.69 million yuan and leads to major asset purchase. The subject company is a professional Internet e-commerce company that mainly sells wine. The company has obtained the authorization of Internet distributor qualification of multi wineries like Sitir Liquor Co., Ltd., Jiangsu Yanghe Brewery Joint-Stock Co., Ltd. (002304.SZ), Kweichow Moutai (Group) Xijiu Co., Ltd., etc. and its clients are mainly JD.com, Inc. (NASDAQ:JD), Tmall Supermarket, Yhd.com, etc. For the first 11 months in 2014, the operation revenue and net profit of the company is 153 million yuan and 11.85 million yuan, respectively.
○ Stanley Fertilizer to establish agricultural service company with RMB500 mln
------
Stanley Fertilizer Co., Ltd. (002588.SZ) plans to establish Stanley Agricultural Service Co., Ltd with 500 million yuan to provide farmer households, cooperatives, etc. with comprehensive agricultural solutions including services like seeds, chemical fertilizer, agricultural technology, agricultural machinery, etc. so as to promote the company to transform from a fertilizer producer to an agricultural service provider.
Comment: The No. 1 Central Document focuses on the construction of agricultural modernization. The agricultural service company founded by the company not only accords with policy requirement and meets market demand, but also coordinates its main business to expand sales.
[Trading Trends]
○ Two decoration-related stocks bought through institutional seats
------
The trading volume ranking list on Feb. 2 shows that Shenzhen Bauing Construction Holding Group Co., Ltd. (002047.SZ) was bought through four institutional seats with a total of 63.80 million yuan; Dong Yi Ri Sheng Home Decoration Group Co., Ltd. (002713.SZ) was bought through four institutional seats with a total of 43.45 million yuan and also sold by one institutional seat with a total of 2.26 million yuan.
Comment: Institutions believe that home decoration industry has natural advantage on consumption loan and is expected to become the entrance of financial products. With 18 years’ experience in mid-and high-end home decoration as well as around 10,000 clients group with continuous renewal, Dong Yi Ri Sheng Home Decoration Group is expected to see large progress in standardization and Internet marketing in 2015; Bauing Construction Holding Group acquires shares of www.525j.com, an advanced O2O e-commerce platform in home decoration, building material and home furnishing area.
> Shanghai SASAC reform conference to convene Friday, SASAC-operated platform to establish.
> RMB exchange rate hits two-year low, textile and clothing export to benefit.
> Ministry of Agriculture to foster agricultural products processing leaders, price of potash fertilizer might surge continuously.
> Shuangcheng Phar. to fully control Ausia BioTech, Huatian Technology to develop integrated circuit
[XFA Focus]
○ Shanghai SASAC reform conference to convene Friday, SASAC-operated platform to establish
------
The 2015 Work Conference on State-owned Enterprises Reform of the State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government (Shanghai SASAC) is proposed to be convened this Friday (Feb. 6), which will further specify the reform work of the Shanghai SASAC. It will also announce the official establishment of the Shanghai SASAC operation platform and the list of groups and companies on the platform. It is also reported that Shanghai Huayi (Group) Company has prepared the framework for its overall listing plan and started to sort out its core assets. It is expected to be listed this year.
Comment: Xu Yibo, director of the Shanghai SASAC, indicated at the “two sessions” of Shanghai convened recently that it will inject the state-owned equities into the mobile platform for state-owned capitals in stages and promote the substantive operation of the mobile platform for state-owned capitals when appropriate. It is analyzed that competitive state-owned enterprises, including group companies with merchandise, food, chemical engineering and other industries as main businesses, will be given priorities for the operation on the platform. Currently, Shanghai Huayi and Bright Food (Group) Co., Ltd. have various unlisted assets. Listed companies under the two groups include Shanghai Chlor-Alkali Chemical Co., Ltd. (600618.SH), Shanghai 3F New Materials Company Limited (600636.SH), Shanghai Maling Aquarius Co., Ltd. (600073.SH) and Shanghai JinFeng Wine Company Limited (600616.SH).
[XFA Selection]
○ The proportion of ordinary fiscal transfer payment will be gradually improved to above 60 percent and special transfer payments in competitive areas will be cancelled gradually.
○ Various domestic airline companies will no longer charge the bunker adjustment factor (BAF) from Feb. 5, which is expected to attract more travellers.
○ The National Tourism Administration will assist transportation authorities in fully promoting traveling vehicles to install satellite-guided positioning equipment with driving recording functions and implementing network controlling.
○ The construction of the Yangtze River Golden Waterway will speed up. 10,000-ton vessels can arrive at Wuhan City from the Yangtze River estuary directly during the flooding period.
○ Eight securities companies, namely Gf Securities Co., Ltd. (000776.SZ), CITIC Securities Company Limited (06030.HK; 600030.SH), Haitong Securities Company Limited (06837.HK; 600837.HK), Guotai Junan Securities Co., Ltd., Huatai Securities Co., Ltd., Orient Securities Co., Ltd., China Merchants Securities Co., Ltd. (600999.HK) and Qilu Securities Co., Ltd., will become the first batch of market makers for the SSE 50 ETF options.
[Industry Information]
○ RMB exchange rate closes at two-year low, textile and clothing export to benefit
------
The spot exchange rate of U.S. dollars against RMB closed at 6.2597 on Feb. 2, hitting a new low on closing in more than two years and depreciating 3 percent from the corresponding period of last year. Institutional investors believe that the depreciation is mainly attributed to the domestic economic slowdown and the appreciation of U.S. dollars. However, to promote the internationalization of RMB, it is unlikely to depreciate significantly or for a long term.
Comment: The depreciation of RMB will benefit clothing and other foreign trade and export-oriented industries. When RMB depreciated 1 percent, the return on the sales of the textile and clothing industries will increase 2 to 6 percent. The proportion of overseas business of Lu Thai Textile Co., Ltd. (000726.SZ) and Sunvim Group Co., Ltd. (002083.SZ) is nearly 70 percent. The export proportion of Henan Rebecca Hair Products Co., Ltd. (600439.SH), a manufacturer of hair products, is above 80 percent.
○ Ministry of Agriculture to implement No. 1 Central Document and foster agricultural products processing leaders
------
The Ministry of Agriculture issued a notice on Feb. 2 and planned the key work in the agricultural products processing industry in 2015 to implement the No. 1 Central Document. It will actively promote the effective implementation of taxation and credit policies on the agricultural products processing and strengthen the preparation of new policies to make breakthroughs in the preliminary processing of agricultural products, the processing of staple food and the comprehensive utilization.
Comment: It is estimated that the proportion of deep processing of agricultural products in China is below 10 percent, lagging behind developed countries by 20 to 25 years. The development of the processing industry will reduce energy consumption, extend industrial chains and boost agricultural incomes. In terms of companies, Dalian Refrigeration Co., Ltd. (000530.SZ) actively develops the refrigeration equipment for agricultural products. Nanfang Black Sesame Group Co., Ltd. (000716.SZ) and Haixin Foods Co., Ltd. (002702.SZ) are leading enterprises in domestic paste products and fish products.
○ Price of potash fertilizer might surge continuously after Spring Festival
------
XFA learns that most of the muriate production devices of potash enterprises have stopped production. The market inventory is relatively low, and producers have strong will to lift the price around the Spring Festival. Moreover, the negotiation of big import contracts for the first half of 2015 has started. Foreign distributors insist on raising the contract price by 10 percent, which will also boost the market. Institutions predict that the potash fertilizer market has ushered in periodical opportunity and the prosperity tendency is almost for certain.
As for companies, Qinghai Salt Lake Industry Co., Ltd. (000792.SZ) was bought by institutions after announcing unexpected annual performance forecast and its stock price continued to surge recently; SDIC Xinjiang Lop Nor Sylvine Limited Liability Company, whose shares were acquired by Xinjiang Guannong Fruit & Antler Group Co., Ltd. (600251.SH), will see 300,000 tons capacity to be newly put into operation.
[Announcement Interpretation]
○ Shuangcheng Phar. to fully control freeze-dried injection processing enterprise
------
Hainan Shuangcheng Pharmaceuticals Co., Ltd. (002693.SZ) plans to purchase 100 percent equities of Hangzhou Aopeng Investment Management Co., Ltd. and 46 percent equities of Ausia BioTech Company with a total of 1,467 million yuan. Hangzhou Aopeng holds 54 percent equities of Ausia BioTech. Therefore, the company will fully control Ausia BioTech after the transaction. At the meantime, the company plans to issue 74.32 million shares at no less than 12.11 yuan per share to raise a total of 900 million yuan through private placement, among which, 300 million yuan will be used to pay part of the fees needed to purchase 46 percent equities of Ausia BioTech and the rest 600 million yuan will be used to pay part of the fees needed to purchase 100 equities of Hangzhou Aopeng.
Comment: After the issuance, it newly adds freeze-dried injection processing CMO business. Ausia BioTech is the largest freeze-dried injection processing outsourcing enterprise nationally. The counterparty promised that its net profit from 2015 to 2017 will be no less than 110 million yuan, 120 million yuan and 130 million yuan, respectively. The net profit of Hangzhou Aopeng in 2014 was 100 million yuan.
○ Huatian Technology to develop integrated circuit package with RMB2 bln
------
Tianshui Huatian Technology Co., Ltd. (002185.SZ) plans to issue 172 million shares at no less than 11.65 yuan per share through private placement to raise 2 billion yuan. For the raised money, 580 million yuan will be invested in the high density package of integrated circuit, 610 million yuan will be invested in smart mobile terminal package industrialization, 510 million yuan will be invested in the development and industrialization of wafer level package and the rest 300 million yuan will be used to supplement working capital. After reaching the designed capacity, the total after-tax net profit of above three projects will reach 197 million yuan. The net profit of Huatian Technology in 2013 was 199 million yuan.
○ Xiamen Xinde to purchase Anni Digital Technology to develop Internet of Things
------
Xiamen Xinde Co., Ltd. (000701.SZ) acquires 51 percent equities of Shenzhen Anni Digital Technology Co., Ltd. with 92.11 million yuan. Anni Digital Technology is a unified video solution provider of high-end monitoring products and platform software. The cloud service mode of its E-video platform has gradually formed the application of the Internet of Things and video big data. The operation revenue and net profit of Anni Digital Technology in 2014 recorded 230 million yuan and 14.11 million yuan, respectively. Its original shareholder promised that its net profit from 2015 to 2017 will be no less than 30 million yuan, 40 million yuan and 50 million yuan respectively. Xiamen Xinde, principally engaged in commerce, continuously invests in the direction of Internet of Things and LED in recent years to explore new profit growth points.
○ Tonghua Grape Wine to control liquor e-commerce company Jiurunyuan
------
Tonghua Grape Wine Co., Ltd. (600365.SH) plans to purchase 51 percent equities of Beijing Jiurunyuan E-commerce Co., Ltd. by capital increase and equity transfer. The transaction is priced at 66.69 million yuan and leads to major asset purchase. The subject company is a professional Internet e-commerce company that mainly sells wine. The company has obtained the authorization of Internet distributor qualification of multi wineries like Sitir Liquor Co., Ltd., Jiangsu Yanghe Brewery Joint-Stock Co., Ltd. (002304.SZ), Kweichow Moutai (Group) Xijiu Co., Ltd., etc. and its clients are mainly JD.com, Inc. (NASDAQ:JD), Tmall Supermarket, Yhd.com, etc. For the first 11 months in 2014, the operation revenue and net profit of the company is 153 million yuan and 11.85 million yuan, respectively.
○ Stanley Fertilizer to establish agricultural service company with RMB500 mln
------
Stanley Fertilizer Co., Ltd. (002588.SZ) plans to establish Stanley Agricultural Service Co., Ltd with 500 million yuan to provide farmer households, cooperatives, etc. with comprehensive agricultural solutions including services like seeds, chemical fertilizer, agricultural technology, agricultural machinery, etc. so as to promote the company to transform from a fertilizer producer to an agricultural service provider.
Comment: The No. 1 Central Document focuses on the construction of agricultural modernization. The agricultural service company founded by the company not only accords with policy requirement and meets market demand, but also coordinates its main business to expand sales.
[Trading Trends]
○ Two decoration-related stocks bought through institutional seats
------
The trading volume ranking list on Feb. 2 shows that Shenzhen Bauing Construction Holding Group Co., Ltd. (002047.SZ) was bought through four institutional seats with a total of 63.80 million yuan; Dong Yi Ri Sheng Home Decoration Group Co., Ltd. (002713.SZ) was bought through four institutional seats with a total of 43.45 million yuan and also sold by one institutional seat with a total of 2.26 million yuan.
Comment: Institutions believe that home decoration industry has natural advantage on consumption loan and is expected to become the entrance of financial products. With 18 years’ experience in mid-and high-end home decoration as well as around 10,000 clients group with continuous renewal, Dong Yi Ri Sheng Home Decoration Group is expected to see large progress in standardization and Internet marketing in 2015; Bauing Construction Holding Group acquires shares of www.525j.com, an advanced O2O e-commerce platform in home decoration, building material and home furnishing area.
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