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Early Bird 22-October-2015

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2015-10-22 13:35

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[Today's Guide]

○"Healthy China" to covered in central document, Internet-based medical service to embrace sound development
○VSF price hike beats expectation, improved supply and demand to boost performance
○Hualong Company to boost nuclear power export, Oil and gas reform plan to unveil within the year
○Qian Hai Life Insurance increases shareholding in Nanning Department Store again, major assets restructuring of 6 companies approved

[SSN Focus]

○"Healthy China" to covered in central document, Internet-based medical service to embrace sound development
The Fifth Plenary Session of the 18th Central Committee of the CPC will be convened next week, indicating that the "thirteenth five-year" plan is coming soon. SSN learns through authoritative channel that "heathy China" might be included in relevant document. The National Health and Family Planning Commission (NHFPC) fully kicked off the formulation of the Planning for the Construction of Healthy China (2016-2020) more than one month ago. Li Bin, director of the NHFPC, once pointed out that to build a "healthy China", more focus should be laid on the moving down of medical and health service work and resources. At present, AliHealth Information Technology Co., Ltd., Didi Chuxing, a car-booking mobile app owned by Didi Kuaidi, and an O2O platform for appointment of medical operations join hands with medical institutions to launch "Didi Doctor", a public benefit activity, trying to build a brand-new diagnosis and treatment mode.

Comment: China's insufficient total medical resources and unreasonable allocation make medical resources even more deficient. "Internet plus medical service" might be effective in moving down medical resources and working out difficulties in getting medical services and embrace sound development. As to listed companies, Andon Health Co., Ltd. (002432.SZ), principally engaged in sphygmomanometer and glucometer, is transforming towards mobile health since 2010 and has developed cooperation relationship with Apple Inc.; Jiangsu Yuyue Medical Equipment & Supply Co., Ltd. (002223.SZ) is engaged in the management of chronic diseases and cooperates with AliHealth Information Technology in Internet-based medical service; Zhuhai Hokai Medical Instruments Co., Ltd. (300273.SZ) and Huapont Life Sciences Co., Ltd. (002004.SZ) are also actively building Internet-based medical service platform; Jointown Pharmaceutical Group Co., Ltd. (600998.SH) owns a medicine e-commerce platform.


[SSN Selection]

○ Executive meeting of the State Council decided to promote income tax pilot policy tested in national self-dependent innovation demonstration zone nationwide and made arrangements to deepen pilot financial reform in Shanghai Free Trade Zone.
○ The central bank announced on Oct. 21 that it has conducted medium-term lending facility (MLF) to 11 financial institutions with an amount of 105.5 billion yuan.
○ Central banks of China and the U.K. has renewed bilateral domestic currency swap agreement, thereby the swap scale has expanded to 350 billion yuan/35 billion pounds from 200 billion yuan/20 billion pounds.
○ Caixin reported that the central inspection team will inspect the central bank and the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission. Inspections on the four state-owned commercial banks will also kick off soon.
○ Total profit for state-owned enterprises decreased 8.2% in the first nine months compared with the same period last year, while transportation, electronic, electricity and chemical industry realized significant year-on-year growth in profit.

[Industry Information]
○ VSF price hike beats expectation, improved supply and demand to boost performance
Leading enterprises in the viscose staple fiber (VSF) industry convened a meeting on Oct. 21 and formed a price alliance to maintain a stable market. It is reported that the current market supply is relatively tight and enterprises barely have inventory. Some enterprises have raise the VSF prices by 100 to 200 yuan per ton since October with a total increase up to 30 percent this year.

Comment: The unexpected hike of VSF prices is mainly attributed to the improved supply and demand pattern. The industrial capacity increased 6.7 percent last year, which is below the demand growth. The environmental protection pressure eliminated outdated capacity by nearly 10 percent this year. Leading enterprises in the industry are expected to continue to benefit. Jiangsu Aoyang Technology Corporation Limited (002172.SZ) owns a capacity of 300,000 tons of VSF. It revised the performance forecast for the third quarter last week as a result of the hike of VSF prices. Nanjing Chemical Fibre Co., Ltd. (600889.SH) owns an equity capacity of 80,000 tons. It transferred the equities in property companies under it in the third quarter, which will boost the liquidity improvement.


○ China to establish Haulong Company to boost proprietary nuclear power technology export
Senior management of China National Nuclear Corporation (CNNC) recently indicated that China will establish "Hualong Company" to further integrate "Hualong One", the nuclear power technology mastered by CNNC and China General Nuclear Power Corporation (CGN), into one company and boost its export. SSN learnt that the plan has been submitted. The first meeting on projects coordination will be convened soon and the company will be established at the beginning of next year at the soonest.

Comment: Like the former CSR Corporation Limited and China CNR Corporation Limited, the combination of the CNNC and the CGN in the bidding for the export of nuclear power will reduce internal friction and improve the competitiveness of the nuclear power technology of China. With the acceleration in the construction of domestic nuclear power projects and the expansion of the export market in the future, relevant ancillary equipment market will see increases in substantial orders. In terms of listed companies, Zhefu Holding Group Co., Ltd. (002266.SZ) has obtained orders for the control rod driven system for Hualong One. China First Heavy Industries (601106.SH) is the biggest forge pieces supplier in China. Dongfang Electric Corporation Limited (01072.HK; 600875.SH) enjoy a high market share for nuclear island and conventional island.


○ Oil and gas reform plan to unveil within the year, separation of pipe network business to benefit private enterprises
SSN learnt that the Overall Plan on Oil and Gas System Reform has been completed and submitted for higher level's approval and is expected to be released before the year end. Opening-up of upstream market and separation of pipe network business will be the core of the new oil and gas reform. The oil and gas transmission pipe networks of oil enterprises may be separated to establish independent oil and gas transmission companies, and the pipe network will open to third parties.

Comment: The separation of pipe network business will break the industrial monopoly and lay foundation for the oil and gas industry to introduce social capitals. Currently, China still lags behind in the development of pipe network as its transmission capacity can meet the demands. With the diversification of investors and higher investment enthusiasm, more pipe networks will be constructed. Oil and gas pipe enterprises, such as Jiangsu Changbao Steeltube Co., Ltd.(002478.SZ) and Jiangsu Yulong Steel Pipe Co., Ltd.(601028.SH) will benefit from it.

[Announcement Interpretation]

○ Qian Hai Life Insurance increases shareholding in Nanning Department Store again
Qian Hai Life Insurance Co., Ltd. bought the share of Nanning Department Store Co., Ltd. (600712.SH) through secondary market acquisition to the 5 percent limit for the second time. Qian Hai Life Insurance bought the equities of Nanning Department Store with 27.23 million shares at a price of 7.57 to 8.70 yuan per share in October, increasing its shareholding proportion to 10.01 percent. The latest closing price of Nanning Department Store is 8.18 yuan. It may continue to increase its shareholding in the following year.


○ Thinking Investment Management increases shareholding in Yuancheng Gold
Yantai Yuancheng Gold Co., Ltd. (600766.SH) discloses that Zhejiang Thinking Investment Management Co. Ltd. and five funds and trust products acting in concert with it hold 22,422,850 shares of the company, accounting for more than 10 percent of its share capital. Thinking Investment Management increases its shareholding in the company through secondary market acquisition to the 5 percent limit for the first time in July.

Comment: Thinking Investment is the first sunshine private fund listed on the National Equities Exchange and Quotations (NEEQ), commonly known as the New Third Board and similar to OTCBB in the U.S. market. Its increase in the shareholding in Yuancheng Gold through secondary market acquisition to the 5 percent limit twice shows that it is rosy about the reorganization of the latter as a company with small market value through backdoor listing.

○Major assets restructuring of 6 companies approved
Ningxia Ningdong Railway Co., Ltd. (NRC) conducting backdoor listing through Guangxia (Yinchuan) Industry Co., Ltd. (000557.SZ) has been approved by China Securities Regulatory Commission (CSRC) on condition that NRC promises to gain total net profits of no less than 1 billion yuan in next three years. The equity restructuring of Talkweb Information System Co., Ltd. (002261.SZ) by acquiring Shandong Changzheng Education Technology Co., Ltd., Shenzhen Sea Sky Land Technology Co., Ltd., Zhuhai Longxing Information Technology Co., Ltd. and Shaanxi Chengchang Information Consultancy Co., Ltd. was approved without any condition.

Shenzhen Sunline Tech Co., Ltd. (300348.SZ) purchasing FIroad (Beijing) Information Technology Co., Ltd., SuZhou TA&A Ultra Clean Technology Co., Ltd. (300390.SZ) purchasing Wuxi Yushou Medical Appliances Co., Ltd., Guangxi Guiguan Electric Power Co., Ltd. (600236.SH) purchasing Longtan Hydroelectric Development Company and Anhui Fangxing Science & Technology Co., Ltd. (600552.SH) purchasing Shenzhen K&D Optoelectronics Co., Ltd. also received approval without conditions.

○Zqgame receives dividend from Small-tech and resumes trading
Shenzhen Zqgame Co., Ltd. (300052.SZ) will obtain 23.5 million yuan of dividend from its holding subsidiary Shenzhen Small-tech Co., Ltd, a mobile game company. It acquired 51 percent equity of Small-tech at 87.46 million yuan in 2013 and promoted game products with aid of the good relation between Small-tech and its former shareholder Tencent Holdings Ltd. (00700.HK). The company also announced termination of private placement for acquiring and restructuring overseas assets and is likely to finish this assets purchase by other ways. 

In addition, Ningbo Gqy Video&Telecom Joint-stock Co., Ltd. (300076.SZ) suspended mulling over purchasing robot assets and resumed trading. Huizhou Speed Wireless Technology Co., Ltd. (300322.SZ) terminated significant restructuring matter and resumed trading.

[Financial Reports Express]

○Net profits of Do-Fluoride Chemicals and Ningbo Shanshan expected to surge
Net profit of Do-Fluoride Chemicals Co., Ltd. (002407.SZ) is predicted to climb by 800-850 percent in the third quarter, which is mainly resulted from the short supply of lithium power battery and lithium hexafluorophosphate products. The company plans to invest 200 million yuan to expand the production line of lithium hexafluorophosphate.

Net profit of Ningbo Shanshan Co., Ltd. (600884.SH) is expected to grow by 335-345 percent in the third quarter, because it gains 520 million yuan of after-tax return from investment after selling equity of Bank Of Ningbo Co., Ltd. (002142.SZ).

○Longzhou Transportation & Global Infotech bought by Central Huijin and CSF
The third quarterly report of Fujian Longzhou Transportation Co., Ltd. (002682.SZ) shows that Central Huijin Investment Ltd. (Central Huijin) held 3.19 percent shares of the company at the end of September, and becomes the second biggest shareholder of the company. Besides, the ten asset management plans of China Securities Finance Corporation Limited (CSF) respectively hold 0.95 percent shares of the company and are the sixth biggest shareholders of the company. The assent management plans of Central Huijin and CSF altogether hold a total of 12.96 percent shares of the company.

The third quarterly report of Global Infotech Co., Ltd. (300465.SZ) shows that Central Huijin hold 1.76 percent shares of the company and is the eighth biggest shareholder of the company. Besides, the ten financial asset management plans CSF respectively hold 701,700 shares of the company and are the tenth biggest shareholders of the company. The assent management plans of Central Huijin and CSF altogether hold a total of 7.03 percent shares of the company.

[Trading Trends]

○NetPosa Technologies bought by four institutional seats
The trading volume ranking list on Oct. 21 shows that NetPosa Technologies, Ltd. (300367.SZ) was bought by four institutional seats with a total of 48.45 million yuan, accounting for 12 percent of its intraday turnover. Meanwhile, one institutional seat sold the stock with 11.05 million yuan.

Comment: Institutions believe that the video surveillance & control industry is experiencing high prosperity. The company is speeding up in the planning of intelligent hardware and artificial intelligence. The company takes big data of video as an opportunity and intelligent hardware as carrier to develop. The company might see high performance growth in next three years.
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