[Today's Guide]
○ Energy storage may adopted in national plan, supporting policies to introduced
○ National aero-engine company to establish, Vitamin A prices hike strongly expected
○ Jiaoda Onlly to acquire pharmaceutical assets, Aeon Life bought Victory Precision Manufacture to 5pct limit
○ Jinfu New Material to invest in smart TV production line, two institutions bough air China
[SSN Focus]
○ Energy storage may adopted in national plan, supporting policies to introduced
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SSN learnt that the 13th five-year plan on energy storage will be adopted into the national 13th Five-year Plan on the Development of Renewable Energy. The plan is currently soliciting opinions and is expected to be introduced in March. It will be the first time that energy storage is adopted in the national plan in the form of special plan and is considered a significant bullish news in the energy storage industry. Energy storage was not mentioned in the 12th Five-year Plan on the Development of Renewable Energy issued years ago.
Comment: It is reported that energy storage will enjoy priority in demonstration and application during the 13th Five-year period. Key energy storage technologies study and industrialization demonstration projects may be adopted in national technology plans. Currently, there are no special supporting policies on the energy storage industry. Supporting policies including fiscal supports, preferential taxes and credit and financing supports are expected to be introduced during the 13th Five-year period. Among listed companies, Zhejiang Narada Power Source Co., Ltd. (300068.SZ) expects its performance to grow 70 to 100 percent thanks to the growth in energy-storage power sources and power lithium battery businesses. Shandong Sacred Sun Power Sources Co., Ltd. (002580.SZ) ranks high in terms of the production and sales of batteries for new energy storage.
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[SSN Selection]
○ The two sessions at the provincial level will be opened from Jan. 23 to 26. Five provinces and autonomous regions completed the two sessions have given priorities to supply-side structural reform.
○ K C Chan, Secretary for Financial Services and the Treasury Bureau, indicated that a weakening HK dollar is evitable in the normalization of the exchange rate against U.S. dollars and Hong Kong is capable of dealing with capital flows.
○ The Ministry of Commerce indicated that China and the Cooperation Council for the Arab States of the Gulf have resumed negotiation on free trade and will strive to reach free trade agreements by the year end.
○ Shanghai released the business plans on intelligent manufacturing on Jan. 20. It will encourage foreign investment in robots, high-end numerically-controlled machine tools and other intelligent manufacturing industries.
○ The IPO application of Jiangsu Changshu Rural Commercial Bank Co., Ltd. has been approved on Jan. 20, making it the third rural commercial bank passing the IPO approval in 2016.
[Industry Information]
○ National aero-engine company to establish, high temperature alloy demand to improve
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Media reported that China will announce the establishment of the National Aero-engine Group Corp. this month at the soonest. The aero-engine businesses of relevant companies will be injected in the company with an asset of over 100 billion yuan. In October 2015, the engine companies under the Aviation Industry Corporation of China (AVIC) announced that their actual controller may change due to significant assets reorganizations.
Comment: It is estimated that the demand for aero-engines and gas turbines in China will exceed 2 trillion yuan in the following 20 years. The potential market demand for high temperature alloys and other core materials may reach 100 billion yuan. Among listed companies, the wrought high temperature alloy products of Fushun Special Steel Co., Ltd. (600399.SH) account for over 80 percent in the aerospace market. Beijing Cisri-gaona Materials ＆ Technology Co., Ltd. (300034.SZ) owns an annual capacity of nearly 2,500 tons of high temperature alloy materials. Over 60 percent of its products are for clients in the aerospace industry. Anhui Yingliu Electromechanical Co., Ltd. (603308.SH) is also actively developing the project for aero-engine blades.
○Vitamin A prices hike strongly expected as market demands rise
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SSN learnt that China's leading vitamin A maker Zhejiang NHU Co., Ltd. (002001.SZ) recently resumed quotation for vitamin A which was quoted at 180 yuan per kilogram, an increase of 80 percent. Other peer enterprises, such as Xiamen Kingdomway Group Company (002626.SZ) and Zhejiang Medicine Co., Ltd. (600216.SH), indicated that as the market demands rise, price hike has become a key word in the industry's development.
Comment: It is learnt that NHU recently resumed its quotation for vitamin A mainly because downstream manufacturers have increased their inventories and the demand for vitamin A has picked up in overseas market. Previously impacted by oversupply, vitamin A prices continued to decline. International vitamin A giant Royal DSM stopped production for overhaul last December, which has transformed the market supply and demand pattern and boosted the price.
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[Announcement Interpretation]
○ Jiaoda Onlly proposes asset acquisition and high share conversion
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Shanghai Jiaoda Onlly Co., Ltd. (600530.SH) and its overseas subsidiary propose to acquire no more than 29.99 percent shares of China NT Pharma Group Company Limited (01011.HK) at an average price of no more than HK$ 2.50 via the secondary market and negotiating transfer, thus becoming major shareholder and strategic investor of the latter. NT Pharma owns a complete industrial system raging from drug sales and distribution and drug production. Its net profit in the first half of 2015 was 36.49 million yuan. Meanwhile, the controlling shareholder of Jiaoda Onlly also proposes a 15-for-10 conversion of capital surplus into shares in 2015.
○ Aeon Life bought Victory Precision Manufacture to 5pct limit
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Suzhou Victory Precision Manufacture Co., Ltd. (002426.SZ) announced that Aeon Life Insurance Co., Ltd. has bought over 69.12 million shares of the company from May 29, 2015 to Jan. 18, 2016, which accounts for 5.93 percent of the total share capital of the company and reaches the 5 percent limit. Aeon Life Insurance previously held no shares in the company. It is likely to continue to increase its shareholding in the company in the coming 12 months.
Comment: Victory Precision Manufacture is transforming to the Industry 4.0 and lithium battery diaphragm, which might be an important reason that it won favors from Aeon Life . According to a rough estimation, Aeon Life bought most shares above 19 yuan. The company's stock prices closes at 21.2 yuan per share on Jan. 20.
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○ Jinfu New Material to raise fund for smart TV production line
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Suzhou Jinfu New Material Co., Ltd. (300128.SZ) proposes to issue 55 million shares through private placement to raise 800 million yuan, which will be used to build LCD/smart TV set automatic production line project and debt repayment. When reaching designed capacity, the project will create additional net profits of 225 million yuan per year.
○ Top Resource Conservation ＆ Environment proposes to control Zhengmao Gas-fired
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Top Resource Conservation ＆ Environment Corp. (300332.SZ) proposes to buy 51 percent shareholding of Hebei Zhengmao Gas-fired Co., Ltd. with 204 million yuan in cash. Zhengmao Gas-fired owns pipeline gas franchise within Bazhou Tianjin Harbor Industrial Park in Langfang City. Its committed performance for 2016 to 2018 are no less than 40 million yuan, 50 million yuan and 60 million yuan, respectively.
○ Controlling shareholder increases shareholding in Sanhua
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Sanhua Holding Group, controlling shareholder of Zhejiang Sanhua Co., Ltd. (002050.SZ), increased holding over 18,010,000 shares in the company during Jan. 14 to Jan. 20, representing 1 percent shareholding in the company. The controlling shareholder may continue to increase holding in the future.
[Financial Reports Express]
○ Multiple companies expect growth
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Shenzhen Sunway Communication Co., ltd. (300136.SZ) expects 246 to 274 percent earnings growth in its annual report, primarily due to the combination of the acquired company Shenzhen Alex Connector Co., Ltd into its financial statements. Zhejiang Sunflower Light Energy Science ＆ Technology Limited Liability Company (300111.SZ) expects 140 to 167 percent earnings growth in its annual report, mainly attribute to the gradual recovery of photovoltaic industry. Besides, Unisplendour Guhan Group Corporation Limited (000590.SZ) and Leshan Electric Power Co., Ltd. (600644.SH) announced that their annual results have turned from losses into profits.
[Trading Trends]
○ Air China bought by two institutions
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The trading volume ranking list on Jan. 20 shows that Air China Limited (601111.SH) was bought through two institutional seat with a total of 329 million yuan, accounting for about 30.3 percent of the intraday trading turnover.
Comment: Analysts pointed out that currently dollar debt ratio of China's three major airlines has dropped from 90 percent at the end of 2014 to 70 percent. It is estimated that the ratio will continue to fall to about 50 percent. Therefore, their sensitivity to unfavorable exchange rate factors has declined significantly. Besides, since no bunker adjustment surcharge is levied on airlines since last February, there is no need to take into account of the variation this year, and airlines will fully benefit from the equivalent factor of oil price slump.
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