汇丰银行-亚洲地区-宏观策略-2019年展望：逆境中的坚持-2019.1.10-37页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)The sector outperformed the broader market in 2018,and investors should selectively add positions in Industrials in 2019 Asias capital expenditure cycle remains mixed in 2019,with government spending better than in the private sector We outline 13 Buy ideas across the region as well as three stocks to avoid in 2019 HSBCs Asia Industrials team has 13 analysts covering 157 stocks,providing value chain analysis and read-across within the region as well as globally.Asias industrials sector saw better performance in 2018 following five years of underperformance.There is light at the end of a long tunnel;we provide our 2019 outlook in the face of adversity.Government investment a key demand driver in 2019:After an eventful 2018 and the growing likelihood of a global economic growth slowdown,the outlook for 2019 government investment plans and corporate capital expenditure remains quite mixed.We think government spending will be a key demand driver and remain cautious on the private sector,at least for 1H19.In July 2018,the Chinese government initiated a policy boosting infrastructure investment to stabilise domestic demand,and the impact of this should continue in 2019.Selected leading indicators have shown early signs of a turnaround in 4Q18,such as in the Chinese construction sector.We think that the Asian industrials sector will continue to outperform the broader market in 2019,and we recommend investors add positions in the sector on a selective basis.Prefer global leaders and companies exposed to government investment:In terms of stock selection in 2019 for the Asian industrials sector,we have two broad categories of preference.First are companies that stand to benefit from government investment,including CRCC(1186 HK;CP:HKD10.82 Buy;TP:HKD14.90),CSCEC(601668 CH;CP:RMB5.73;Buy;TP:RMB7.90),Anhui Conch(914 HK;CP:HKD35.70;Buy;TP:HKD58.00),Focused Photonics(300203 CH;CP:RMB23.65;Buy;RMB38.04),Larsen&Toubro(LT IN;CP:INR1,388;Buy;TP:INR1,580),and Doosan Bobcat(241560 KS;CP:KRW30,700;Buy;TP:KRW46,000).Second are global leaders in their respective sub-sector:Fanuc(6954 JP;CP:JPY15,935;Buy;TP:JPY22,000),Hikvision(002415 CH;CP:RMB25.91;Buy;TP:RMB40.00),and Minth Group(425 HK;CP:HKD24.65;Buy;TP:HKD35.10).A few Asian industrial stocks with beaten up valuations and improving prospects include Yuexiu Transport(1052 HK;CP:HKD5.76;Buy;TP:HKD9.00),Keppel Corp(KEP SP;CP:SGD5.94;Buy;TP:SGD9.28),and Brilliance Auto(1114 HK;CP:SGD5.94;Buy;TP:SGD9.28).Risks for the sector include softness in auto sales,policy measures affecting property demand in multiple Asian countries,and global trade uncertainty.Exchange rate volatility could also push up input costs for manufacturers.We make no changes to EPS estimates,target prices or ratings in this report.10 January 2019 Anderson Chow*Global Co-Head of Industrials Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6669 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Asia Industrials EQUITIES INDUSTRIALS Asia This report replaces the version of the same date and title published earlier,to correct an error in our list of preferred stocks on page 1 and in the valuation and risks table on pages 28-31(one stock has been removed).2019 outlook Persistency in the face of adversity EQUITIES INDUSTRIALS 10 January 2019 2 Figure 1:Top buy ideas from HSBC Asia industrial analysts Analyst Sector Stock Bbg code 4-Jan price Rating/TP/Upside Investment thesis Anderson Chow*Construction CRCC 1186 HK HKD10.82 Buy HKD14.90 37.7%Government policy to increase infrastructure investment should benefit infrastructure contractors in 2019 Strong balance sheet and positive cash flow will help increase asset turnover Lesley Liu*Transport Infrastructure Yuexiu Transport Infra 1052 HK HKD5.76 Buy HKD9.00 56.3%Three expressways located in central China become a new growth driver The company offers a higher-than-peers dividend yield,which we think is sustainable Howard Lau*Building Materials Anhui Conch 914 HK/600585 CH HKD35.7/RMB28.4 Buy/Buy HKD58.00/RMB53.00 62.5%/86.7%Indisputable cost leader of the industry GP/tonne expansion driven by supply-side control Corey Chan*Construction China State Construction 601668 CH RMB5.73 Buy RMB7.90 37.9%Attractive dividend yield of around 8%for 2018e c60%of revenue from housing construction provides cash to fund long-term growth opportunities in infrastructure construction(c20%of revenue)Strong balance sheet and deep order-backlog should support 18%earnings CAGR in 2017-20e Helen Fang*Automation Fanuc 6954 JP JPY15,935 Buy JPY22,000 38.1%Global leader in the robotics industry and beneficiary of increasing Chinese factory automation level Market-leading profitability helped by new software combining AI and IoT for factory automation Emily Li*Capital goods Hikvision 002415 CH RMB25.91 Buy RMB40.00 54.4%A global leader in the surveillance industry,which would see stronger growth of 15.4%CAGR between 2017 and 2022 compared with 11.4%historically AI-embedded surveillance projects rolled out in China will enhance profitability Bonan Li*Commercial Services Focused Photonics 300203 CH RMB23.65 Buy RMB38.04 60.8%Substantially high R&D commitment(R&D-to-Sales ratio around 10%)differentiated the company from peers and secured its long-term competitiveness.Strong government investment,favourable national policies and improving credit conditions will benefit the sector as well as the company Wei Sim*Autos Brilliance 1114 HK HKD5.75 Buy HKD8.50 47.8%We forecast Brilliances growth to be driven by BMW and also forecast a recovery in sales volumes for Brilliance-Renault Strong model cycle combined with luxury exposure should drive better growth for BMW relative to peers Tracy Li*Auto Components Minth Group 425 HK HKD24.65 Buy HKD35.10 42.4%Dollar content per car is rising,riding the popularity of aluminium Benefits from market share expansion of Japanese clients and closer partnership with European OEMs Somesh Agarwal*Conglomerate Keppel Corp KEP SP SGD5.94 Buy SGD9.28 56.2%The company is a conglomerate now and reaping the benefits of diversifying outside of O&M over the last three years New recurring income in infrastructure and investments segments have emerged,along with a better performance from the property business in Singapore,Vietnam and China.Puneet Gulati*Construction Larsen&Toubro LT IN INR1,388 Buy INR1,580 13.8%L&Ts focus in its five-year strategic plan(starting FY18)is to improve profitability,reduce working capital intensity,RoE expansion and asset monetisation Best way to play India Industrials story in 2019 due to its diversified exposure Brian Cho*Machinery Doosan Bobcat 241560 KS KRW30,700 Buy KRW46,000 49.8%Emerging market sales turnaround and engine business contribution US construction spending is still rising and the US government allocated USD45bn towards its FY2019 infrastructure budget which should see additional demand for machinery products*Employed by a non-US affiliate of HSBC Securities(USA)Inc.and not registered/qualified pursuant to FINRA regulations Source:Bloomberg,HSBC estimates 3 EQUITIES INDUSTRIALS 10 January 2019 Figure 2:Top Reduce Ideas Analyst Sector Stock Bbg code 4-Jan price Rating/TP/Downside Investment thesis Somesh Agarwal*Machinery Yangzijiang Shipbuilding YZJSGD SP SGD1.27 Reduce SGD0.87 31.5%Demand for its core products containerships and bulk carriers have been declining for the last six months,a trend we think will continue into 2019 Opaque business model(the company does not disclose the entire list of buyers of its vessels)and company derives income mostly(c70%)from non-core investments Somesh Agarwal*Construction Materials Siam Cement Company SCC TB THB436 Reduce THB346 20.6%The cement business in Thailand is ex-growth given that Thailand is a mature cement market with cement consumption of around 475kg/capita(compared with Indonesia and Philippines at around 220kg/capita)Core Chemicals business(c70%of SCCs total invested capital and PBT)will likely continue to face headwinds as the PE-Naptha margins have been getting squeezed globally Brian Cho*Construction&Engineering Hyundai Development 294870 KS KRW46,000 Reduce KRW35,000 23.9%Companys in-house and contract housing margins are likely to fall due to declines in volume and prices Domestic housing volume and prices are the main margin drivers for the company and we continue to have a bearish view on the Korean property market*Employed by a non-US affiliate of HSBC Securities(USA)Inc.and not registered/qualified pursuant to FINRA regulations Source:Bloomberg,HSBC estimates 4 EQUITIES INDUSTRIALS 10 January 2019 Asia Industrials:Valuation comparison tables Reuters Mkt cap Price TP Share perf(%)_ PE(x)_ _ EV/EBITDA(x)_ _ Div yield(%)_ _ Net gearing(%)_ _ ROE(%)_ _ PB(x)_ Company code(USDm)Rating(local)(local)YTD-3M 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e MSCI EM Asia Industrials#(0.9%)(4.9%)MSCI World Industrials#(0.8%)(3.7%)Capital Goods average 0.2%(0.1%)China Zhuzhou CRRC Times 3898.HK 3,008 Buy 43.05 46.00(0.8%)(2.8%)17.6 16.6 14.2 12.7 11.7 9.4 1.2 1.2 1.4(19)(29)(37)15.0 14.8 15.5 2.5 2.4 2.0 CRRC Corp 1766.HK 36,912 Buy 7.78 8.80 1.8%9.9%18.1 16.1 14.0 10.3 9.4 8.2 1.7 1.9 2.5(9)(9)(16)9.5 9.6 10.4 1.6 1.5 1.4 CRRC Corporation A 601766.SS 36,912 Hold 9.19 7.80 1.9%6.4%21.4 19.1 16.5 10.3 9.4 8.2 1.5 1.6 2.1(9)(9)(16)9.5 9.6 10.4 1.9 1.8 1.7 Zoomlion Heavy Industry 1157.HK 3,826 Buy 2.80 3.90(0.7%)(7.6%)14.0 11.3 11.3 20.3 11.8 12.2 8.3 1.8 1.8 56 52 60 3.6 4.4 4.3 0.5 0.5 0.5 Zoomlion Heavy Industry A 000157.SZ 3,826 Hold 3.56 3.50 0.0%(4.8%)20.2 16.3 16.4 20.3 11.8 12.3 5.7 1.2 1.2 56 52 60 3.6 4.4 4.3 0.7 0.7 0.7 Lonking Holdings 3339.HK 1,038 Buy 1.90 3.00(6.4%)(24.6%)6.8 5.3 4.5 3.2 2.8 2.3 8.5 9.8 10.7(21)(20)(20)13.5 16.4 17.6 0.9 0.9 0.8 Weichai Power A 000338.SZ 8,868 Buy 7.61 11.50(1.2%)(11.0%)8.9 8.3 7.7 2.9 2.3 1.7 5.3 5.7 6.1 8(7)(19)20.3 19.8 19.2 1.7 1.6 1.4 Weichai Power 2338.HK 8,868 Buy 8.69 13.70(2.9%)(4.4%)9.0 8.3 7.7 2.9 2.3 1.7 5.2 5.7 6.1 8(7)(19)20.3 19.8 19.2 1.7 1.6 1.4 Sinotruk 3808.HK 3,877 Hold 11.00 15.00(6.8%)(23.2%)8.8 6.9 6.3 3.0 2.2 2.2 7.3 7.3 7.9(33)(40)(35)14.2 16.3 16.3 1.2 1.1 1.0 China Yuchai CYD.N 539 Buy 13.18 34.60 5.9%(24.3%)3.9 3.2 2.8 1.1 0.7 0.8 6.7 12.5 14.1(34)(41)(38)11.9 13.2 13.8 0.4 0.4 0.4 Sany Heavy 600031.SS 9,171 Buy 8.07 12.61(3.2%)(9.1%)30.1 11.7 9.0 10.7 7.0 5.6 2.0 4.5 5.9 41 31 16 8.7 19.6 22.0 2.5 2.1 1.9 XCMG 000425.SZ 3,709 Buy 3.25 5.33 0.6%(17.7%)24.9 13.5 10.7 12.5 9.1 7.5 1.1 2.0 2.6 32 25 18 4.6 7.6 8.9 1.1 1.0 0.9 Liugong 000528.SZ 1,321 Buy 6.20 10.59 2.1%(26.2%)28.1 10.5 7.8 12.2 6.2 4.6 1.9 5.0 6.7 20 20 13 3.6 9.1 11.4 1.0 0.9 0.9 Hangcha 603298.SS 1,104 Buy 12.24 14.66 3.6%(1.7%)16.0 14.2 11.0 10.9 9.7 7.2 2.5 2.8 3.5(18)(14)(20)14.2 14.6 16.8 2.2 2.0 1.8 Hengli Hydraulic 601100.SS 2,472 Buy 19.24 30.98(2.9%)(13.8%)44.4 20.1 15.7 24.5 14.3 11.4 1.1 1.8 2.3 12 9 2 10.4 20.2 21.9 4.4 3.7 3.2 ASEAN Region Yangzijiang Shipbuilding YAZG.SI 3,710 Reduce 1.27 0.87 1.6%(0.8%)8.4 13.3 15.0 8.2 9.5 10.1 3.5 3.0 2.7(5)(5)(8)12.1 6.9 6.0 0.9 0.9 0.9 Sembcorp Marine SCMN.SI 2,412 Hold 1.57 1.75 1.9%(25.9%)n.m.n.m.n.m.26.7 47.2 22.3 1.3 n.a.0.6 111 120 130 0.6 n.m.n.m.1.3 1.4 1.4 India Bharat Heavy Electricals BHEL.BO 3,759 Hold 71.40 75.00(3.3%)(2.9%)35.2 32.5 17.7 18.6 7.5 7.8 2.2 2.5 1.4(32)(34)(27)1.5 2.5 4.6 0.5 0.8 0.8 ABB India ABB.BO 3,961 Hold 1,303.7 1,290.0(1.2%)(5.7%)52.8 51.4 38.7 35.1 27.8 22.0 0.3 0.6 0.8(43)(28)(34)15.2 14.0 16.6 7.7 6.8 6.1 Suzlon Energy SUZL.NS 831 Buy 5.45 9.50 0.0%(4.4%)3.4 n.m.n.m.5.2 14.2 239.1 n.a.n.a.n.a.(158)(164)(135)n.m.12.0 20.1 n.m.n.m.n.m.Crompton Greaves CGPO.NS 398 Hold 44.30 44.00(3.1%)0.1%n.m.n.m.n.m.7.0 8.9 6.5 n.a.n.a.n.a.18 53 48 n.m.n.m.n.m.0.7 1.0 1.1 Siemens India SIEM.BO 5,426 Hold 1,062.7 1,020.0 0.0%10.3%53.7 42.3 36.2 32.1 25.9 22.2 0.7 0.7 0.8(53)(44)(48)9.9 11.2 12.1 4.9 4.6 4.2 Voltas Ltd VOLT.BO 2,544 Hold 536.15 625.00(3.5%)4.0%34.9 31.0 26.5 26.4 22.4 18.3 0.7 0.7 0.9(0)(0)(0)17.8 15.9 16.1 5.4 4.5 4.0 Thermax India THMX.BO 1,948 Hold 1,140.3 1,030.0 0.8%23.9%43.8 58.5 42.6 28.7 30.0 25.5 0.5 0.5 0.7(4)(3)8 12.7 8.8 11.3 5.4 5.0 4.6 Cummins India CUMM.BO 3,306 Hold 831.90 780.00(2.0%)23.1%31.4 34.4 29.9 27.5 30.4 24.5 1.7 1.8 2.0 3(6)(9)21.3 17.4 18.9 6.2 5.8 5.5 Havells India HVEL.BO 6,085 Buy 678.55 720.00(2.3%)12.0%71.0 60.5 51.3 48.9 39.1 33.3 0.5 0.6 0.7(58)(38)(37)20.2 20.0 20.9 13.0 11.4 10.1 Korea Samsung Heavy Industries 010140.KS 4,346 Buy 7,750 11,000 4.6%(7.4%)n.m.n.m.23.4-90.8 12.5 n.a.n.a.1.9 51 27 22 n.m.n.m.3.0 0.5 0.6 0.7 Hyundai Heavy Industries 009540.KS 8,716 Buy 138,500 180,000 7.8%(1.8%)n.m.69.2 23.3 17.2 11.5 9.1 n.a.n.a.1.4 10(18)(2)n.m.1.2 3.3 0.7 0.7 0.8 Doosan Corporation 000150.KS 1,964 Buy 100,000 148,000(10.3%)(27.0%)47.3 8.7 6.4 6.3 5.8 4.5 5.1 5.1 5.1 125 115 92 1.7 8.6 10.3 0.8 0.7 0.6 Doosan Infracore 042670.KS 1,385 Buy 7,480 14,500(1.4%)(23.0%)10.5 5.5 5.0 5.3 4.7 4.0 n.a.n.a.n.a.(13)(24)(13)8.1 19.1 20.4 1.0 1.1 0.9 Doosan Bobcat 241560.KS 2,737 Buy 30,700 46,000(2.5%)(23.0%)12.0 11.7 10.4 7.9 7.5 6.6 2.6 2.6 2.6 27 23 17 7.6 7.5 7.9 0.9 0.9 0.8 Note:Priced at close of 4 January 2019 NA=Not Applicable Source:Refinitiv Datastream,HSBC estimates 5 EQUITIES INDUSTRIALS 10 January 2019 Asia Industrials:Valuation comparison tables Reuters Mkt cap Price TP Share perf(%)_ PE(x)_ _ EV/EBITDA(x)_ _ Div yield(%)_ _ Net gearing(%)_ _ ROE(%)_ _ PB(x)_ Company code(USDm)Rating(local)(local)YTD-3M 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e 17a 18e 19e MSCI EM Asia Industrials#(0.9%)(4.9%)MSCI World Industrials#(0.8%)(3.7%)Construction average (0.5%)(3.0%)China CRCC 1186.HK 21,436 Buy 10.82 14.90(0.4%)4.8%8.0 6.8 5.4 4.0 3.7 3.1 1.9 2.6 3.3(2)1(1)11.4 12.3 14.3 0.9 0.8 0.7 CRCC A 601186.SS 21,436 Buy 11.08 13.30 1.9%(0.6%)9.4 7.9 6.4 4.0 3.7 3.1 1.6 2.3 2.8(2)1(1)11.4 12.3 14.3 1.0 0.9 0.9 CCCC 1800.HK 23,465 Buy 7.30 9.10(1.4%)(8.3%)6.1 5.5 4.9 6.3 6.9 6.5 3.8 3.8 4.3 71 83 83 10.5 10.6 10.9 0.6 0.6 0.5 CCCC A 601800.SS 23,465 Reduce 11.30 8.10 0.4%(11.6%)10.8 9.8 8.7 6.3 6.9 6.5 2.1 2.2 2.4 64 83 83 9.3 10.6 10.9 1.0 1.0 0.9 CRG 0390.HK 22,846 Buy 7.10 8.60(0.4%)(7.8%)9.3 7.8 6.6 6.3 5.0 4.4 1.8 1.9 2.3 36 33 34 11.3 11.4 11.5 1.0 0.8 0.7 CRG A 601390.SS 22,846 Hold 7.01 7.60 0.3%(9.8%)10.5 8.8 7.4 6.3 5.0 4.4 1.6 1.7 2.0 36 33 34 11.3 11.4 11.5 1.1 0.9 0.8 CSCI 3311.HK 3,926 Buy 6.09 9.70(2.1%)(26.0%)5.1 5.5 4.6 4.5 4.4 3.6 5.7 5.5 6.5 41 46 40 13.2 13.7 14.5 0.8 0.8 0.7 China Gez