麦格理-亚太地区-宏观策略-亚太宏观要闻-2019.1.14-22页.pdf

14 January 2019AsiaAsia EssentialsAsia EssentialsBYD(1211 HK)BYD(1211 HK)(Underperform)(Underperform)3 3Exposed to high risk from subsidy cuts;sellAllen YuanHeavy reliance on subsidies creates continued challenges for BYD as subsidies will be graduallycut and fully removed beyond 2020.Report by EV Hui indicates that 2019 subsidies may decline up to over 50%.Reiterate BYD as our top short idea.Anhui Conch Cement(914 HK)Anhui Conch Cement(914 HK)(Outperform)(Outperform)4 4Prelim FY18 beat;optimistic on 2019 pricesDavid ChingConch prelim FY18+80-100%YoY,beating consensus by 7%on averageRecent large cement price cuts expected and less than seasonalityReiterate OP attractive valuation at 5.7x 19E PE,7%div yield,26%ROETSMC(2330 TT)TSMC(2330 TT)(Outperform)(Outperform)5 5Defensive name despite short-term weaknessPatrick LiaoWe lower EPS and TP on weaker smartphone,but maintain Outperform given its leadershipposition,low valuation,and high dividend yield.Despite weak demand from smartphone,7nm yield ramp-up is faster than expected,reaching70%now(vs our previous estimate of 50-60%).22nm will be a long node with better performance vs 28nm and much lower cost than 16nm.TSMC is also expanding 8”fab for specialty demand.Philippine banksPhilippine banks6 6Better growth in 2019E,especially for those with good costcontrolGilbert LopezFrom a country perspective we are moving to an overweight stance on the Philippine banks.Higher NIM is a key driver for higher EPS,but those banks with good cost control should have themost attractive growth.We are upgrading SECB to Outperform,though MBT is our top sector Outperform as it has themost upside potential.Indorama Ventures(IVL TB)Indorama Ventures(IVL TB)(Downgrade to Underperform)(Downgrade to Underperform)7 7Entering slower growth phaseYupapan PolpornprasertModerating earnings growth and recent outperformance prompt us to downgrade the stock toUnderperform from Outperform.Start-up of ethane cracker will drag down earnings amid weak US ethylene outlook and potentialpressure from MEG supply addition in the US.We cut our TP from Bt76 to Bt48 as we lower our target EV/EBITDA multiple to reflect slowerearnings growth and a lower margin expectation.Please refer to page 20 for important disclosures and analyst certification,or on our website Bank(BANDHAN IN)Bandhan Bank(BANDHAN IN)(Downgrade to Underperform)(Downgrade to Underperform)8 8Capital allocation dilemma;Downgrade to UPNishant ShahWe introduce a 20%capital allocation discount to our target multiple and cut TP by 25%toRs400.Downgrade Bandhan to Underperform.Acquisition of GRUH at expensive 13x fwd PBV raises capital allocation concerns.Risk of anotherexpensive or ill-conceived merger an overhang.Expect the stock to underperform despite strong fundamentals,as multiples will be under pressuretill promoter stake sale issue is behind.AAC(2018 HK)AAC(2018 HK)(Upgrade to Neutral)(Upgrade to Neutral)9 9Sinopec Engineering Group(2386 HK)Sinopec Engineering Group(2386 HK)(Outperform)(Outperform)1010SMIC(981 HK)SMIC(981 HK)(Outperform)(Outperform)1111Taiwan textile&footwear sectorTaiwan textile&footwear sector1212Xiaomi(1810 HK)Xiaomi(1810 HK)(Outperform)(Outperform)1313MegaChips(6875 JP)MegaChips(6875 JP)(Outperform)(Outperform)1414Bank of the Philippine Islands(BPI PM)Bank of the Philippine Islands(BPI PM)(Neutral)(Neutral)1515BDO Unibank(BDO PM)BDO Unibank(BDO PM)(Neutral)(Neutral)1616IHH Healthcare Bhd(IHH MK)IHH Healthcare Bhd(IHH MK)(Upgrade to Neutral)(Upgrade to Neutral)1717Metropolitan Bank(MBT PM)Metropolitan Bank(MBT PM)(Outperform)(Outperform)1818Security Bank(SECB PM)Security Bank(SECB PM)(Upgrade to Outperform)(Upgrade to Outperform)19192 Please refer to page 6 for important disclosures and analyst certification,or on our website January 2019 Hong Kong EQUITIES 1211 HK Underperform Price(at 08:50,10 Jan 2019 GMT)HK$47.95 Valuation HK$25.80 -PER 12-month target HK$25.80 Upside/Downside%-46.2 12-month TSR%-45.8 Volatility Index High GICS sector Automobiles&Components Market cap HK$m 112,879 Market cap US$m 14,403 30-day avg turnover US$m 28.8 Number shares on issue m 2,354 Investment fundamentals Year end 31 Dec 2017A 2018E 2019E 2020E Revenue bn 102.7 135.0 156.1 182.5 EBIT bn 7.9 8.4 9.6 11.0 EBIT growth%-9.3 6.4 13.4 14.6 Reported profit bn 4.1 3.9 4.8 5.7 Adjusted profit bn 3.8 3.7 4.6 5.5 EPS rep Rmb 1.49 1.42 1.78 2.09 EPS rep growth%-24.1-4.9 25.2 17.9 EPS adj Rmb 1.40 1.34 1.70 2.02 EPS adj growth%-25.3-4.3 26.6 18.7 PER rep x 28.0 29.5 23.5 20.0 Total DPS Rmb 0.14 0.14 0.18 0.21 Total div yield%0.3 0.3 0.4 0.5 ROA%4.9 4.3 4.4 4.7 ROE%7.2 6.4 7.6 8.4 EV/EBITDA x 10.8 9.3 8.1 7.0 Net debt/equity%78.3 68.0 59.9 47.8 P/BV x 2.1 2.0 1.8 1.7 1211 HK rel HSI performance,&rec history Note:Recommendation timeline-if not a continuous line,then there was no Macquarie coverage at the time or there was an embargo period.Source:FactSet,Macquarie Research,January 2019(all figures in Rmb unless noted,TP in HKD)Analysts Macquarie Capital Limited Allen Yuan +86 21 2412 9009 Macquarie Capital Securities(Japan)Limited Janet Lewis,CFA +81 3 3512 7856 BYD(1211 HK)Exposed to high risk from subsidy cuts;sell Key points Heavy reliance on subsidies creates continued challenges for BYD as subsidies will be gradually cut and fully removed beyond 2020.Report by EV Hui indicates that 2019 subsidies may decline up to over 50%.Reiterate BYD as our top short idea.Conclusion We expect the central government to release its 2019 subsidy policy for new energy vehicles(NEVs)in January or early February.Given BYDs heavy reliance on subsidies,the upcoming subsidy cut provides a near term catalyst to trigger a share price correction.We reiterate our Marquee sell idea on BYD ahead of such a risk,especially considering its demanding valuation.Impact BYD relies heavily on subsidies:BYDs total NEV shipments doubled YoY to 248k units in 2018.Total subsidies should be Rmb12.8-15.5bn,on our estimate(Fig 1).This represents over 4x of its guided 2018 net profit of Rmb2.7-3.1bn.We factor in a 20%subsidy cut in 2019 in our base scenario,which implies a decline of Rmb2.6-3.1bn in subsidies.We do expect BYD to be faced with continued challenges from subsidy cuts in 2019/20 subsidies will be removed beyond 2020 per existing policies and we dont see effective measures for the company to offset such a negative impact.Latest reported subsidy plan points to a cut much higher than 20%:Per the report by EV Hui on 10 January(LINK),1)subsidies will be cut substantially in 2019 mainly constrained by fiscal budget(Fig 4);2)Base subsidies for pure electric passenger vehicles(Fig 2)and E-buses(Fig 3)will be cut by 42-55%or completely removed;3)there will be a 3-month transition period,during which the subsidies will be cut by 40%;4)local government subsidies should be cancelled;5)There will be no favourable subsidy multiples that used to enable a vehicle to get up to 0.2x extra subsidies.A 40%subsidy cut would lead to Rmb2.6-3.1bn earnings downside to our base scenario for BYD,purely from subsidies perspective.Sales growth could be negatively impacted as well.While official policy is yet to be announced,we would like to highlight the risk.Why we are negative on BYD:We expect to see a long-term structural derating for BYD in light of the change of the competitive landscape of both NEV and power battery industries.In the near term,subsidy cuts,elevated financing costs and deteriorated profitability of E-buses also create headwinds.Earnings and target price revision No change.We will review our numbers post the announcement of the 2019 subsidy policy.Price catalyst 12-month price target:HK$25.80 based on a Sum of Parts methodology.Catalyst:Announcement of 2019 subsidy policy;annual results in March Action and recommendation Reiterate our Underperform rating.3 Please refer to page 6 for important disclosures and analyst certification,or on our website January 2019 Hong Kong EQUITIES 914 HK Outperform Price(at 08:50,10 Jan 2019 GMT)HK$37.95 Valuation HK$58.00 -EV/EBITDA 12-month target HK$58.00 Upside/Downside%+52.8 12-month TSR%+59.7 Volatility Index Medium GICS sector Materials Market cap HK$m 183,231 Market cap US$m 23,379 Free float%55 30-day avg turnover US$m 34.9 Number shares on issue m 4,828 Investment fundamentals Year end 31 Dec 2017A 2018E 2019E 2020E Revenue bn 75.3 124.5 130.8 131.4 EBIT bn 21.4 39.7 40.4 42.5 EBIT growth%74.7 85.7 1.8 5.2 Reported profit bn 15.9 29.5 30.6 32.7 Adjusted profit bn 15.9 29.5 30.6 32.7 EPS rep Rmb 3.00 5.56 5.77 6.17 EPS rep growth%85.4 85.3 3.7 7.0 EPS adj Rmb 3.00 5.56 5.77 6.17 EPS adj growth%85.4 85.3 3.7 7.0 PER rep x 11.0 6.0 5.7 5.4 PER adj x 11.0 6.0 5.7 5.4 Total DPS Rmb 1.20 2.22 2.31 2.47 Total div yield%3.6 6.7 7.0 7.5 ROA%18.4 29.4 25.1 23.1 ROE%19.2 30.1 26.3 24.2 EV/EBITDA x 6.2 3.6 3.5 3.3 Net debt/equity%3.9-8.5-17.7-27.3 P/BV x 2.0 1.6 1.4 1.2 914 HK rel HSI performance,&rec history Note:Recommendation timeline-if not a continuous line,then there was no Macquarie coverage at the time or there was an embargo period.Source:FactSet,Macquarie Research,January 2019(all figures in Rmb unless noted,TP in HKD)Analysts Macquarie Capital Limited David Ching,CFA +852 3922 1823 Bryan Wang +852 3922 3589 Anhui Conch Cement(914 HK)Prelim FY18 beat;optimistic on 2019 prices Key points Conch prelim FY18+80-100%YoY,beating consensus by 7%on average Recent large cement price cuts expected and less than seasonality Reiterate OP attractive valuation at 5.7x 19E PE,7%div yield,26%ROE Event Conch announced a FY18 positive profit alert post market-close on 10 Jan expecting NPAT at+80-100%YoY to Rmb28.6-31.8bn,beating our est./consensus by 5%/7%on average.This implies 4Q18 NPAT+30-82%YoY to Rmb7.9-11bn(we est.Rmb8.7bn).We see 4Q18E self-produced volume flat YoY at 85mnt,with historic high ASP of Rmb364/t and GP/t of Rmb185/t(4Q17 Rmb17/t).We believe the recent share price correction is a good entry point cement is our preferred sub-sector in 2019 and Conch is our top pick.Impact East China price cut last than seasonality:Clinker prices were cut last week by Rmb160/t to Rmb360/t(-31%and still up Rmb40/t YoY)this has sparked investor concern the price drop is more than seasonality.But this was mainly to cut off imported clinker from Vietnam(breakeven at Rmb388/t).In 2018,the price drop from 4Q peak to 1Q trough was-Rmb180/t or-36%(from Rmb500/t to Rmb320/t.So the current price drop is more in one-step and less than the previous years magnitude.The one-step big cut is a signal by major players to set the price bottom so other players dont try to undercut it.Trading platform helps stabilise price:In 3Q18 Conch/CNBM established a trading platform in East China to centralize the inflow of cheap products from different regions Conch earn a very low margin(NP/t Rmb1/t)for this,but it can control the cement selling price of these inflow products so as to stabilise prices and achieving higher pricing power(and being less affected by low prices in other regions)we see 70mnt trading volume in FY18E Remained positive on 2019 outlook:Cement is our most preferred sector in 2019,and we are less bearish on property demand compared to the street,as we believe construction progress should speed up in 1H19 as property developers land banking activity slows.We also see limited risks from new capacity(including capacity swap)seeing only 0.3%net capacity addition vs.1%demand growth.Voluntary production cut/price coordination of key players should remain strong in key regions like East/South China.We see limited risks for regulator intervention on cement prices,given the 95%utilisation.Earnings and target price revision We lower 2019-20E EPS by 4%/5%on lower smartphone demand,and lower TP to NT$250(16x 2H19-1H20E PE)from NT$270(17x previously).Price catalyst 12-month price target:NT$250.00 based on a PER methodology.Catalyst:7nm ramp,customers 7nm product launches.Action and recommendation Maintain Outperform.5 Please refer to page 20 for important disclosures and analyst certification,or on our website January 2019 Philippines EQUITIES Philippine banks Recommendations,target prices,volatility Mkt cap TSR Target Ticker Rec(US$bn)Volatility(%)(P)BDO N 10.9 Low 9.1 140 BPI N 8.0 Low 9.3 100 MBT OP 6.2 Low 19.1 96 SECB OP 2.5 Low/med 11.7 189 Prices as of the market close of 8 January 2019.Source:Bloomberg,Macquarie Research,January 2019 Philippine banks Valuations 2019E 2019E 2019E 2019E Price PER EPS ch P/B ROE Ticker(P)(x)(%)(x)(%)BDO 130.30 16.3 11.1 1.6 10.5 BPI 93.00 15.4 7.3 1.6 10.5 MBT 81.45 11.4 13.5 1.1 10.0 SECB 171.00 15.1 12.6 1.3 8.8 sector 14.7 10.7 1.5 10.2 Prices as of the market close of 8 January 2019.Source:Bloomberg,Macquarie Research,January 2019 Philippine banks EPS changes 18E 19E 20E (%)(%)(%)BDO 9.0 9.8 9.4 BPI 6.0 0.8 1.4 MBT 3.0 12.5 10.4 SECB 5.1 14.4 21.3 Sector 6.2 10.5 10.5 Source:Macquarie Research,January 2019 Philippine banks:New TPs and ratings PT PT Rating Rating New old new Old (P)(P)BDO 140 130 N N BPI 100 95 N N MBT 96 88 OP OP SECB 189 160 OP UP We are moving our stance on the sector to overweight from neutral,from a country perspective.Source:Macquarie Research,January 2019 Inside BDO Unibank 4 Bank of the Philippine Islands 8 Metropolitan Bank 12 Security Bank 16 Analysts Macquarie Capital Securities(Philippines)Inc.Gilbert Lopez +63 2 857 0892 Philippine banks Better growth in 2019E,especially for those with good cost control Key points From a country perspective we are moving to an overweight stance on the Philippine banks.Higher NIM is a key driver for higher EPS,but those banks with good cost control should have the most attractive growth.We are upgrading SECB to Outperform,though MBT is our top sector Outperform as it has the most upside potential.Conclusion From a country perspective,we are moving to an overweight stance on the Philippine banks from a neutral stance.For the individual banks,our biggest change is our upgrade of Security Bank(SECB)shares to Outperform from Underperform.We are also raising target prices for all of the banks under coverage,in step with the average 9.1%increase in EPS for the sector.On a regional financials perspective,Philippine banks are less favoured due to the persistence of low ROE amid relatively high valuations.Impact NIM improvement on loan pricing emphasis and RRR reductions.The biggest driver behind our increased EPS forecasts is an average annual increase in NIM of 19bp.This is being driven by the recent increased emphasis by the banks in fully passing on increases in interest rates to borrowers rather than staying volume growth-focussed.Also helping NIM will be the forthcoming RRR cuts,which we believe will be more pronounced in 2019 compared with the 200bp in cuts seen last year due to the far tighter liquidity landscape and the lower likelihood of a further rise in interest rates.NIM expansion should overshadow the mild slowdown in loan growth.Cost control should be the main differentiator