摩根士丹利-中国-房地产行业-房地产交易的潜在赢家-2020.2.18-43页.pdf

MMMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research.Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of this report.+=Analysts employed by non-U.S.affiliates are not registered with FINRA,may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company,public appearances and trading securities held by a research analyst account.China Consumer and China IndustrialsPotential Winners from Property CompletionsIn our view,China property completions are heading into an upcycle.We initiate coverage on six property completion-related stocks in two accompanying reports:B2B players BNBM and Kibing at OW;and B2C players Oppein,Suofeiya at OW;Shangpin,Opple at EW.February 18,2020 09:00 PM GMTMMMORGAN STANLEY ASIA LIMITED+Hanli Fan,CFAEquity Analyst+852 3963-1017Hanli.F Contributors MORGAN STANLEY ASIA LIMITED+Hangjie ChenEquity Analyst+852 2848-7168Hangjie.CMORGAN STANLEY ASIA LIMITED+Lillian LouEquity Analyst+852 2848-6502Lillian.LMORGAN STANLEY ASIA LIMITED+Kevin Luo,CFAEquity Analyst+852 2239-1527Kevin.LMMChina Consumer and China IndustrialsPotential Winners from Property CompletionsIn our view,China property completions are heading into an upcycle.We initiate coverage on six property completion-related stocks in two accompanying reports:B2B players BNBM and Kibing at OW;and B2C players Oppein,Suofeiya at OW;Shangpin,Opple at EW.We are bullish on the China property completion upcycle.Chinas National Bureau of Statistics(NBS)recorded 16%yoy growth in property completions in 4Q19,after 28 months of data in negative territory.We believe that 4Q19 was the inflection point,and the upturn will continue in 2020.Apartments completed,forecast from 4Q19 to 2021,were the ones pre-sold in 2016 and 2017.The upcycle is evidenced by higher growth in total property development funds,acceleration in leading indicators,and 20-25%yoy revenue growth forecasts for property developers in 2019-21,according to our China property team.We expect a surge in property completions to act as the primary share price catalyst for related companies in 2020.Fundamental impacts vary by company product offerings.We split the property completion-related companies business models into B2B(sells to property developers)and B2C(sells to consumers)businesses.We also consider the fact that pre-decorated apartments are taking share from concrete apartments.For B2B business,funda-mentals have improved from 3Q19,ahead of property completions.We believe that the fundamental upturn will continue in 2020,sup-ported by a surge in construction activities.For B2C,we expect the weak demand in 2019 to turn around in 2Q/3Q20,given that con-sumers should start purchasing home durables after obtaining prop-erty.Market share dynamic,channel strategy and expansion into other categories are company differentiators.For the China Industrials industry,BNBM and Kibing are,respectively,expanding into waterproof materials and other high-margin glass products,seeking new earnings growth drivers.For the China Consumer industry,pre-decorated apartments and young consumers are struc-turally shifting the channel landscape of furnishing companies.The property developer,online,and decoration channels are taking share from the traditional offline retail channel.In our view,companies can gain significant share if they can quickly react to this shift in sales channels.Initiate on BNBM,Kibing,Oppein,Suofeiya at OW;Shangpin and Opple at EW.All six companies appear favorably positioned,as they are leaders in their respective segments,each with strong capability to benefit from the property completion tailwinds.Our ratings and order of preference are based on stock risk-reward profiles.Oppein,BNBM,and Suofeiya are our top picks.Refer to the accompanying two separate reports for our B2B initiations(BNBM and Kibing),and our B2C initiations(Oppein,Suofeiya,Shangpin,Opple).Exhibit 1:Key metrics-ratings and price targets CompanyAnalystTickerRatingMarket CapPTClose PriceUpside/(downside)US$mnRmbRmbOppeinHanli Fan603833.SSOW6,902139.0114.821%BNBMHangjie Chen000786.SZOW6,22530.525.718%SuofeiyaHanli Fan002572.SZOW2,66024.020.418%KibingHangjie Chen601636.SSOW2,0246.15.316%OppleHanli Fan603515.SSEW2,87327.026.62%ShangpinHanli Fan300616.SZEW2,08970.073.5-5%Source:Refinitiv,Morgan Stanley Research.e=Morgan Stanley Research estimates.Note:Closing prices in this report are as of the market close on February 17,2020,unless otherwise indicated.Exhibit 2:Key metrics-valuations and forecastsCompanyPT Implied20e P/E21e P/E20e P/E19e20e21eOppein21.518.026.018%20%20%BNBM13.811.916.4-84%699%16%Suofeiya15.413.618.012%14%13%Kibing8.97.710.310%20%16%Opple18.115.918.57%15%14%Shangpin22.119.121.015%18%16%TradingEarnings growthSource:Refinitiv,Morgan Stanley Research.e=Morgan Stanley Research estimates.Industry ViewChina/Hong Kong Consumer -In-LineChina Industrials -In-LineM4M Contents 5Key Charts6Order of Preference7Investment Summary12Potential Impact from the Property Market21Property Completion-Related Companies26China Home Furnishings Segment 33Potential Impact from Covid-1935Comps TableMMORGAN STANLEY RESEARCH5MExhibit 3:Property new starts,sales,completions GFA monthly yoy growth(3MMA)-30%-20%-10%0%10%20%30%40%Started yoy%(3MMA)Sold yoy%(3MMA)Completed yoy%(3MMA)Source:National Bureau of Statistics of China(NBS),Morgan Stanley Research.Key ChartsExhibit 4:Pre-decorated apartments nationwide penetration (left)and pre-deco-rated apartments city-tier penetration in 2018(right)12%20%28%32%86%50%8%88%80%73%68%14%50%92%0%10%20%30%40%50%60%70%80%90%100%20162017201820191st tier2nd tier3rd tierand belowPre-decoratedConcreteSource:Zhilian,Morgan Stanley Research.Exhibit 5:Construction process and corresponding property completion-related companies in each stageSource:Morgan Stanley Research.Exhibit 7:Revenue growth,2019/20e9%13%17%6%10%5%32%14%20%13%14%12%0%5%10%15%20%25%30%35%BNBMKibingOppeinSuofeiyaShangpinOpple2019e2020eSource:Company data,Morgan Stanley Research.e=Morgan Stanley Research estimates.Exhibit 6:Revenue contribution estimates from domestic property developers channel(B2B),domestic retail channel(B2C),and overseas channel89%89%15%13%9%10%75%85%90%100%11%10%0%10%20%30%40%50%60%70%80%90%100%KibingBNBMOppleOppeinSuofeiyaShangpinChina B2B channelChina B2C channelOverseasSource:Company data,Morgan Stanley Research.Note:Opples B2B channel also includes offices and public buildings.M6MOrder of PreferenceExhibit 8:Property completion-related stocks:Order of preferenceOppeinBNBMSuofeiyaKibingOppleShangpin603833.SS000786.SZ002572.SZ601636.SS603515.SS300616.SZRatingOverweightOverweightOverweightOverweightEqualweightEqualweightTrading CurrencyCNYCNYCNYCNYCNYCNYPrice Target139.030.524.06.127.070.0Current Price 114.8 25.74 20.4 5.26 26.6 73.5 Upside/(Downside)(%)21%18%18%16%2%-5%Market Cap(in USD mm)6,848.6 6,225.1 2,689.0 2,024.2 2,871.9 2,039.6 Avg Daily Traded Vol(in USD mm)17.5 32.0 32.6 19.3 9.8 5.6 Morgan Stanley EstimatesFY19eCNYCNYCNYCNYCNYCNYSales 13,473 13,729 7,727 9,458 8,376 7,312 EBITDA 2,463 3,103 1,576 2,334 947 667 EBIT 1,973 2,608 1,267 1,553 834 545 EPS 4.5 0.2 1.2 0.5 1.3 2.8 FY20eSales 16,174 18,144 8,728 10,799 9,369 8,370 EBITDA 3,103 4,055 1,873 2,726 1,101 807 EBIT 2,425 3,526 1,494 1,874 974 647 EPS 5.3 1.9 1.3 0.6 1.5 3.3 FY19 MSe vs.Consensus MeanSales0.3%7.0%-1.1%2.8%0.7%-1.0%EBITDA-1.9%8.9%3.4%-11.1%-9.0%-2.1%EBIT-4.7%12.4%-0.3%-2.2%-11.0%-11.4%EPS1.4%-27.4%5.2%-0.9%3.9%0.8%FY20 MSe vs.Consensus MeanSales2.8%26.6%0.2%8.5%1.3%-4.4%EBITDA3.6%12.6%7.0%-6.3%-6.5%-9.6%EBIT-2.0%17.0%1.5%8.5%-9.1%-12.2%EPS2.4%14.5%6.0%6.2%6.0%-0.8%Valuation Multiples at Last CloseFY19eP/E25.7x110.5x17.6x10.7x20.8x26.1xEV/EBIT 23.4x17.1x14.2x10.4x24.4x23.0 xEV/EBITDA18.7x14.4x11.4x7.0 x21.5x18.8xEV/Sales3.4x3.3x2.3x1.7x2.4x1.7xFCF Yield1.2%-1.3%4.2%6.2%4.1%2.5%FY20eP/E21.5x13.8x15.4x8.9x18.1x22.1xEV/EBIT 18.3x12.4x11.4x8.2x19.0 x18.4xEV/EBITDA14.3x10.8x9.1x5.7x16.8x14.8xEV/Sales2.7x2.4x1.9x1.4x2.0 x1.4xFCF Yield2.3%5.4%5.0%7.5%4.9%4.0%Implied Multiples on MS Price TargetFY19eP/E31.2x130.9x20.7x12.4x21.2x24.8xEV/EBIT 28.1x20.4x16.4x11.5x23.4x21.4xEV/EBITDA22.5x17.1x13.2x7.7x20.6x17.5xEV/Sales4.1x3.9x2.7x1.9x2.3x1.6xFY20eP/E26.0 x16.4x18.1x10.3x18.4x21.1xEV/EBIT 26.7x16.4x16.6x9.8x23.9x24.1xEV/EBITDA20.9x14.3x13.3x6.8x21.1x19.3xEV/Sales4.0 x3.2x2.8x1.7x2.5x1.9xSource:Refinitiv,Morgan Stanley Research estimates.e=Morgan Stanley Research estimates.MMORGAN STANLEY RESEARCH7MHangjie Chen initiates coverage on two B2B property completion-re-lated companies in the China Industrials industry.Please see the com-pany details in the separate report,China Industrials:Potential Winners from Property Completions-Initiating on Two Industrials Stocks:lBeijing New Building Material (BNBM,000786.SZ,OW,PT=Rmb30.5)lKibing(601636.SS,OW,PT=Rmb6.1)Hanli Fan initiates coverage on four B2C property completion-related companies in the China Consumer industry.Please see the company details in the separate report,China Consumer:Potential Winners from Property Completions-Initiating on Four Consumer Stocks.lOppein(603833.SS,OW,PT=Rmb139.0)lSuofeiya(002572.SZ,OW,PT=Rmb24.0)lShangpin(300616.SZ.EW,PT=Rmb70.0)lOpple(603515.SS,EW,PT=Rmb27.0)From a top-down perspective,we are bullish on the property comple-tion cycle in 2020,and we expect the upturn to continue from 2H19 to 1H21,following the number of apartments pre-sold in 2016 and 2017.Company-specific performance depends on products offerings,market dynamics,and individual financial performance.Across our three reports published today,we initiate on six stocks that will give Investment Summaryinvestors an opportunity to invest across subsegments and cycle stages.BNBM and Kibing are construction material companies that should continue to benefit from property completion construction activities.Oppein,Suofeiya,Shangpin,and Opple are home furnish-ings companies.Consumers would start purchasing home furnish-ings after getting apartments from developers.We expect furnishing fundamentals to turn upward in 2Q/3Q20.Under Morgan Stanley Research current China Industrials and China Consumer coverages,market sentiment of the following 12 stocks is likely to be driven by property completion activities in 2020:lConstruction and decoration activities:Gold MantislConstruction and decoration materials:Lesso,BNBM,Kibing,Oriental Yuhong,WeixinglCustomized furniture:Oppein,Suofeiya,ShangpinlLighting:OpplelKitchen appliances:Robam,VattiWhite goods companies(Gree,Midea,Haier Smart Home,Haier Electronics)should also benefit from the property completion upcycle.However,because of their large scale and reliance on replacement demand,the effects are unlikely to be as direct as expe-rienced by the other 12 stocks.Exhibit 9:Property completion stocks under Morgan Stanley China Consumer and China Industrials teams coverage IndustryB2B/B2CCompanyTickerAnalystProduct categoryChina B2BChina B2COverseasKibing601636.SSHangjie ChenGlass89%0%11%Lesso2128.HKKevin LuoPlastic pipe95%2%3%BNBM000786.SZHangjie ChenGypsum board89%10%1%B2BGold Mantis002081.SZHangjie ChenDecoration90%10%0%Oriental Yuhong002271.SZHangjie ChenWaterproof materials84%15%1%Weixing002372.SZHangjie ChenPlastic pipe33%63%4%Robam002508.SZHanli FanKitchen appliances20%79%1%Opple603515.SSHanli FanLighting15%75%10%Oppein603833.SSHanli FanKitchen cabinets13%85%3%Suofeiya002572.SZHanli FanWardrobes9%90%1%B2CVatti002035.SZHanli FanKitchen appliances8%83%9%Gree000651.SZLillian LouLarge appliances7%82%11%Midea000333.SZLillian LouLarge appliances5%52%43%Haier Smart Home600690.SSLillian LouLarge appliances3%48%49%Haier Electronics1169.HKHanli FanLarge appliances3%89%8%Shangpin300616.SZHanli FanCustomized funiture0%100%0%Revenue contribution estimatesChina IndustrialsChina ConsumerSource:Company data,Morgan Stanley Research estimates.Note:Rows shaded in grey refer to the six stocks that we are initiating coverage on.M8MWe are confident on property completions in 2020After 28 months(including residential,offices,public buildings,etc)in negative territory,NBS property completion monthly growth rates returned to positive territory in August 2019,and recorded 16%yoy growth for 4Q19.Property developers intention to extend the construction period was the main reason for the delayed completion downcycle from 2017 to 2019.Recently,underlying data have been pointing to a recovery in prop-erty completions in 4Q19,and we believe that the trend will last across 2020 and into 2021.Property construction growth surged in 2019,indicating a late-stage acceleration in property development,i.e.,stemming from construction activities around the completion period.We have also seen other evidence supporting our view:(1)growth in total property development funds has surpassed that in housing sales since late 2018;(2)leading indicators,such as produc-tion of elevators and plate glass,have recorded accelerated growth in 2019;and(3)major developers expect 20-25%yoy revenue Exhibit 11:Property completions GFA annual yoy growth7%2%6%-7%6%-4%-8%3%10%-10%-8%-6%-4%-2%0%2%4%6%8%10%12%-200 400 600 800 1,000 1,2002011201220132014201520162017201820192020Esqm mnGross floor area completedCompleted yoy%Source:NBS,Morgan Stanley Research.e=Morgan Stanley Research estimates.growth in 2019/20/21.We believe that the subdued construction activities in 2018 were primary reasons for delayed completions,and that a recovery in completions will last until 1H21.Apartments that will be delivered from 4Q19 to 2021 were pre-sold in 2016 and 2017,and mostly driven by 3rd tier cities.We expect property completions to increase 10%yoy in 2020.Along with the strong completion cycle,we see a structural change for delivering more pre-decorated apartments than concrete apart-ments,particularly in 1st and 2nd tier cities.Under pre-decoration apartments,decoration activities such as water and electricity instal-lation,plaster work,carpentry work,painting work,kitchen cabinets and kitchen appliances installation etc.,are mostly carried out by property developers rather than property owners(the consumers).A shift in this direction will drastically change the business model of construction materials and home durables companies.These compa-nies will see more business orders from the property developers(B2B channel)than from consumers(B2C channel).Related compa-nies that can quickly shift their business model to adapt to this change in the property market should see better business perfor-mance.Exhibit 10:Property new starts,sales,completions GFA monthly yoy growth(3MMA)-30%-20%-10%0%10%20%30%40%Started yoy%(3MMA)Sold yoy%(3MMA)Complet