Report Review of October 2017 November 1, 2017 909

Automobile & Air (ZhangJing)

This month I released 4 equity reports including SIA(600009 CH),Yutong(600066 CH),Weifu(000581 CH),and Navinfo (002405 CH). Among which, we prefer the Weifu and SIA. On July 1, 2017, the National V Emission Standard was formally implemented for domestic heavy trucks around the country. On January 1, 2018, it will be implemented for light trucks as well. In addition, the National VI Emission Standard formally entered its preparation stage (predicted to be implemented in 2020); the post-treatment system of commercial vehicle will enter a period of favorable policies. It is expected that both the quality and price of products of Weifu will increase.The duty-free business contract of the Company will expire in March 2018, and the management has indicated that a new round of bidding plan is underway, and we expect that it will be started before the end of this year. It is expected that the commission percentage will increase from about 25% to 45%, greatly improving the result of the SIA.

Environmental protection (Wang Yannan)

In this month I released 3equity reports, including Doongjiang ENV (895.HK), Kangda ENV(6136.HK ), Tus-Sound (000826.SZ). The Company spares no efforts to accelerate the expansion of newly constructed/increased hazardous waste treatment projects, coupled with rapid expansion of treatment scale. With the release of new capacity and concentration of market share to the dominant industry, it is expected that the main business of hazardous waste treatment will maintain high-speed growth. In addition, environmental facilities services and municipal business will make a significant complement to overall result. Also, the Company seizes the opportunity to launch PPP new business and focuses on expanding soil restoration, watershed management, urban pipe network and other new projects with the aim of creating new profit growth point and opening upward space for overall result. It is forecast that net profit of the Company in 2017 and 2018 will reach RMB506 million and RMB640 million, respectively; earnings per share (EPS) will be RMB0.57 and RMB0.72, respectively; the target price will be HKD14.0, with a Buy rating.

Healthcare & Consuming (Eurus Zhou)

This month I released 4 equity reports, including CSPC Pharma (1093.HK), Hop Hing Group (47.HK), China-TCM (570.HK) and Jumpcan Pharma (600566.SH). We tend to highly recommend China-TCM (1093.HK) and CSPC Pharma (47.HK). Both the companies reported solid growth in first half. For China-TCM, in first half the concentrated TCM granules distributed by medicine dispensing machine dramatically increased by 65.7% YoY in terms of revenue. Because it charges a high switching cost to the hospitals, we see that the company takes first-mover advantage in hospital market. The company completed the acquisition of two firms mainly focusing on TCM decoction pieces, which contributes to extension of up-stream business and ensure better control over raw materials for TCM granules production. As for CPSC Pharma, we think that in long run its core product NBP and oncology portfolio will serve as key drivers to boost sales volume, given the expanding sales network and wider hospital coverage.

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