Morning Brief

MarketResearch MorningBrief [September19th,2024] MorningBrief ZHOUJinyu021‐38674924zhoujinyu011178@gtjas.comS0880516080007 Contents TopRecommendations ●OverseasMarketStrategy:HongKongStocks ●A‐ShareStrategySpecial:PassiveFunds ●FluorineChemicalSector:UpdateReport ●ConstructionSector:UpdateReport LatestReports ●HongfaTech(600885):OW,TP@RMB35.36 ●JinxiAxle(600495):OW,TP@RMB4.38 ●iSoftStone(301236):OW,TP@RMB42.97↓ ●Leadshine(002979):OW,TP@RMB32.50↑ ●TriumphTech(600552):OW,TP@RMB14.03 ●VeichiElectric(688698):OW,TP@RMB31.40↓ SectorRatingsoftheMonthMarketStrategyWeeklyViewpoint 本报告内容译自同日发布的简体中文报告《国泰君安晨报》，报告观点及内容如有任何不一致的地方，一律以该简体中文版报告为准。 TopRecommendations OverseasMarketStrategy:HongKongStocks AstheFedReserve’sinterestratecutwillbesoonconfirmedthisSeptember,weadvisetoactivelyparticipateinthetradingofHongKongstocksonthisinterestcut.Theinterestrate‐sensitivesectorswhichhavemanagedtoimproveorsustaintheirbusinessearningsaremoreabletorealizebetterstockmarketperformances.AndtherisingexpectationsforthepolicysupportoftheChinesegovernmentmaydeterminehowfarthereboundofHongKongstockscango.Ofallsectors,weprefer (1)(risingprofitmarginandinvestmentreturnafterthemarketclearing)theleadingHSTECHandinternetstocks;(2)(sensitivetointerestrate;betterbusinessclimate)electronic,automobileandpharmaceuticalsectors;(3)(stablehigh‐dividendassets)publicutilitiesandtelecomsectors. A‐ShareStrategySpecial:PassiveFunds Duringtheinflowofpassivefunds,CentralHuijin’spricingpowerhasbecomemuchstronger.Besidesthetraditionalbroad‐baseCSI300ETF,Shanghai50ETFandCSI500ETF,CentralHuijinhasstartedsubscribeotherbroad‐baseETFsincludingChiNextETF,STAR50ETFandCSI1000ETF.TheETFholdingsofCentralHuijinrosefromRMB110.0bnattheyearbeginningtoRMB570.0bnbytheendof2024Q2.Itsaveragepositionratiorosefrom34.60%attheendof2023to47.48%sofarthisyear,andhasexceeded50%inmanyETFs.TheAUMofCentralHuijinincreaseditspositionbyRMB5.0bnin2024H1,ofwhich,CSI300ETFandCSI500ETFtookthemajoritypart. OnSeptember23,CSIA500istobelaunched.ComparedtoCSI300,CSI500reducestheinfluencesofsizefactoronsectordistributionandenhancedequilibriumofsectordistributionundermarket‐capsampleselection.Meanwhile,CSI500includesmoreleadingcompaniesfromtheemergingindustries,ofwhich,theweightingsofpowerequipment,pharmaceutical&biotech,warindustry,nonferrousmetalsandmediasectorsincreasewhiletheweightingsofbanking,non‐banfinance,food&beverage,agricultureandcoalsectorsdecrease. FluorineChemicalSector:UpdateReport Sincethequotaofsecond‐generationrefrigerantswascutasexpected,thepricesmayreboundlater.Astheindustrialpolicyonthethird‐generationrefrigerantsisunchanged,thebusinessclimateoftheproducersmaycontinue.Weprefertheproducersofstrongcompetitivepowerindomesticmarket,wideproductrange,richtechreservesandhighproductionquota,includingSanmeiChemical(603379),YongheRefrigerant(605020),HaohuaChemical(600378)andDongyueGroup(0189.HK). ConstructionSector:UpdateReport InAugust,thecompletedfixedassetinvestmentincreasedby2.0%yoy(+0.2%ptmom);exportvalueincreasedby8.7%yoy(+1.7%ptmom);medium‐andlong‐termbusinessloansincreasedbyRMB490.0bnyoy(‐RMB154.4bnyoy).Inthesamemonth,thebroad‐senseinfrastructureinvestmentincreasedby6.2%yoy(‐4.5%ptmom),of which,powerinvestmentincreasedby21.9%yoy.Thenarrow‐senseinfrastructureinvestmentincreasedby1.2%(‐0.8%ptmom). Theissuanceanduseofultra‐long‐termTreasurybondsandspecialgovernmentbondswillhelptosustainthestablegrowthofinvestment.Offeaturedcompanies,werecommend(powertransmissionandtransformationengineeringforpowergrid)ChinaEnergyEngineering(601868),(realestate)ChinaConstructionEngineering(601668),(infrastructure)ChinaCommunicationsConstruction(601800),(pro‐cyclical)ChinaChemicalEngineering(601117)and(highdividend)TunnelEngineering(600820). LatestReports HongfaTech(600885):OW,TP@RMB35.36 [Rating:OW(Prv:N/A);TP:RMB35.36(Prv:N/A);MP:RMB26.65;Mkt‐Cap:RMB27787mn] TheCompanyisaleadingproducerofrelaysintheworld,andisabletorealizefastprofitgrowththankstoboththehighbusinessclimateofthedownstreamalternativeenergyindustryandtherecoveryofautomobileandhomeappliancesindustries.WeforecasttheCompany’s2024‐2026netprofitofRMB1.685bn(+21%yoy),1.960bn(+16.3%yoy)and2.242bn(+14.4%yoy),andEPSofRMB1.62,1.88and 2.15.BasedonbothPEandPBvaluationmethods,wesuggest2025targetpriceofRMB35.36.“Overweight”rating. JinxiAxle(600495):OW,TP@RMB4.38 [Rating:OW(Prv:N/A);TP:RMB4.38(Prv:N/A);MP:RMB3.25;Mkt‐Cap:RMB3927mn] TheCompanyengagesintheproductionofrailwayequipment,anditsprofitgrowthmayoutrunmarketexpectationsbecauseofthegovernmentpromotionofequipmentreplacementandtheoverhaulofrailways.WeforecasttheCompany’s2024‐2026EPSofRMB0.03,0.04and0.05.WesuggesttargetpriceofRMB4.38(2024PEof128x)and“Overweight”rating. iSoftStone(301236):OW,TP@RMB42.97↓ [Rating:OW(Prv:OW);TP:RMB42.97(Prv:RMB46.96);MP:RMB33.59;Mkt‐Cap:RMB32009mn] BasedontheCompany’slatestfinancialdata,welowerourforecastsoftheCompany’s2024‐2026EPStoRMB0.66(‐0.34),0.86(‐0.58)and1.16.Wesuggest2024PEof65.10xandlowerthecorrespondingtargetpricetoRMB42.97.“Overweight”ratingmaintained. Leads