Morning Brief

MarketResearch MorningBrief [November4th,2024] MorningBrief ZHOUJinyu021‐38674924zhoujinyu011178@gtjas.comS0880516080007 Contents TopRecommendations ●A‐ShareStrategyWeekly:Broad‐baseLarge‐capStocksPreferred ●SecuritiesSector:UpdateReport ●Ruoyuchen(003010):OW,TP@RMB22.35 ●ActiveQuantitativeResearch:UpdateReport ●IPOMarket:UpdateReport ●MacroResearch:UpdateReport ●OverseasMarketStrategy:HongKongStocks 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 A‐ShareStrategyWeekly:Broad‐baseLarge‐capStocksPreferred Althoughtherehavebeenshort‐termmarketcorrectionsrecentlydespitesmallerdisputesaboutgovernmentpolicies,A‐sharemarketismostprobablytofollowanN‐shapedcurveinthemediumrun.OurpredictionsaboutmarketcorrectionsdatedonSeptember24thandOctober20thwerealmostinlinewiththeactualmarketperformancesafterwards.Asforthemarketperformancesinfuture,wewouldliketomentiontwopoints.First,thechangeoftheauthority’sattitudetowardeconomicsituationandcapitalmarketisthecornerstonefortheriseofA‐sharemarketandmarketsentiments,anditisalsothebasisforamedium‐termN‐shapedmarketriseatahigherstartingpoint.Second,afterthemarketdisputeshavenarrowed,thetradingonmarketexpectationsaloneisnolongerabletosustainthestockmarketrise,assignaledbythedescendingturnoverofthematicstocks.Duringtheongoingmarketfluctuations,large‐capstocksaremoreabletorealizerelativereturn,wethink.Thegeneralmarketdirectionwillbecomeclearbytheendthisyearwhentheauthoritydecideswhethertomoveonfrom“monetaryeasing”to“creditexpansion”. TheU.S.presidentialelectionisanotheressentialfactor.ThemarketconsensusexpectationbelievesthatifTrumpisreelected,Chinawillhavetostrengthenitscountercyclicalpolicies.Suchexpectationisalogicalconclusion,buttherealconditionswillbecomplicatedanduncertain.First,ittakestimetoseeasecondinflationdrivenbyTrump’stariff,taxationandimmigrantpoliciesifhedoeswintheelection,butthefastrisinginterestrateswillbeaninstantpressureonthedemandside.Therefore,itisadvisabletotradeonliquidityeasingfirstandthenonthesecondinflation.Theinterest‐rate‐sensitivenonferrousmetals,innovativedrugsandHongKonginternetsectorsshouldbethefirstchoice,wethink.Second,becauseofthetariffhikeagainstChinaproposedbyTrump,weadvisetoavoidthelabor‐intensiveindustriesincludingtextileandgarment,furnitureandbags&suitcases,andtheindustriesrelianttoexporttoU.S.suchasmedicalsupplies,dailychemicalsandautomotiveparts.Ontheotherhand,becauseChinamayresorttoRMBdevaluationtoassuagetheimpactfromU.S.tariffhike,China’sexportstonon‐U.S.countriesmaytakebenefit,suchastheexportsoftwo‐wheeledvehicles,commercialvehiclesandships. Thematicsectorshavestartedtocooldown;large‐capstocksaremoreabletorealizerelativereturnintheshortterm;themedium‐termoutlookwillcountontheturnaroundofindustryclimates.Forthetimebeing,wepreferbroad‐baselarge‐capstocks,andwerecommendthefollowingsectors:(1)(beneficiariesofliquidityeasing)electricpower,telecomoperator,railwayandexpressway;(2)(beneficiariesofdomesticpolicystimulus(e.g.localgovernmentdebtreduction,consumptionstimulus)):construction,environmentalprotection,warindustryandHongKonginternetstocks;(3)(bottom‐outofproductioncapacities)electronic,automobile,constructionmachineryandalternativeenergy. Asforinvestmentthemes,werecommend(1)“LocalGovernmentDebtReduction”:environmentalprotection(municipalengineering)andITapplicationinnovation;(2)“ZhuhaiAirshow”:assemblyandunmannedequipmentandsmart equipmentindustrychain;(3)“WinterSportsEconomy”:stadiumandsportsgrounddesignandconstruction,wintersportsequipment,andwintersports‐relatedtourism; (4)“M&AofSOEs”:state‐ownedcapital’sM&Ainstrategicemergingindustries,andenergy&naturalresourcesandpublicservicessectors. Risks:bigger‐than‐expectedrecessionofoverseaseconomies;globalgeopoliticaluncertainties. SecuritiesSector:UpdateReport In2024Q1~3,thenetprofitandadjustedrevenueoflistedsecuritiescompaniesfellby5.93%and6.13%yoy.Onlyinvestmentbusinessmanagedsomeprofitgrowth,butthecontractionoftheequityinvestmentexposurehasrestrictedthegrowthofinvestmentreturn.Takingintoboththefasteradvanceofsupply‐sidereformsandthestrongerabilitiesoftheleadingbigcomprehensivesecuritiescompaniestocopewiththecyclicalrotationofthemarketenvironment,werecommendtheleadingsecuritiescompaniespossibleofM&Aactivities,suchasGalaxySecurities(601881)andCITICSecurities(600030). Ruoyuchen(003010):OW,TP@RMB22.35 [Rating:OW(Prv:N/A);TP:RMB22.35(Prv:N/A);MP:RMB14.45;Mkt‐Cap:RMB2457mn] FastersalesgrowthoftheCompany’smainbrandLYCOCELLEwillsustaintheCompany’sfastprofitgrowth.WeforecasttheCompany’s2024‐2026EPSofRMB0.53,0.79and1.08.BasedontheaverageofPEandPSvaluations,wesuggesttargetpriceofRMB22.35(marketvalueofRMB3.8bn,2025PEof28x).“Overweight”rating. ActiveQuantitativeResearch:UpdateReport Thisweek(October28th–November1st,2024),small‐capthematictradingremainedactive.AveragedailymarketturnoverrosetoCNY2trillion,indicatingincreasingmarketdisputes.TheU.S.presidentialelectionandChina’sdomesticfiscalpoliciesarestillthekeyfactorsthat