HK/China small capsSector outlookHK/China small caps under coverageCompanyTickerMkt capADTOTP (HK$)RecNet profit change(US$m)(US$m)OldNewOldNew15CL16CLSingyes Solar750.HK1,1938.314.8016.60BUYBUY0.1%0.0%Xinyi Solar968.HK2,42013.43.133.59BUYBUY0.0%0.0%CALC*1848.HK9234.115.5015.50BUYBUY0.0%0.0%Tongda698.HK8824.71.751.85BUYBUY5.5%9.1%Minth425.HK2,7413.519.5022.80BUYBUY(0.3%)0.2%Man Wah1999.HK2,2813.29.2010.45BUYBUY0.0%0.0%Lesso2128.HK2,1273.15.156.30BUYBUY0.0%0.0%BJUCD1599.HK1,0261.85.507.00O-PFO-PF0.0%0.0%Xinyi Glass868.HK2,3589.65.105.20O-PFO-PF(1.2%)(1.7%)Haitian1882.HK3,9172.917.0018.20U-PFU-PF0.0%0.0%Lee & Man2314.HK2,4724.14.204.40U-PFU-PF0.0%(0.1%)Nine Dragons2689.HK3,3968.14.405.10SELLSELL0.0%0.0%VTech*303.HK3,5305.0107.50107.50U-PFU-PF0.0%0.0%* No change in Rec and TP for CALC and VTech. Source: CLSA Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@torproprietary database at clsa.comFor important disclosures please refer to page 16.Timothy Lee, CFAtimothy.lee@clsa.com+852 2600 846124 April 2015ChinaSmall capswww.clsa.comSnoopin aroundSmall-capsresearchFactoring in a re-ratingRaising TPs but we still prefer fundamentally sound playsStrong market liquidity will likely help small caps re-rate, leading us to raise TPs. We stick to fundamentals for stock picks as good fundamentals are more welcome by investors and make any re-rating more sustainable. Companies reported mixed 2014 results and we expect this to continue, with better prospects for solar downstream, beneficiaries of falling commodity prices and transport names. Our preferred picks are Singyes, Xinyi Solar, CALC, Tongda, Minth and Man Wah.Mixed performance in 2014qHK/China small caps reported mixed 2014 / 1HFY15 results under a sluggish economic environment with slower growth in various sectors.qXinyi Glass, Nine Dragons and Lee & Man reported weak results on slow property/ retail. Singyes was dragged by unsatisfactory solar installations, and Minth was impacted by slower Japanese car sales.qMeanwhile, Xinyi Solar and Tongda delivered strong results on better product mix.Lesso also saw better margin performance.2015 trend 1: Liquidity-driven market to help re-ratingqAs we discussed in our recent note HK/China SMID Caps (Small caps, big leap), we believe SMID caps are winners under bull markets in general.qDespite no significant, cross-sector fundamental improvement, better liquidity could still help small caps to yield some re-rating.qHowever, we still stick to fundamentals (which will make any re-rating to be more sustainable) for stock picks despite we raise TPs for most stocks under coverage (on higher multiple or on lower discount rate).2015 trend 2: Still mixed fundamentalsqMore solar.We expect 14GW solar installation in 15CL vs. 10.6GW in 2014, with acceleration likely in the coming months, benefiting solar glass demand (Xinyi Solar) and EPC orders (Singyes).qFalling commodity prices.Lower input costs would be margin supportive for Minth, Tongdaand Man Wah.qTransportation. CALCwill see high growth visibility from new aircraft addition. Investments in URT will likely to grow further, driving new orders and benefitUCD.qProperty remains unclear.This will drag float glass demand for Xinyi Glassbut lower LNG cost would help. Plastic pipe demand could also be affected a bit but Lessowill see support from municipal projects, plus still undemanding valuation. qTraditional economy. We remain cautious on Nine Dragons, Lee & Manand Haitianamid still sluggish demand with no major pick up in orders/product prices.Prepared for: ThomsonReuterstony.fung@clamc.com.hk Tony Fung 04/24/15 01:52:55 AM China Life Franklin Asset Management Factoring in a re-ratingHK/China small caps24 April 2015timothy.lee@clsa.com2Mixed performance in 2014HK/China small caps reported mixed 2014 / 1HFY15 results under a sluggish economic environment with slower growth in various sectors. In particular, due to the changing economic structure, traditional sectors like property and retail sectors were slow, and Xinyi Glass, Nine Dragons and Lee & Man reported weak results. Singyes was dragged by unsatisfactory solar installations, and Minth was impacted by slower Japanese car sales. Meanwhile, certain players logged satisfactory results on company-specific strengths, e.g. Xinyi Solar and Tongda delivered strong results on better product mix. Lesso also saw better margin performance.Figure 1HK/China small caps results recapCompanyTickerResults reportedBeat/miss/in-line?DescriptionSingyes Solar750.HK2014Miss2014 core profit of Rmb410m (-12.9% YoY) was 35.7% below our forecast. Major shortfall was the 14% lower than expected revenue particularly for solar EPC and solar product sales, with total order booking of c.480MW (240MW EPC + 240MW product sales) vs. 500MW original target and more lower-ASP product sales in the mix. Bes