Asia ex-Japan Morning Research Summary

Equity Research Hong Kong Open | 24 April 2015Asia ex-Japan Morning Research SummaryRead the latest Japan Equity Research Summary »This summary is compiled from research reports previously published by Barclays Equity Research. A full list of all publications isavailable on Barclays Live. VIEW SETTLEMENT DISCLOSURES, ANALYST CERTIFICATIONS AND OTHER IMPORTANT DISCLOSURES Company ResearchCairn India (CAIL.NS)Cheil Worldwide (030000.KS)China Unicom (0762.HK)Hanjin Transportation (002320.KS)HDFC Bank (HDBK.NS)Hyundai Motor Company (005380.KS)KT&G (033780.KS)M&M Financial Services (MMFS.NS)PAX Global Technology Ltd. (0327.HK)Sands China Ltd. (1928.HK)Siliconware Precision Industries (2325.TW)SK Hynix (000660.KS)SK Telecom (017670.KS)TCL Communication (2618.HK)Industry ResearchChina/Hong Kong Equity Strategy: Still early days in China stock rallyIndonesia Telecom Services: Trip takeaways - easier top down than bottom up storyMINED MATTERS 24/4/15: 450 m3 is the magic number - the rhyme and reason behind the very precise definition of BF size for steel capacityclosures in TangshanMacro ResearchChina: April 'flash' PMI remains subdued at 49.2Global Macro Daily (New York Open): Weak growth weighs on marketsKorea: Q1 growth lifted by construction; we expect an acceleration in Q2Singapore: Services inflation remains stableTaiwan: March IP: Electronics continue to shine Publications Summary | ReportsConsumerKT&G: Results less exciting than they appearStock RatingEqual WeightIndustry ViewNeutralPrice TargetKRW 95000.00Price (23 Apr 2015)KRW 98700.00EPS FY1 (E)7190.38EPS FY2 (E)6227.64Market Cap (KRW mn)13550769Ticker033780.KSAsia ex-Japan StaplesPaul Hwang+82 2 2126 2983paul.hwang@barclays.comBCSL, Seoul Moon Hee Hong+822 2126 2619moonhee.hong@barclays.comBCSL, Seoul 23 April 2015KT&G reported 1Q15 results that initially looked very strong. However, after strippingout an estimated one-off gain of W241bn, we find 1Q15 results to be less exciting.After raising FY15/16E NP estimates by 7%/1% (incorporating 1Q15 results), weraise our 12m PT to W95,000 by applying a target P/E of 16x (15x previously) to ouradjusted FY15E EPS of W5,914. We maintain our EW rating as we consider thevaluation unattractive (trading at FY15E adjusted P/E of 17x, compared to itshistorical high-end average P/E of 16x) and do not see much scope for a dividendincrease this year. We think GS Retail (OW) is a better name to participate in thesmaller-than-expected cigarette volume decline in Korea.Less exciting underlying earnings in 1Q15: KT&G reported W1.1tr sales (+18% y/y),W429bn OP (+65% y/y) and W309bn NP (+64% y/y) in 1Q15, with OP/NP coming inat 85%/82% above Bloomberg consensus estimates. That said, we attribute a largerportion of stronger-than-consensus OP/NP to 1) a larger-than-expected estimatedone-off gain of W241bn (vs. our estimate of W150bn) and 2) consensus largely notreflecting the one-off gain earnings estimates. With 1Q15 adjusted OP (stripping outthe one-off gain) coming in at W188bn (vs. our estimate of W196bn), we raise ourFY16E OP/NP estimates by only 6%/1%, compared to a 15%/7% revision in FY15EOP/NP estimates (more due to the larger-than-expected one-off gain in 1Q15).Positives: 1) Domestic cigarette volumes: 35% y/y decline in 1Q15 and managementindicating mid-teen y/y volume decline in 2Q15, lower than our previousassumptions of 42%/28% y/y decline in 1Q15/2Q15 post tobacco tax hike; and 2)+16% y/y sales growth and OPM expansion at its ginseng business in 1Q15 (thoughthe company's guidance for OPM expansion is not likely to be sustained from 2Q15due to promotions).Negatives: 1) Sharper-than-expected adjusted OPM decline at domestic cigarette(from 39% in 1Q14 to 16%in 1Q15 after stripping out the one-off gain) despitelower-than-expected hit on volume; 2) KT&G suggesting a low possibility of dividendincrease for FY15 (given KT&G raised dividend last year + likely earnings decline inFY16); and 3) OPM decline at cigarette export (from 34% in 1Q14 to 29% in 1Q15)amid both volume decline (-9% y/y) and ASP decline (-3% y/y) - though thecompany is guiding for a better performance from 2Q15. View full report on Barclays LiveBack to Top EnergyCairn India: 4Q net loss but not as bad as it looksStock RatingOverweightIndustry ViewNeutralPrice TargetINR 275.00Price (23 Apr 2015)INR 213.60EPS FY1 (E)22.05EPS FY2 (E)23.79Market Cap (INR mn)400469TickerCAIL.NSAsia ex-Japan Oil & GasSomshankar Sinha+852 2903 2434somshankar.sinha@barclays.comBarclays Bank, Hong Kong Pooja Gupta+91 22 6719 6023pooja.x.gupta@barclays.comBSIPL, Mumbai 24 April 2015Cairn reported an Rs2.4bn loss in 4Q, hurt by write-offs even as core performancewas better than we expected. Still, pre-exceptional FY15 EPS nearly halved y/y withthe firm also cutting dividends to stay cashflow positive. This intent should reflect insharply lower FY16 capex too, weighing on RJ output. Even so, we expect Cairn togenerate +US$1bn in EBITDA at US$60 Brent, leaving the shares at just