Zhitong tips:
Nomura lowered Tencent's (00700) non-IAS net profit forecast for the 2021-22 fiscal year by 5% and 9% to reflect the decline in online gaming revenue forecasts. Online gaming revenue and earnings are expected to increase by 12% and 13% respectively in FY2021;
CMB International expects the revenue and adjusted net profit of China Mobile Games (00302) to increase 40% and 18% year-on-year in the first half of the year, and will launch more than 15 new games in the second half of the year. It is expected that the company will continue to focus on using IP games to drive continuous growth next year;
Daiwa said that given the success of Great Wall Motor (02333) in manufacturing popular models, the 2021 sales forecast will be raised from 1.31 million units to 1.38 million units;
Goldman Sachs raised Nongfu Spring's (09633) earnings per share by 5-6% over the next three years to reflect positive views on the results of the first half of the year. Annual sales are expected to increase 22% and earnings per share are expected to increase by 24%.
Nomura: Maintaining Tencent Holdings' (00700) “Buy” Rating Target Price Reduced 4.5% to HK$698
Nomura said that Tencent's (00700) non-IAS net profit forecast for the 2021-22 fiscal year was lowered by 5% and 9% to reflect the decline in online gaming revenue forecasts. Online gaming revenue and earnings for FY2021 are expected to increase by 12% and 13% respectively. Earlier forecasts were 16% and 19%. Expected next quarter revenue is generally in line with forecasts. Increased investment is expected to slow profit growth, but it may still exceed market expectations. The bank estimates that the company's online gaming revenue in the second fiscal quarter will increase 11% year-on-year, slowing down from 15% in the first quarter. The increase mainly comes from mobile games, mainly due to base effects and the lack of focused new game releases during the period. It also expects fintech and cloud business revenue to increase 40% and 38% respectively in the second quarter.
CMB International: Maintaining the target price of China Mobile Games (00302) “Buy” rating rises to HK$6.2
According to CMB International, it raised the adjusted net profit forecast for China Mobile Games (00302) 2021-23 by 5%, 8% and 6%. The company's revenue and adjusted net profit for the first half of the year are also expected to increase by 40% and 18%, respectively, mainly driven by the dynamics of existing games and the outstanding performance of the two new games. Although profit margins for the first half of the year may be slightly hampered by higher promotion and R&D expenses, the bank believes there is no harm to the full-year profit outlook. The company launched more than 15 new games in the second half of the year, and looks forward to continuing to focus on IP games to drive continued growth next year. Also, the report indicates that the main catalysts include the launch of two new games next month and further cooperation with Bilibili (09626).
Daiwa: Reiterates that the target price of Great Wall Motor (02333) “buy” rating was raised by 31.3% to HK$42
According to the Daiwa Research Report, Great Wall Motor (02333) recently announced that production of the Tank 300 will be suspended from July 22 to August 1, and that chip factories in Southeast Asian countries will close in July, affecting supply. As of mid-July, the total number of undelivered orders for the Tank 300 reached 50,000 units. However, orders are expected to be delayed until the third quarter, seeing some easing in the tight global chip supply situation in August. The bank believes that the Tank 300 is Great Wall Motor's SUV off-road model. Since its price is more attractive than other major off-road models on the market, it sells more than 5,000 units per month, and sales are quite impressive. It believes that due to strong demand, the temporary suspension of production of the Tank 300 will have limited impact on its annual sales. Given the company's success in manufacturing popular models, the bank raised the company's 2021 sales forecast, from 1.31 million units to 1.38 million units. During the first half of the year, the average price of each Great Wall Motor vehicle increased 11% and 16% year-on-year in the first and second quarters, respectively. Due to the increase in the average price of higher models, the average selling price is now expected to rise 8% in 2021 to reflect product portfolio upgrades.
Tianfeng Securities: Maintains China Glass's (03300) “Buy” rating target price of HK$4.31
Tianfeng Securities expects that the boom in the flotation industry will continue, and that the company's performance elasticity is expected to continue to be realized. Supply side: The new production capacity of float glass is strictly restricted by the policy. The resumption of production lines and the pace of cold repair have become the core variables affecting marginal changes in supply; the high boom in float glass phased overdrafts the increase in effective production capacity in the short term, and the superposition industry has cold repair pressure on a large proportion of production capacity, and short-term supply increases may be limited. Demand side: The scissor gap between new construction and completion includes sufficient upward momentum for completion, and it is urgent for developers to speed up completion and carry-over requirements under the “three red lines”; furthermore, in the context of continuous increases in energy efficiency requirements for buildings, the proportion of multi-layer glass used has increased or contributed to a considerable increase in demand for medium- to long-term float glass, and the bank is confident in the sustainability of demand.
Taken together, the bank determined that there may be some continuity in the tight supply and demand situation for float glass. According to Zhuochuang information, the national average price of 5mm white glass is 148 yuan/heavy box (2021/7/15), with weekly, month-on-month, and year-over-year respectively +1, +2, and +64 yuan/heavy box, respectively. Prices have continued to hit new highs since 11 years; glass manufacturers have inventories of 18.85 million heavy boxes (2021/7/16), with a month-on-month, month-on-month, and year-on-year ratio of -111, -35, and 26.18 million heavy boxes respectively. Traditional demand for off-season inventories has not increased effectively. At this stage, inventories are at their lowest value in the same period since 13. The continued high boom in the industry may drive the elasticity of the company's performance to gradually become apparent. The 21H1 performance forecast is a phased verification.
Goldman Sachs: Maintaining Nongfu Spring's (09633) “Buy” Rating Target Price Increased 6.3% to HK$51
Goldman Sachs said that Nongfu Spring's (09633) earnings per share will be raised by 5-6% over the next 3 years to reflect positive views on the first half of the year's results. Sales for the full year are expected to increase by 22% and earnings per share will increase by 24%; in addition, it believes that after the first half of the year's results, there may be an opportunity to increase its fiscal year guidance. The company's sales growth in the first half of 2021 is expected to increase by 24% and recurring earnings per share to increase by 30%, which is stronger than the company's fiscal year guidelines. Due to higher industry demand and share, sales grew faster than expected. The bank's forecast reflects an improvement in the commodity's annual solid beverage demand, as other beverage peers, such as Master Kong (00322) and Tongyi (00220), have also seen similar industry trends. Outdoor activities and demand for beverages are apparently returning to normal after the pandemic. Furthermore, Nongfu Spring's inventory levels were low at the beginning of the year, and deployed a more aggressive promotion/channel strategy in the first half of the year. More branding campaigns should lead to continued market share growth this year.
The report mentioned that when it comes to new products, sparkling water is the key. Considering the demand of the booming industry and the strong trend of peers, companies will also benefit and will gradually see the new products contribute more. Profit margin expansion and cost pressure for sales in the first half of the year were limited due to low inventory costs. Furthermore, sales of products with higher gross margins, such as water/tea products, are growing faster, which should bring a better product mix to the company. Although the profit margin base for the first half of 2020 is high, profit margins for the first half of this year are still expected to improve further and reach record highs. Sales/operating leverage throughout the year largely offsets rising packaging material costs.
Credit Suisse: Maintaining China's Ping An (02318) “Outperform the Market” rating target price fell 9% to HK$100
Credit Suisse lowered the earnings forecasts for Ping An of China (02318) by 4% and 8% for next year, respectively, to reflect headwinds in the life insurance business and falling stock prices of its subsidiary LU.US (LU.US). Furthermore, the company's operating profit after tax will increase by about 5% in the first half of the year, mainly supported by the steady performance of Ping An Bank (000001.SZ). The company will announce its results for the first half of this year on August 26. It is expected that the value of the new business will fall 13% year on year, meaning a 45% drop in the second quarter. Also, new business sales in the second quarter are expected to fall 25% year on year, up 15% compared to the first quarter, as industry challenges increase and gross margin pressure.