|
中航光电
|
电子元器件行业
|
2015-12-01
|
40.88
|
15.67
|
--
|
42.00
|
2.74% |
|
42.00
|
2.74% |
|
详细
Strong organic growth underpinned by diversified drivers; Buy With balanced exposures to both the military and civil markets, JONHONOptronic has established its leading position in China's electric and opticalconnector market. Given limited scope of asset injections, organic earningsgrowth has been the key share price driver for the stock. We forecast EPSgrowth of 48% in 2015-2017 driven by healthy military market growth andcontinued civil market expansion, in addition to eased capacity constraint. Weinitiate coverage on the stock with Buy and a P/E-based target price of Rmb50. A low-risk defense spending play with balanced military market exposures Unlike other listed AVIC affiliates in our coverage universe, JONHON Optronichas substantial exposures outside of AVIC’s supply chain, with non-aviationmilitary sales representing roughly 2/3rd of the company’s military sales. Webelieve the company’s balanced military product portfolio makes it a uniqueproxy to China’s military procurement budget with diversified risk exposures.We expect the company’s military sales to remain elevated in light ofaccelerated procurement budget growth for military equipment. Civil market penetration to further increase With nearly half of its sales derived from civil product sales, we expect thecompany’s continued penetration into high-growth civil markets including newenergy vehicle, railway and subway equipment to drive earnings growth in thenear-to-medium term. Leveraging on its proven R&D capabilities in the militarymarket, strategic partnership with market leaders and M&A, the company hassuccessfully penetrated the civil market, which we believe is poised to becomea sustainable long-term growth driver for the company. Valuation and risks We base our target price of Rmb50 on a 2016 P/E of 36x, a c.20% premium toits mid-cycle level, justified by its significantly accelerated earnings growth(CAGR of 48% in 2015-2017). The stock is the cheapest one within our A-shareA&D coverage. Its valuations also look attractive compared to other A-sharelisted connector manufacturers as it will deliver its superior earnings growth.Key downside risks include an unexpected decrease in China’s militaryspending and slower-than-expected civil market penetration.
|
|
|
中航电子
|
交运设备行业
|
2015-11-30
|
27.80
|
30.86
|
140.33%
|
26.51
|
-4.64% |
|
26.51
|
-4.64% |
|
详细
Superior returns and restructuring potential justify premium valuation; Buy AVIC Avionics is one of China's largest suppliers of avionics, the "brain"system of an aircraft. High entry barrier enables the company to enjoy superiorreturns vs. its peers. We expect its earnings to return to growth trajectory in2015 and further accelerate during 2016-2017 (20% CAGR in 2015-2017). Wesee value-accretive asset injections as a key catalyst for the stock. We initiatecoverage with a Buy rating and a P/E based target price of Rmb32. Riding on China’s military aircraft upgrade cycle We believe rising budget allocation to military aircraft procurement is set tobenefit the domestic avionics market, which is currently dominated by AVICAvionics. Unlike domestic military airframers, component suppliers are lessexposed to product concentration risk, with better pricing power, hence higherprofitability. The imminent avionics upgrade cycle for PLA’s existing air fleet, ifmaterialized, could yield upside potential to our forecasts in the coming years. Value-accretive asset injections on the horizon Positioned as the ultimate listing platform for AVIC’s avionics segment, webelieve further asset injections into AVIC Avionics are conceivable givensubstantial assets still remain at AVIC with sizable profits. Currently, the listcois managing these assets via entrustment agreement, making further assetinjection a sensible next move, in our view. Our scenario analysis suggeststhese asset injections, if they take place, could enhance AVIC Avionics’ 2016Eearnings by as much as 164%. Valuation and risks Our target price of Rmb32 is derived based on 67x FY16E EPS, a 20% premiumto its historical mid-cycle P/E in the past five years. We believe such premiumis justified given accelerated growth and upside potential from avionicsreplacement cycle. Moreover, potential asset injections, if materialized, couldbring down our target P/E to 25x. Key risks include an unexpected decrease inChina’s military spending and delay in asset restructuring.
|
|