Strong earnings growth in 2019. Tigermed reported inline 2019results withattributable net profit surged 78% YoY to RMB842mn which was mainly due to 1)22% YoY revenue growth, 2) RMB278mn one-off investment gains and fair valuegains, and 3) spin-off of Shengtong (晟通) in Feb 2019. Core net profit rose 56%YoY in 2019to RMB658mn. We estimate the organic revenue growth in 2019Ewas around 27% YoY, excluding impact from the Shengtong spin-off. Grossmargin improved 3.4ppts to 46.5% in 2019thanks to the spin-off of low marginlogistics business and improving operating efficiencies. To factor in the impactfrom COVID-19outbreak, we trimmed 2020E/21E net profit forecasts by 17%/11%respectively and cut SOTP-based TP to RMB87.18, implying 56x FY21E P/E.n Short-term impact from COVID-19outbreak. The progress of clinical trialsin China was delayed due to the COVID-19outbreak. However, hospitals inmost regions in China have resumed operation from Mar 2020. We think theoverall impact on Tigermed’s domestic income will be minimal. However,given that the virus outbreak in the US and Europe were more serious than inChina, Tigermed’s overseas orders could face some delays. We noticed thatthe daily increases in infections cases in the US and major European countrieshave peaked recently. Thus, we believe the impact on Tigermed’s overseasbusiness will last in short term.n Strong backlog growth indicates solid demand in high-quality clinicalCRO services. Tigermed recorded RMB4.2bn backlog additions in 2019, up28% YoY while the Company had RMB5.0bn backlogs as of end-2019, up 36%YoY. The number of ongoing clinical trials in China has been increasing fastthanks to encouraging policies on drug innovation and pharma and biotechcompanies’ rising focus on innovative drug development. Tigermedparticipated in the development of 7out of the 13domestic innovative drugsapproved in 2019, demonstrating its leading position in China’s CRO industry.n Global expansion opens up room for long-term growth. Tigermed’ssubsidiary DreamCIS will be listed in KOSDAQ, which will further strengthenthe Company’s presence in South Korea. In Nov 2019, Tigermed announcedto establish a JV with Accerise to provide MRCT services in Japan. Tigermedalso acquired 3.06% stake in EPS, a Japanese CRO company, in Dec 2019.Tigermed may complete its dual-listing in HKEX in 2020E. With sufficientcapital raised overseas, we believe Tigermed will accelerate the acquisitionprocess in global market.

The reported net profit of RMB28bn was 13.2% higher than our forecast ofRMB24.7bn because of higher than our expected gross margin and morecontribution from JCE. We raise our 2020earnings forecast by 7.1% and raise TP toRMB22.16, which is equivalent to 8.0x 2020E P/E. Reiterate BUY recommendation.n Net profit surged 48% in 2019. Revenue and net profit surged by 21.3% toRMB235.9bn and 47.9% to RMB28.0bn in 2019, respectively. The robustresults were driven by increase of delivery GFA and margin improvement.GM for property development expanded by 2.7ppts to 35.4% in 2019. Thereported net profit was 13.2% higher than our forecast of RMB24.7bnbecause of higher than our expected gross margin and more contributionfrom JCE. The Company declared final dividend of RMB0.82per share,representing increase of payout ratio to 35%.n Top five in contracted sales in 2019. Contracted sales amount increasedby 14.1% to RMB461.8bn in 2019, respectively. Market share climbed to2.89%. Cash collection ratio was 93% and cash collection from contractedsales amounted to RMB431.2bn in 2019. So net gearing ratio improved by23.6ppts to 56.9% and cash on hand amounted to RMB139.4bn as at Dec2019. Cost of debt reduced by 8bp to 4.95% in 2019. Balance sheet wasstrong. Although contracted sales dropped by 35% to RMB71bn in 1Q20, weexpect Poly Development achieved 5% sales growth in 2020due to itsstrong saleable resources.n 213mn sq m land bank. Poly Development acquired 127projects of 26.8mnsq m land bank for considerations of RMB155.5bn in 2019. Meanwhile,attributable ratio for new land increased from 68% in 2018to 71% in 2019. Asat Dec 2019, GFA under development and for future planning were 132mn sqm and 81mn sq m, respectively. We estimate NAV to be RMB27.73per share.n Leading property management company. Poly Property Development(6049HK, BUY) posted 49% net profit growth to RMB491mn in 2019. As atDec 2019, it managed 1,490properties projects in 170cities. Totalcontracted GFA reached 498mn sq m as at Dec 2019.n Raise TP and forecast. We raise our earnings forecast by 7.1% toRMB33.0bn in 2020and 8.5% to RMB38.4bn in 2021. Accordingly, we raiseour target price from RMB20.72to RMB22.16, based on 8.0x 2020E P/E.Maintain BUY recommendation.

Key highlights on 2019results. The revenue growth in 2H19was 50% YoYand gross margin expanded 1.3ppt YoY to 30% (stable HoH). However, S&Dexpense ratio increased to 9% in 2H19, compared with 8.3% in 2H18and 8.4%in 1H19. Besides, R&D expense ratio increased to 5% in 2H19, up significantlyfrom 2.7% in 2H18and 2.1% in 1H19. We believe the higher expense ratiowas due to the launch of new products. Thanks to lower finance expense andeffective tax rate, net profit in 2H19grew 55% YoY to ~RMB1.8bn. Dividend cut reflects the conservative approach taken by the Company.We are surprised about the dividend cut as the Company generated strongoperating cash flow of RMB6bn in 2019, though it spent RMB2.1bn on sharebuyback for employee share incentive scheme. The latest dividend policysuggested that the Company is potentially planning for debt repayment orredemption. Several tranches of bonds will be matured over the coming fewyears, with the first one in Dec 2022(principal amount of US$600m withcoupon rate of 6.13%). The recent volatile bond market due to the lack ofliquidity may offer the Company with the opportunity to buyback at discount. Risk factors: (1) Unexpected weakness on property construction activities;(2) Slow recovery of infrastructure spending;(3) High earnings volatility.

虽然我们下调2019年盈利预测14%以反映卡车业务疲软和减值损失,但我们相信这些因素已为市场预期。在低基数下,我们预期重汽今年盈利同比上升18%,主要驱动因素包括:1)管理层架构重组大致完成,重汽与潍柴动力(2338HK/000338CH,买入)将产生更大协同效应;2)中国重汽集团(重汽的母公司)2月份重卡销售在疫情下仍高于行业平均;3)基建投资在二季度拉动工程车需求复苏。我们将目标价由19.4港元微调至19.3港元,滚动基期至2020年(基于5倍EV/EBITDA,倍数维持不变)。重申买入。 管理层改组大致完成。重汽于3月9日宣布母公司副总经理刘正涛获委任为重汽的执行董事。此外,曲洪坤女士获委任为重汽执行董事及财务总监,她曾在山东重工(潍柴动力及中国重型汽车集团的母公司)旗下的子公司工作15年。这次新管理层委任加上早前的管理层调动,让整个董事局自山东重工控股中国重汽后大幅改动,而董事局成员平均年龄由53岁下降至49岁。我们相信管理层改组已大致完成,今年公司会将重心由内部重组转移至业务增长。 2月份销售优于行业平均水平。受政府打击「大吨小标」的措施所影响,重汽在2019年的卡车销量增长大部分时间都低于行业平均水平,直到11月才有所改善。根据第一商用车的最新数据,今年2月中国重汽集团的重卡销量仅同比下降22%,远优于疫情下行业平均下跌50%的水平。考虑到重汽过去贡献母公司90%的卡车销量,我们相信重汽在2月份录得相若的销量数字。在中国地方政府增加债券发行额度下将有助拉动基建投资,从而拉动今年二季度的重卡需求。 主要风险因素:(1)工程复苏慢于预期,(2)疫情造成零部件供应中断。

在新冠肺炎疫情爆发对银行业经营环境带来挑战之际,我们认为邮储银行将表现出良好的防御性。与此同时,广泛的网点布局和庞大的客户资源能够激发其利润增长潜力。首次覆盖给予“买入”评级。 扎实的负债基础和持续优化的资产结构可巩固NIM 优势。邮储银行独特的“自营+代理”模式使得吸储成本低廉且稳定,存款余额占负债比重超过95%。 2017年以来银行业存款竞争加剧,邮储银行相对五大行的NIM 优势进一步扩大。该行在同业市场是资金净融出方,因而近期市场利率下行对其NIM 造成一定压力,但通过提升贷存比和增加高收益的消费类信贷配置给未来NIM 扩张创造了空间。若央行下调存款基准利率,邮储银行将显著受惠。根据我们的测算,定期和活期存款利率分别降低10bp 和5bp 可提升该行NIM 和净利润8.5bp 和 3.0%。 资产质量健康且潜在风险低。邮储银行的核心资产质量指标十分优异,不良贷款率仅为0.83%,拨备覆盖率高达391%,关注及逾期贷款率在可比同业中最低。我们认为该行健康的资产质量主要归因于:1) 零售贷款占比达54.3%,其中低风险的按揭贷款占比61.5%;2) 经营历史较短,过往信贷周期中的不良贷款遗留问题少;3) 对高风险行业的信贷敞口有限。因此,即便在疫情影响下,邮储银行也能保持低于同业的不良生成水平。 广泛的客户资源为利润增长带来潜力。截至1H19,邮储银行共有39,680个营业网点,其中包括7,945个自营网点和31,735个代理网点。零售客户总数达5.89亿(工商银行为6.27亿)。该行众多的网点数量及庞大的客户资源还未充分完成利润转化。提高网点服务能力、增强客户渗透、强化科技应用将成为利润增长的主要驱动力。该行1H19手续费收入仅占营收的6.6%,也意味着中间业务存在巨大的提升空间。 首次覆盖给予“买入”评级和人民币7.30元目标价。我们预计邮储银行2019-2021年净利润增速分别为15.0%、12.8%、15.6%,净利润预测比市场预期高1-4%。鉴于邮储银行显著的零售优势、较快的信贷及利润增速、更具韧性的NIM 以及较低的资产质量风险,该行应享有较五大行更高的估值溢价。 我们的目标价为人民币7.30元,相当于2020年1.16倍的预测P/B。

PAB reported FY19net profit of RMB 28.2bn, up 13.6% YoY and in line with itspreliminary earnings announcement. Key results positives are stable NIM, lowerCIR, stricter NPL recognition, and higher dividend payout. We remain upbeat onPAB’s growth prospects and see major catalysts from: 1) continued better-thanpeersNIM and asset quality trend, thanks to greater retail exposure; 2)successful transformation in corporate banking, with support from Ping AnGroup; and 3) management’s boost for wealth management business, in orderto make up the long-standing weakness in funding cost. Results positives: 1) Loan growth accelerated to 8.0% in 4Q19, ascapital was replenished after the conversion of RMB 26bn CB in 3Q19.Corporate loan growth picked up to 10% QoQ, driving a strong depositgrowth of 6.3% QoQ. 2) NIM remained stable QoQ at 2.62%, as 10bpdecline in loan yield was offset by 8bp/3bp retreat in deposit/interbankfunding costs; 3) 4Q19cost-income ratio fell 2.5ppt YoY to 31.1%,indicating better operating efficiency; 4) Asset quality improved withstricter loss recognition. NPL ratio edged down 3bp QoQ to 1.65%, mainlyfrom 22bp contraction in corporate NPL ratio. Moreover, NPLs has covered122%/104% of 90/60-day overdue loans, implying less formation pressuregoing forward; 5) Retail client base continued to expand. No. of retailclient rose 3.6% QoQ to 97.1mn, and retail AUM increased 5.9% QoQ toRMB 1.98tn. 6) Management proposed a higher dividend payout of 15%,up 5ppts from FY18. Results negatives: 1) Capital ratio declined in 4Q19. CET-1/total CARslid 64bp/14bp QoQ to 9.1%/13.2% on faster RWA expansion. 2) RetailNPL ratio rose 10bp HoH to 1.19%, due to 29bp and 12bp HoH increase inNPL ratio for credit card (1.66%) and auto finance loans (0.74%). As aprecautionary measure, PAB slowed down the growth of credit cardoverdraft to 5.8%, vs 11.6% total loan growth in 2H19. Maintain BUY and lower TP to RMB 19.80. We trim our FY20-21earningsestimates by 4.2-7.5%, as we lower NIM forecast by 3-5bp and raise creditcost assumption by 8-10bp to reflect COVID-19’s impact. That said, webelieve recent share price correction offers a good opportunity to accumulatethe stock. Our revised RMB 19.8TP is based on 1.28x target P/B andFY20E BVPS of RMB 15.5.

中联重科发盈喜,公司预期 2019年净利润同比增长 113-123%至 43-45亿元人民 币,略低于我们预测的 45.5亿元,但符合市场一致预期的 44亿元。我们维持盈 利预测不变,但将目标价从 7.28人民币上调至 7.55人民币,主要由于滚动基期 至 2020年(基于 1.4倍市账率,对应 2020-21年净资产收益率为 13%)。强劲 行业销售数据将成为近期催化剂。重申买入。 n 2019年盈利增长的主要原因。 净利润强劲增长主要因于起重机、混凝土机 械、以及新产品如土方机械(例如挖掘机)和高空作业平台需求火热。此外, 海外业务增长升势持续。这些都有助中联重科实现高于行业平均水平的增长。 另一方面,由于生产效率提升,产品升级以及销量提高,公司的毛利率亦有 增长。 2019年四季度净利润同比增长 47%至 10.7亿元人民币。 n 未来驱动力量。 我们对中联重科 2020年的前景保持乐观, 正面因素包括 2020年一季度基建投资复苏、房地产施工活动强韧、国 III 加快淘汰、大型 塔式起重机交付强劲以及新产品销售快速增长。 n 风险因素: (1)房地产开发差于预期; (2)基建支出复苏缓慢; (3)盈 利波动性高。

We expect Perfect World (“PW”) to keep its solid game momentum and seeotential entertainment recovery, backed by valuable IPs, strong developmenteam and high-quality productions. We forecast PW to deliver 11%/17%evenue/earnings CAGR during FY18-21E. Initiate with BUY with DCF-based TPRMB49.n A leading game & entertainment player with valuable IPs. As a PC gamepioneer, PW successfully transferred its strategic focus on mobile games, anddeveloped notable IP-based titles, such as New Jade Dynasty Mobile (新诛仙)and Perfect World Mobile (完美世界手游). We forecast PW to deliver 11%/17%revenue/earnings CAGR during FY18-21E, thanks to its solid game andentertainment pipeline.n Game: rich game portfolio to maintain strong momentum. Backed byvaluable IPs and strong development team, PW had rich game pipeline in2H19E, including New Swordsman Mobile (新笑傲江湖), Nightmare, NewForsaken World (新神魔大陆), etc. We expect its rich game pipeline willcontinuously boost ongoing growth in 2020E, supported by stepping-up newgames introduction and launch. We forecast its game sector to grow 23%/14%YoY in FY19/20E, in which PC/ mobile games to deliver 5%/39% YoY growthin FY19E.n Entertainment: more high-quality productions to come. Film industry inChina faces multiple challenges in 2019, including flat industrial growth andtightening regulations on celebrity, content and pipeline. Given recent filmheadwinds, we expect PW’s entertainment segment to bear pressure inFY19E, but keep positive on it recovery in FY20E, supported by its strongpipeline with high-quality TV dramas and movies.n Initiate with BUY. We initiate BUY with DCF-based TP of RMB49, implying26.7x P/E in FY20E. We think the majority of PW’s solid FY19E financialshave been partly priced in, and PW’s positive price drivers and catalystsoriginate from: 1) further performance of new games; and 2) stepping-upcontribution from entertainment after regulation headwinds.

A leading MMORPG player with chuanqi-themed types and effective marketing. As a leading game developer and operator with chuanqi-themed MMORPGs, Sanqi successfully transformed from web games to mobile games operator, with high quality hot titles. Backed by its reputable R&D team and highly effective marketing, we forecast Sanqi to deliver 29%/40% revenue/earnings CAGR during FY18-21E, thanks to its strong pipeline, category diversification and overseas expansion. Category diversification to deliver ongoing pipeline. Backed by its successful record of chuanqi-themed MMORPGs, Sanqi will continue strengthen its position in chuanqi-themed types development, in our view. Meanwhile, Sanqi also expanded its game category into diversified types, including SLG, ARPG, casual games, etc, backed by self-development and IP investment. We expect its ongoing category expansion to help it gain shares and tap into younger generations, especially supported by recent hot titles of The Soul Land (斗罗大陆), Yi Dao Chuan Shi (一刀传世) and Jing Ling Sheng Dian ( 精灵盛典). Further catalyst will come from its rich game reserve, including Fantasy of Tomorrow, Glory Adventure, etc. Stepping-up overseas expansion to tap into broader market. Apart from strengthening its leading position in domestic market, Sanqi steps up its overseas expansion path by leveraging its advantage in traffic operation and precise marketing. According to App Annie, Sanqi ranked Top 6 in China mobile game publishers in 2Q19. With initial fruits in SEA market, we expect Sanqi to proactively explore other promising regions, like Japan, Korea, Europe and USA. Initiate with BUY. We set our DCF-based TP at RMB30 (implying 26x P/E in FY20E), slightly higher than industry average, for its strong pipeline and high-effective marketing. Key risks: regulation uncertainty, grossing decline of hot titles, weak performance of newly-launched games.

SANY Heavy announced yesterday that it plans to acquire 91.43% interest in SANY Capital (“三一汽车金融”) from SANY Group (parent company of SANY Heavy) for cash consideration of RMB3.98bn. The implied valuation of 24.4x 2018P/E and 1.5x P/B (equity as at Oct 2019) does not look attractive, in our view. Besides, an additional liability of RMB6.8bn will be consolidated in SANY Heavy’s balance sheet upon completion (attributable liabilities: RMB6.4bn). That said, we believe the overall impact on SANY Heavy is limited given that the deal size is not substantial. We estimate the earnings accretive will be <1%. We have left our forecast unchanged as the deal is subject to shareholders’ approval.n Details of the acquisition. SANY Capital is one of the 25auto financing companies approved by CBIRC in China. SANY Capital is mainly engaged in machinery financing business. SANY Group, parent company of SANY Heavy, currently owns 91.43% stake in SANY Capital, while SANY Heavy owns 3% interest. After the acquisition, SANY Heavy will control 94.43% stake in SANY Capital. Approval from regulators and shareholders of SANY Heavy is required before the transaction.n Reasons for the acquisition. The acquisition can reduce the connected transaction. Besides, SANY Heavy believes that SANY Capital can help support the Company’s overseas expansion and better control risk.n Financial performance of SANY Capital. SANY Capital generated interest income of RMB235mn in 10M19and net profit of RMB84mn. The book value as at end-Oct 2019was RMB2.9bn while total liabilities reached RMB6.8bn, implying gearing ratio of 235%. Based on our calculation, the rate of interest income (net income / loan portfolio) ranged from 2.7% to 3.8% between 2017and 10M19(figure 1).n Not attractive due to high valuation and increased liabilities. We calculate that the implied P/E (based on earnings in 2018) reached 24.4x. Besides, the acquisition cost of RMB3.98bn plus the increased attributable liabilities of RMB6.4bn (RMB6.8bn x 94.43%) from SANY Capital will result in a reduction of attributable net cash by >RMB10bn, though we think is still manageable due to the Company’s strong free cash flow.n Key risks: (1) Cyclical nature; (2) Risk of overseas business; (3) Increase in raw material cost; (4) Risk of expanding to financing business.

What’s new? We believe the stock ownership plan that announced last Fridaywill offer strong motivation to the management and key employees to deliversustainable earnings growth over the next three years, which should more thanoffset the share incentive expense arising from this. We maintain our TP ofRMB7.28(based on 1.4x 2019E P/B, on the back of 12%-13% ROE in 2019E-21E). Reiterate BUY.n Details of the stock ownership plan. The participants include the coremanagement and key employees in the Company, with a maximum of 1,200employees. The purchase price is set at RMB2.75per share. The lock-upperiod is divided into three stages, with 40%, 30% and 30% of the shares tobe unlocked in 2020E, 2021E and 2022E respectively, subject to Zoomlion’snet profit targets during the period. Either of the following two criteria has tobe satisfied for each of the year: (1) In 2020/ 21/ 22, the net profit growth tobe no less than 80%/90%/100%, compared with the Benchmark (Benchmark= average net profit in 2017-19); (2) the total net profit in 2020-21to grow 170%from the Benchmark, and the total net profit in 2020-22to grow 270% from theBenchmark (Figure 1). The stock ownership plan is subject to the approval byshareholders in EGM.n Higher expense but higher employee incentive. Given that the underlyingshares of the stock ownership plan are the 390mn A shares (4.96% of totalo/s shares) the Company repurchased in 2Q19(average price: RMB5.49), wecalculate that the total share incentive expense to Zoomlion to be RMB1bn in2020E-22E. That’s said, we believe the discount on purchase price (RMB2.75)is attractive to the participants, offering strong incentive.n Investment in agricultural machinery segment. Zoomlion plans to investRMB2.05bn in 2020-25(annual capex: RMB342mn) in the intelligentagriculture machinery business in Wuhu. While the industry has been on adowncycle, Zoomlion expects the favourable government policy to support theupgrade of agriculture machinery will offer new opportunities. In 2018/1H19,revenue from agricultural machinery accounted for only 5%/4% of the totalrevenue. Zoomlion targets to achieve breakeven this year versus a loss in2018. We fine-tuned our 2020E-21E earnings forecast by -0.5%/-0.5% afterincorporating the capex but have not modelled growth in this segment. Anyimprovement will offer upside to our existing forecast.

A solid 3Q19for Midea, consists of 1) remarkable market shares gain in A.C., 2)consumer electronic segment recovery, and 3) favorable input costs and FX rate.Thanks to positive outlook in 2H19E, we maintain BUY and raised TP to RMB75.33, based on 18x FY20E P/E (from 16x), or 1.3x PEG (vs peers’ avg. of 1.8x).n 3Q19net profit up 23%, solid beat. Midea’s net profit att. increased by 23%YoY, 10% above BBG’s est., backed by 6% YoY sales growth, noted thatconsolidation of Little Swan accounted for ~4% NP att. growth. GP marginexpanded by 0.7ppt, in our view, helped by: 1) RMB depreciation, 2) softeningraw material prices and 3) greater sales from high-end products series (e.g.COLMO, Midea PRO, etc.). Opex , as % of total sales also recorded a savingof 0.4ppt, thanks to the company’s rigid costs control strategy.n A.C sales slowed down, consumer electronics quicken up, robotics andautomation stabilized. Even though A.C. sales growth slowed down to just~5% in 3Q19(vs 12% in 1H19), it was still far better than the industry, whereboth volume and ASP had fallen by ~3% and ~5% (offline)/ ~10% (online),according to China IOL and A.V.C., implying solid market shares gain, thanksto successful new product launches in FY19E. Sales growth of consumerelectronics in 3Q19accelerated to ~10% (vs 6% in 1H19), driven mostly bystrong recovery of washing machines, by ~12% (vs 6% in 1H19) and smallappliances, by 13% (vs low single digit in 1H19), plus the improved exportssales (helped by favorable FX). Sales growth of robotic and automation wasa small negative in 3Q19(vs -4% in 1H19), on track to resume growth, whileEBIT margin also rose to 4.3% (vs 3.1% last year), by effective costs control.n Remains confident on sales growth and margin expansions in 2H19E.The Company maintained its targets of a 5-10% sales growth in FY19E, a mildGP margin expansion and a stable opex ratio. It also expect online sales toaccounted for ~35% of total retail sales (CMBI est. ~38% of group sales),implying a 20%+ YoY E-commerce sales growth. Moreover, for offline, thecompany aims to open more home decoration (now at ~150), multi-category(targeting ~1,000, now at ~500) and flagship stores (targeting ~1,900).n Maintain BUY and raised TP to RMB 75.33(27% upside). We lifted FY19E/20E/ 21E’s net profit by 2.6%/ 3.1%/ 2.8%, to factor in: 1) favorable input costsand currency rate and 3) greater efficiency gain. Our new TP is based on 18xFY20E P/E (lifted from 16x FY20E, thanks to picked up in NP growth). Thecounter now trades at 16x/ 14x FY19E/ 20E P/E or 1.0x 3years PEG.

The Company announced 3Q19results on 31Oct. 9M19revenue +17.0% YoY.Net profit -13.8% YoY. Adjusted net profit -4.9% YoY. RPK +16.8% YoY.Passenger load factor was 85.9%, down 0.7ppt YoY. For 4Q19, as China and USare marching towards a “phase one” deal, we reiterate our view that we expectdomestic demand to release. And we believe the Company will achieve 15% YoYincrease in ASK for the whole year. We factor in our house view of 2019E averageBrent crude oil, and raise TP from RMB 15.03to RMB 17.63, corresponding to 2.9x2020E P/B. Maintain BUY.n 9M19revenue in line. For 9M19, operating revenue increased 17.0% YoY toRMB 13bn, representing 80%/78% of our/consensus previous full-yearestimates. Net profit decreased 13.8% YoY to RMB 1,236mn, representing98%/91% of our/consensus previous full-year estimates. Net profit in 3Q19decreased 19.5% YoY, mainly due to sharp decline in non-operating income.Excluding extraordinary items, decrease in net profit shrank to 4.9% YoY toRMB 1,153mn.n RPK growth beats expectation. For 9M19, RPK increased 16.8% YoY,highest among peers (CEA +10.4%; CSA +9.2%; AC +6.2%; Spring Airlines+13.7%). The third quarter is a traditional peak season for business, studentand tourism travel. Benefitting from new international routes opened in YE18,traffic in 3Q19increased 19.1% YoY, as compared with 6.7% increase in3Q18. ASK increased 17.7% YoY, higher than management guidance at thebeginning of the year. Passenger load factor was 85.9%, down 0.7ppt YoY.n Positive 4Q19outlook. For 4Q19, as domestic economy stabilizes, andChina and US are marching towards a “phase one” deal, we reiterate our viewthat we expect both domestic and international demand to release. And webelieve the Company will achieve 15% YoY increase in ASK for the wholeyear.n Valuation. After drone attack on two Saudi Aramco’s oil facilities, productionresumed faster than expected, our house trimmed 2019E average Brent crudeoil to US$64/b. We adjust 2019/20E net profit up by 13.7%/31.5%, and rollover TP to RMB 17.63. Our TP corresponds to 2.9x 2020E P/B. The stock iscurrently trading at 2.5x 2020E P/B, lower than historical average of 3.0x.Maintain BUY.

China Life announced 9M19set of result on 29Oct 2019, which is highlighted by1) net profit surge, mainly coming from investment gains and also from tax benefit; 2) satisfactory progress of underwriting business transition; and accordingly, 3)outstanding NBV growth. We stay bullish on the Company’s near-term financialperformance for the whole year and its long-term outlook as well since businessreform initiatives have been reviving the largest lifer in China profoundly.n Net profit surged 190% YoY to RMB 57.7bn (~88% of our revised FY19Enet profit), thanks to 1) investment gains. Investment income increased88.2% YoY in 9M19to ~RMB125.6bn according to our calculation. Realizedgains and fair value gains from equity investment have contributed to themajority of improvement. 2) One-off tax benefit of RMB 5.2bn, deductingwhich net profit would increase164% YoY in 9M19.n Life transition underwent satisfactory progress. 1) Premium structurecontinued to optimize, with longer payment durations and more protectionoriented products. FYRP with 10y+ payment duration accounted for 51.06%of FYRP in 9M19, up 15.7ppt YoY. The share of designated protectionoriented products increased 8.79ppt YoY. 2) Agent headcount maintainedsteady growth. As of 30Sep 2019, individual agents amounted to 1.663million, up 15.6% from YE18and 5.7% from 2Q19. Monthly averageproductive agents increased 37.4% YoY.n Solid NBV growth. New business value achieved 20.4% YoY growth in9M19, outperforming major peers. The figure was largely in line with ourannual NBV growth estimate at 16.4% (1Q/1H NBV growth was28.3%/26.2%, respectively). Our growth forecast is slightly lower than 9M19number due to a higher base in 2H18.n Risks. 1) Capital market volatilities in 4Q; 2) Challenges with respect toagent team management and quality improvement.n Raise TP to RMB 38.04. We roll over valuation basis to FY20E. We raiseTP to RMB 38.04based on H-share TP plus historical average A/H premiumof 50%. The A-share stock is now trading at 0.84x FY20E P/EV, close tohistorical average minus 1STD. We remain bullish on the Company’s nearterm financial performance as well as long-term business prospect.Reiterate BUY.

The Company announced 3Q19results. 9M19revenue +6.3% YoY, in line withour/consensus estimates. Net profit -2.7% YoY. Adjusted net profit -8.0% YoY.RPK +10.4% YoY, highest among major peers. Passenger load factor was 82.6%,down 0.3ppt YoY. For 4Q19, as China-US are marching towards a “phase one”deal, we reiterate our view that we expect domestic demand to release. We factorin our house view of 2019E average Brent crude oil, and roll over TP to RMB 6.86,corresponding to 1.5x 2019E P/B. Upgrade to BUY.n 9M19revenue in line; net profit decline narrowed due to other income.For 9M19, operating revenue increased 6.3% YoY to RMB 93.4bn,representing 79%/74% of our/consensus full-year estimates. Net profitdecreased 2.7% YoY to RMB 4,367mn, representing 103%/91% ofour/consensus full-year estimates. Net profit in 3Q19increased 9.8% YoY,benefitting from 30.5% YoY increase in other income. Adjusted net profitdecreased 8.0% YoY to RMB 3,893mn.n Highest RPK growth among major peers. For 9M19, RPK increased 10.4%YoY, higher than major peers (CSA +9.2% YoY, AC +6.2%). Third quarter isa traditional peak season for business, student and tourism travel. Traffic in3Q19increased 11.0% YoY, as compared with 6.8% in 3Q18. ASK increased10.9% YoY, in line with management guidance at the beginning of the year.Passenger load factor was 82.6%, slightly down 0.3ppt YoY.n Positive 4Q19outlook. For 4Q19, as China-US trade negotiation is inchingtowards a “phase one” deal, we reiterate our view that we expect domesticdemand to release. And we believe the Company will achieve 10% YoYincrease in ASK for the whole year.n Valuation. We adjust 2019E revenue up 1.4% to reflect increase in otherincome. After drone attack on two Saudi Aramco’s oil facilities, productionresumed faster than expected, our house trimmed 2019E average Brent crudeoil to US$64/b. We adjust 2019/20E net profit up by 59.4%/74.6%, and rollover TP to RMB 6.86. Our TP corresponds to 1.5x 2019E P/B. The stock iscurrently trading at 1.1x 2019E P/B, lower than historical average of 2.2x.Upgrade to BUY.