ReportCN 2nd edition – Best Brokerage Reports in China

Thematic Report: 4Q Data by Overseas Companies Shows Signs of Modest Optimism

Report Author: He Zi, Zhou Guang

Brokerage: CICC

CICC has this great compilation of 59 MNCs’ performances in China during the fourth quarter, including 12 consumer-related companies, 10 raw material companies, 19 industrial companies, 11 scientific research companies and 7 pharmaceutical companies:

Alocoa thinks that there will be improving dynamics in China’s Aluminum industry with regards to capacity curtailments:


Rockwell and Otis are still reporting a negative yoy trend, but the decline has narrowed:


In terms of consumer-related companies, Nike still reports a 28% YoY growth in Greater China (excluding exchange rate effects), of which shoes grew 34% and garments grew 19%. EBIT margin also further improved from 34.1% to 34.9%. Under Armour reports its Greater China revenue to at least double in the fourth quarter. Starbucks was also optimistic on China, it has continuously reported positive SSSG growth and opened another 150 stores in the fourth quarter. McDonald, however, reports a meager growth of 4%, owing to intensified competition of dining in China.  Meanwhile, Kimberly Clark’s diaper sales remained at 15% YoY growth, same as third quarter; Coach also reported a 5% YoY growth in Greater China (after exchange rate adjustments) – China stores were growing by double digits, but stores in Hong Kong and Macau is growing negative.


Consumer electronics giant Apple shows its greater China sales growing by 14% YoY, or 47% QoQ to 18.4 billion USD, accounting for 24.2% of the company’s total. Mac sales has increased by 27% YoY. Meanwhile, Netflix commented that its process to enter China might take a while, due to negotiations with various cooperation partners.


It is quite amazing that multiple MNCs still reported double digit growth in their results in Greater China (HK might stall the overall growth a bit due to multiple reasons). There are signs of a slowdown, but MNCs won’t give up China market for sure, as some of them has contributed significantly for their overall growth.

Industry Report: Curbing Excess Capacity a “Prisoners’ Dilemma”

Authors: Yan Chen et al.

Brokerage: CICC

One phrase that we think best describes the current situation is the ‘prisoners’ dilemma,’ where all the companies are trying to outsmart and outlast each other by delaying their salary payments, borrowing more aggressively, and by leveraging their relationships with local governments, etc. The end result is the elimination of capacity being a slow and drawn out process.

The report mainly summarizes its fieldtrip to Shanxi and Hebei about the latest progress on eliminating capacity in the Shanxi and Hebei provinces. In Tangshan, Hebei province, althought 10 out of 43 steel mills have been shut down, some of the mills have restarted recently due to sheer optimism that things might improve. Of the operating companies, few have real cash flow problems, showing that they are unlikely to shut down voluntarily.


Coal production companies were even more stubborn in terms of shutting down their businesses, due to help from local governments or banks in order to avoid large-scale unemployment. The conclusion is thus elimination of capacity could be a long process, unless cash flow conditions worsen significantly or the government forces the issues to take off these capacity.

Fact and Figures: What happened to the NEEQ Board of China in 2015?

Authors: Zhu Haibin (Not the JPM economist)

Brokerage: Essence Securities

3568 companies got listed on the NEEQ (or “New Third Board”, 新三板) in 2015, a 191.98% YoY growth over 2014. In December alone, 746 companies were listed, an unprecedented record. Overall trading has increased tenfold, reaching 187.9 billion RMB. Total market capitalization of the board more than quadrupled, but 70% of the companies were below 500 million RMB market cap. Only 33 companies were valued above 5 billion RMB mark.

(No. of listed companies on a monthly basis)


Among the top-ten companies in terms of market cap, 7 of 10 were in the financial industry, ranging from PE (Jiu Ding) to brokerages (Donghai Securities). In terms of valuation, average PE was above 30x for most industries, yet there is still a 30% discount over A-shares.

4Q pre-earnings alert for Chinese listcos- A Slight Correction

Author: Xun Yugen

Brokerage: Haitong Securities

Excluding the main board, most small to medium sized companies reported 20+% YoY growth in net profit for the full year, but lower than 25-35% average growth in the 3rd quarter.


Overall, the Growth Enterprise Board’s net profit has grown by 17% YoY in the fourth quarter, with top 100 companies growing by 26% YoY, all below third quarter’s growth. Some industries, such as oil & gas, defense, electronics, were outpacing their growth in the third quarter.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s