银河国际Yum Cha饮茶

SUNNY OPTICAL [2382.HK; HK$60; NOT RATED] - We believe that the market isre-visiting non-Apple suppliers such as Sunny Optical, given increasing interest inhandset component makers and the strong share price performance of Taiwan-listedoptical component makers such as Largan. Since investors are focusing on shipmentfigures, and Sunny Optical’s shipments are likely to remain lacklustre in Apr, this maycap upside potential for its shares, given its higher valuation. We suggest investorstake any share price weakness due to unexciting Apr 2017 shipment figures as arevisit opportunity.

    STRATEGY - We believe MSCI is likely to include A-shares in its index series duringthe annual review in late June. However, based on the new proposal, A-shares mayinitially account for less than a 2% weighting in the MSCI China Index. Therefore, wedesigned a relatively simple A-share model portfolio for investors who just want tolargely follow the index performance initially. Our 10-stock model portfolio includesKweichow Moutai, Shanghai Pudong Development Bank, SAIC Motor, China StateConstruction Engineering, Hangzhou Hikvision Digital Technology, Midea Group,China Merchants Shekou Industrial Zone, Ping An Bank, Shanghai International Portand Baoshan Iron & Steel.

    CR CEMENT [1313.HK; HK$4.26; BUY] - CR Cement’s share price dropped about6% yesterday, although it reported solid Q1 2017 results. We believe it was drivenmainly by profit-taking, as the share price had already surged 48.5% YTD (up to lastFriday). However, after the results conference call yesterday, we still believe that itshould not be difficult for the Company to achieve the relatively conservative consensusforecast of HK$2.8bn net profit this year. We also maintain our full-year projectionof HK$3.4bn net profit. Overall, we believe management’s expectation of a stableASP in Q2 and Q3 with the potential to raise the ASP in Q4 during the peak season isachievable, based on the latest cement price trend in its major operating regions. Thecorrection offers an opportunity to accumulate the shares, in our view. We maintainour BUY rating and a target price of HK$5.40 (equivalent to 1.25x 2017E PBR and10.3x 2017E PER).