Dim Sum Express

A-Share Market

    Construction: FAI growth to remain stale in near term amid pro-growth efforts

    Now that an FAI rebound has been established, we suggest focusing on when investment growthwill weaken again. Based on our channel checks, FAI growth can be maintained at the current levelin the near term. We expect construction firms to look for new growth drivers on top of their traditionalbusinesses by tapping the 13th FYP, and to maintain stable revenue growth by taking advantage ofOne Belt One Road, ongoing urbanization, lending support from the government and the PPP model.

    We suggest watching private-sector firms that have taken the initiative to transform their businessamid deteriorating industry conditions.

    Home Appliances: Wait for hot weather to ignite AC sector; positive on small appliances

    We expect a significant relief in AC inventory pressure this year, while weather conditions remainsthe most important factor driving AC sales in the near term. We highlight white goods names’ marginof safety and investment value given their cheap valuations and high dividend yields. Separately, wecontinue to have a positive outlook on the fundamentals of the small appliance subsector, withmomentum to come from the upgrade of rice cookers (which is a traditionally large product category),accelerating rural home appliance market growth, and the increased popularity of western-styleappliances.

    Hong Kong Market

    Tech Monthly (Apr 2016): Value stocks outperformed in MarchFeb data showed the usual seasonal pattern and a decline on a MoM basis. Nonetheless, businessmomentum was weak on a YoY basis. Tongda topped the chart among hardware companies underour coverage in terms of earnings growth in 2015, with net profit up 40% YoY. Coolpad was the worstperformer. Apple is due to report a 10% YoY sales decline and 15% YoY decline in net profit for theMar quarter on Apr 25. Unexciting news from Apple should weigh on AAC Tech’s shares. Our pickfor this month is Q Tech, a 2016 earnings recovery play.