【英文】J.P. 摩根报告：中国股票策略：建立对经济复苏的信心（75页）

英文研究报告 2020年05月07日 07:43 管理员

As for our China Model Portfolio revisions, we increase our cyclical exposure by adding Midea under consumer discretionary (upgrade to OW) and SANY under the industrial sector. We believe the home appliance segment will benefit from the release of the pent-up demand on durable goods when the outbreak situation stabilizes, and we like construction machinery on the back of the robust excavator sales amid infra FAI recovery. We reduce our defensive position and move utilities to UW by selling Yangtze Power and GDI. Within the financial sector, we rotate from insurance (downgrade to UW) into banks by trimming Ping An Insurance and adding BoCom. We believe that the declining market rates and potential deposit rate cut in 2Q could aid bank’s NIM, while insurance is facing higher credit and market risks due to the declining bond yield and increasing market volatility. 1Q20 results underway The 1Q20 corporate earnings results season is underway, with 85 MSCI China constituents reporting their earnings this week, representing ~12% of the index that report quarterly. The results generally came in-line/ahead of our analysts’ expectation. Out of the 17 companies under our coverage, 8 of them were in-line with our forecast and 6 were above. By taking into account the consensus estimates of the 46 companies, 22 (35%) beat, 15 (24%) were in-line, and 26 (41%) missed.

While the overall negative impact from the COVID-19 outbreak was severe due to the disruption on both the supply and demand side, most of the companies witnessed some recovery and business normalization in March, which is consistent with the macro activities data reported in April. In particular, some retail companies’ management are anticipating 90% sales recovery in 2Q and complete recovery in June, although the destocking pressure may still pose a drag to the 2Q earnings on corporate level. This reinforces our views that the normalization of domestic consumption demand will be a key driver of the macro recovery in next quarters, on the back of the gradual relaxation on the social control measures and further fiscal supports. We expect growth to normalize in 2H20 and into 2021. Our analysts forecast a strong recovery on corporate earnings for CY21E at 18.3%oya, following the weak 3.7%oya for this year, which is largely in-line with our top down view at 3-4%oya (link). Based on the bottom-up CY21E EPS integer at 7.46, our base case MSCI China target of 92 implies a 3% re-rating on 12m forward PE to 12.3x from current at 11.9x, which is still within range particularly if the global pandemic begins to ease around mid-year as expected. Nonetheless, risks of a potential reescalation in the US and China confrontation remains an overhang after the virus concerns abate. Overall, we still see some upside on the corporate earnings outlook for next year when the global economy normalizes and benefitting from a lower base effects.