麥格里科技和通訊報告：A股如魔，我們買什麼股票？蘋果產業鏈大跟蹤！

新聞 06-27

Tech and Telecom

A-share inclusion; What to follow?

Event

? The Tech/ Telecom names in MSCI A-share inclusion are well captured by Macquarie (table on the left). We reiterate our bullish view on the A-share space on the back of: 1) volatile competition dynamics to facilitate the supply chain to grow, 2) significant earnings growth profile to be driven by low base and market share gain, 3) corporate management』s improving awareness on corporate governance, transparency and profitability according to our comprehensive company visits, and 4) large-scale repositioning of institutional funds given the positive change in the accessibility to the China A-share market.

? We already cover 34 A-share Tech/Telco names with 7 names in the MSCI A-share inclusion list (link): Hikvision, ZTE, Luxshare, Dahua, Goertek, BOE, and Sanan. Other high conviction BUY ideas in our A-share coverage: O-film, China Unicom, Lens Tech, Sunway, Everwin and CCTC. We will host A-share Corporate Day in Shenzhen on July 4-5 with attended companies including Hikvision, O-film, Siasun, Inovance, CCTC, BOE, Goertek, Han』s Laser, and Estun.

Impact

? Hikvision – innovative surveillance expansion: Hikvision leverages its expertise in image analysis to new technology areas like auto-electronics, robots and drones, of which the company began to disclose revenue contribution separately from 4Q16. The company is also moving to AI-featured surveillance solutions to structure data starting from the front-end (ex: facialrecognition) while easing data analysis burden in the central controlling system. We are positive on Hikvision』s diversifying business footprint to support both earnings growth and valuation in the long term.

? ZTE – the winner in a 5G era: We expect ZTE』s faster-than-expected progress on 5G technology will put it in the prime position for the nextmega catalyst in the telecom equipment space (「Faster 5G progress; PT up toRmb26.5」, link, published on June-2017). Massive MIMO, the key technology in 5G, is adopted by ZTE for Pre5G solutions in the commercial trial with China Unicom in May 2017, and we expect the accumulated experience in Pre5G will accelerate the transition to 5G smoothly.

?Luxshare, Sanan, Dahua, Goertek, BOE also in MSCI A-share list: Luxshare – speaker box, wireless charging, and Type C. Sanan – positive on the joint venture with Cree for mid-power LED product markets. Dahua – skewing to total solutions to sustain profitability with market share gain. Goertek – VR and key suppliers of Apple acoustic products, BOE – 1) rapid ramping of flexible OLED, 2) LTPS development, and 3) the key display supplier in China.

? Riding on promising sentiment in the A-share market: We expect the promising sentiment led by MSCI A-share inclusion will spread to other outperformers. Other high conviction BUY ideas in our A-share coverage are supported by different technology trends: 1) dual-cam: O-film, 2) diversifying casings – 3D glass and ceramics: Lens Tech, CCTC and Everwin; 3) synergies from mixed ownership: China Unicom; and 4) wireless charging – Sunway.