Nanfang Securities Weekly Market Strategy (2004.7.05) Market Strategy Number: 70501 July 5, 2004 Market Strategy / Weekly Stock Market Policy Plan to Determine Rebound Strength ◆ Market Scanning and Forward-looking Technical and Policy Sides Together Promote CSI and Shenzhen Stock Exchange The local market has seen a phased inflection point, and the market is expected to form a wave of tri-fold type of secondary-secondary rebound market. ◆ The value of operational strategy investment is still the mainstream of the current round of rebound, and the difference between the performance of pre-income stocks. After the SME board stabilizes, it should have a chance to rebound. ◆ Focus on the company: Shandong Aluminum (recommended to hold RMB12.5) The company is mainly engaged in alumina, aluminum hydroxide, chemical alumina; metal antimony and its compounds; electrolytic aluminum, aluminum alloy, aluminum processing products, building curtain wall design, construction Carbon products; heat, power products and business related to the above products. It is expected that the company's earnings per share for the first half of 2004 will be 0.75 yuan, and it will be around 1.3 yuan for the whole year. ◆ Newer research report Jinan Iron and Steel (600022) raised funds to enhance the company's competitiveness (Wang Qianming); Tasly (600535) company has further development space (Kong Jun); industry profitability is difficult to change - the home appliance industry in the second half of 2004 industry investment Strategic Analysis (Lan Feiyan); Masteel (600808) was heavily influenced by macro-control (Wang Qianming). The market scan last week recalled: Technology and policy jointly promoted the market to rebound. Last week, the Shanghai and Shenzhen stock markets made the first move. Later, the vice chairman of the China Securities Regulatory Commission, Tu Guangshao, said that the pace of new stocks may slow down, and the SASAC clarified that state funds must be forced to withdraw from the stock market. Rumors. This not only relieves some of the pressure that the funds will be withdrawn from the market, but also gives a certain affirmation to the securities market, which is extremely beneficial to the restoration and accumulation of investor confidence. The market began to soar on Thursday, and the rebound trend is not at all drastic. In terms of hotspots, value stocks held by publicly-held funds in heavy positions are the first to stabilize and rebound. Their main varieties are concentrated in the petrochemical, steel, power, coal and other sectors; the rest are oversold and rebounding. The SME board that was launched in the past week lacked a market foundation and formed a gray-headed situation. Actively following the small and medium-sized investors suffered heavy losses. Analysis of the trend: the bottom of the stage has formed a rebound process. The wave of the Shanghai Composite Index Zhou K line from the Shanghai Stock Exchange's weekly K line. After the stock market fell after nearly three months, the index index has approached the 1300 point long-term box position at the bottom of the Shanghai index. The market's own rebound requirement is very strong. However, due to the fact that there was no clear release of market turnover, the increase last week still belongs to the category of rebound. The rebound level is likely to belong to the secondary level. The rebound goal is based on the year line. The process of bounce has shown twists and turns. Operational Strategy Investment Highlights: For the impact of the Fed rate hike on China's securities market, we can look at this point of view, because China's foreign exchange is only freely convertible under the current account, the exchange under the capital account is limited, so it's It is only an indirect impact that interest rate hikes will have an impact on our securities market. This indirect impact medium is the capital side. In the short term, the Fed’s rate hike can prompt us to increase the supply of money in the money market. We all know that an important aspect of the central bank’s release of funds to the market is to release the renminbi by absorbing foreign currency. Now, with the Fed’s rate hike, Domestic foreign currency deposits in the US dollar will also require interest rate hikes. The central bank’s foreign exchange reserves may increase significantly in a short period of time, which in turn will speed up the release of RMB funds from the central bank to the market, which will increase the market’s The supply of capital will drive the stock market to rise; but from the perspective of the country’s macroeconomic policies, this increase in the supply of funds will not last long because the country’s recent policy has been to focus on austerity and face the funds that have to be released in the short term. The central bank will soon be able to recycle through other means. One of the important measures is to increase the level of positive repurchases and notes issuance. Operational suggestions: Value investment is still the main stream of this round of rebound. Differentiation of performance The pre-increase of shares As the stage of the current round of downturn has been established at the bottom, though the market may have multiple oscillations, the market will tend to become more active. Judging from the market capital flow, public funds still dominate, which means that the movement of blue chip stocks during the current round of rebound is a benchmark for the market. After this round of adjustments, the blue-chip stocks have seen a certain contraction, but due to the more concentrated holding structure of the fund, the power sector should pay more attention to petrochemicals with relatively promising growth potential. In theory, the next week's position can be properly controlled at about 70%, it is recommended that 40% of the positions lock high-growth blue chip stocks, the remaining 30% of the funds can be bargaining to absorb the potential of science and technology, home appliances stocks. Differences in performance pre-income stocks. 1. Steel, cement, automobile, non-ferrous metals and other stocks that belong to the state's macroeconomic control. Although the results of the interim report are expected to increase, the annual report results may decline or the growth rate may slow down. These stocks are pre-funded by the fund, although lightening up the stock price. If the price falls sharply but has not been reduced, it will inevitably use the opportunity of pre-increase in the performance of the interim report to pull up and reduce it again. For such stocks, investors should focus on short-term operations. 2. For coal, electricity, petrochemicals, consumer goods and other stocks with growth potential, is the focus of the broader market correction, that is, the stocks with large losses in the previous period, but also growth stocks with pre-increase performance, of course, become the preferred choice for institutional purchases. . Industry investment opportunity analysis will divide the market according to the South industry standards, and analyze relevant statistical indicators of various industries. The industries with higher turnover in last week were: network media industry, communications industry, machinery industry, computer industry, petrochemical industry, etc., indicating that leading companies in these industries were sought after by market funds last week. The main concern is variety. The industries with higher returns last week were: airport industry, petrochemical industry, steel industry, road and bridge industry, port industry, etc., indicating that the leading companies in these industries have performed better in the past week and are the hotspot industries in the market. We believe that the petrochemical industry has a higher turnover rate and a higher return rate. There are still opportunities for profitability in the future and attention should be focused. Focus on the company Shandong Aluminum (600205-¥12.5 hold) Company Overview The company is mainly engaged in alumina, aluminum hydroxide, chemical alumina; metal antimony and its compounds; electrolytic aluminum, aluminum alloy, aluminum processing products, building curtain wall design, Construction; Carbon Products; Heat, Power Products, and Related Businesses. Investment Highlights l The company expects the company's earnings per share for the first half of 2004 to be 0.75 yuan, which is about 1.3 yuan for the whole year. l At present, the alumina price of the company is still at 4300 yuan/ton. The issuance of additional work is under way. l Recently, the price of alumina imports fell from the previous high of 5,300 yuan/ton to the current 4,400 yuan/ton, mainly because of the impact of macro-control, the company’s funds were tight, and the electrolytic aluminum companies only consumed inventories and reduced their purchases. The performance of alumina companies decreased while inventories increased. It is worth noting that the current domestic electrolytic aluminum production is not affected by macro regulation, which shows that the demand for alumina has not been reduced. It is only because of the shortage of funds that consumes inventory and reduces purchases. l Influenced by the above factors, domestic investors also It is expected that Shandong Aluminum will reduce its price and sell it, causing the stock price to fall sharply. l I think there is indeed pressure for price cuts in domestic alumina, and it may happen in the second half of the year. However, there is no change in demand, and once the macro-control is relaxed, the alumina prices will definitely rebound. The valuation lowered the company's 2004 performance to 1.3 yuan, but it still maintains the forecast for 2005 and 2006. At present, the company's stock price dynamic P/E ratio is less than 9 times, and the investment value is gradually revealed. It is recommended that the current (10.51 yuan) price can continue to hold, and long-term funds can be gradually increased. The main risk of a risk company comes from the business condition of the company's own business. (Source: Southern Research Institute, “Shandong Aluminum (600205) No fundamental change in the fundamentals†(Wang Qianming) Economic data / company dynamics Coal prices continue to rise, some products have slowed somewhat. This year, fixed assets investment With the rapid growth, the market demand for coal products has become increasingly strong, coupled with the significant effects of the nation’s efforts to renovate small coal mines in recent years and the impact of tight domestic capacity, coal products continue to maintain their upward trend after rising for three years. The ex-factory price of the washing industry rose by 15.4% from the same month of last year, which was an increase of 2.3 percentage points over April and a cumulative increase of 11.1% from January to May. Affected by the slowdown in demand, prices of some coal products have slowed somewhat, according to June. The price monitoring of important national production data products in the first half of the year showed that the factory price of anthracite decreased by 0.1% from the end of May; as the demand for steelmaking and coking decreased, the rising prices of coking coal prices stabilized, up only 0.2% from the end of May; The price of common bituminous coal as a thermal coal rose slightly, up 2.2% from the end of May. Due to fluctuations in the grid and the impact of domestic pricing lag factors, domestic crude oil prices showed a trend of highs and lows in the first quarter. In March, crude oil prices fell by 2.5% compared to the same month of last year, which is the lower point of the year. After the second quarter, the international market crude oil Prices have been rising all the way, once soared to 40 US dollars per barrel, affected by this, from the beginning of April, domestic crude oil prices rebounded and the rate of increase gradually accelerated, in April and May, crude oil prices rose 3.8% and 9.5% over the same month last year. In the first half of June, the prices of major production materials in the country were monitored, and the price of crude oil continued to rise, which was 8.9% higher than that in late May.. Brief comment: At present, the peak of electricity consumption in summer and thermal coal power resources are further used. The bottleneck effect of transportation has not been effectively resolved, and the price of power coal has gradually increased. At the same time, the price of coal for coking coal prices has been gradually declining due to the impact of investment slowdown in the steel industry. Both of them have a simultaneous effect and the overall level of coal prices will continue to rise, but The gains have slowed down, as oil prices in the international market have been fluctuating due to political, economic, and other complex factors. There are many variables, and the oil price in the international market is still running at a high level. Although China's oil pricing system is already in line with the international market, the price of oil products in the domestic market will continue to be strong under the influence of lagging factors. According to US High-Tech Market Research Corporation International According to a market analysis report released by the data company on the 29th, with the popularity of DVD players and flat panel displays, global digital TV sales will reach US$70 billion by 2008. According to statistics of the International Data Corporation, the global television in 2003 With a sales volume of 170 million units, it is expected to increase to 196 million units by 2008, and sales will increase from 61 billion US dollars to 86 billion US dollars.The company expects that in 2004, TVs will be delivered globally. The share of digital television will increase from 7.1% in 2003 to over 12%, and it will further increase to 60% in 2008. Comment: According to experts' forecasts, although the current trend of TV is the increasing size of the screen, when consumers start to update TVs a few years later, digital TVs with smaller screens will become more popular. After 35 years of independent development, Dongfeng Motor has accumulated a total of 3.56 million Dongfeng-branded commercial vehicles. The products cover more than 500 varieties of light, medium, and heavy commercial vehicles, and its full range of vehicle and component products markets. The market share has continued to increase, becoming a well-known brand for commercial vehicles with a completely independent intellectual property right in the Chinese market. Saab Saab Cars Top of Global Safety In the safety assessment of the authoritative European New Car Assessment Organization (NCAP), the Saab 9-3 convertible owned by General Motors won a high five-star rating, making it the only convertible in the world to receive this award. . Saab Saab also won the top spot in global safety and became the only auto brand with a full five-star rating for its full range of products. Comment: Saab9-3 sports sedan and 04 Saab9-5 sedan were launched in the first half of this year, and the Saab 9-3 convertible is also expected to land in China in the second half of the year. Dongfang Boiler (600,786) signed a boiler supply contract with Huadian Power International Co., Ltd. recently for the "2 × 1000MW ultra-supercritical unit boiler project for the fourth phase of the Huadian International Zouxian Power Plant." The total contract value exceeded RMB 1 billion. It is reported that Huadian International Zouxian Power Plant Phase IV 2×1000MW ultra-supercritical unit is the current domestic large-capacity thermal power unit, which was approved by the National Development and Reform Commission at the end of 2003. At the same time, the project's boiler ultra-supercritical Boiler type direct current boiler is another major cooperation between the company and Japan's Babcock-Hitachi on the basis of the comprehensive cooperation of 600MW supercritical Boiler-type direct current boiler technology and manufacturing. Comment: Obtaining large orders is a good thing, which is beneficial to the company's rapid growth in the next few years. However, the stock price of Dongfang Boiler has been severely overdrawn and has little impact on the market in the short term. ST Ning Pit, which was suspended from the 28th, announced major events yesterday. The company stated that the company’s creditor, Ningcheng County Taifeng Glass Products Co., Ltd. (hereafter referred to as Taifeng Glass) has applied to the court for the bankruptcy and repayment of the ST-Ning Pit. The Intermediate People's Court of Chifeng Municipality accepted the request and is scheduled to hold the previous creditors' meeting on October 15. If the company can not reach a settlement with the creditors' meeting or there are other circumstances that should be subject to bankruptcy, the court will declare the bankruptcy of the company. The information disclosed by ST Ning Pit stated that from 2001 to 2003, the company had defaulted on a total of approximately RMB 9.28 million in Taifeng glass purchases and another RMB 1 million in borrowings. Comment: Taifeng Glass, which put ST Ning Pit on the bankruptcy process, is a private enterprise. The company and its shareholders had close business and debt-to-debt relations with ST Ning Pit. On June 28, Harbin Air Conditioning (600202) signed an order contract with Inner Mongolia Huadian Zhuozi Power Generation Co., Ltd. with a total amount of RMB 15.78 million. The contract stipulates that Harbin Air-conditioner will provide 4 air-cooled cooling towers for 200MW air cooling units in Inner Mongolia Huadian Zhuozi Power Generation Co., Ltd. from April 2005 to June 2006. Brief comment: At present, the company has obtained the qualification for direct air-cooled bidding for large-scale power plants, and achieved a historic breakthrough for the domestic air-cooled production enterprises to participate in the projects of domestic large-scale power station air cooling system projects. The total investment of the project is 115 million yuan. After the completion of the project, the company's technical equipment and competitiveness will be further improved. Closer to the company report Jinan Iron & Steel (600022) raised funds to enhance the company's competitiveness (Wang Qianming) The company's main products are plate, rebar, and round bar. In 2003, the output of iron was 2,984,100 tons, steel output was 3,345,900 tons, and steel production 298.27 million tons. This macro-control has a great influence on construction steel such as rebar and wire, and has a relatively small impact on the plate. Plates, especially special plates, have great potential for development. Tasly (600,535) has further development space (Kong Jun) Tasly has made great efforts in independent R&D and acquisition of new drugs and is in a leading position in the industry, laying the foundation for the future sustainable development of the company. The company's compound Salvia miltiorrhiza product has a strong profit-making ability. Although the benefits of the holding subsidiary have not yet been used, the parent company has built a good platform for it. The work done by holding subsidiaries plays a significant role in the sustainable development of the company. From the current work done by the company, great efforts have been made in the independent R&D and acquisition of new drugs, which laid the foundation for the future sustainable development of the company. In addition, the company's compound Danshen entered the international market will greatly increase sales revenue. Given the company's fundamental situation and the current secondary market share price, the dynamic price-earnings ratio is only about 17 times, and the company has great development prospects. In the traditional Chinese medicine companies, the value is underestimated and the stock is worth investing. Industry profitability is difficult to change - Analysis of the industry investment strategy in the second half of 2004 of the home appliance industry (Lan Feiyan) Home Appliance Industry Investment Rating: Maintain Neutral Rating (Fridge Washing Machine Upgrading from Unfavorable Rating to Neutral; Neutral; color TV ratings remain neutral; monitors maintain bullish ratings). The home appliance industry is in a state of oversupply and market competition, and product prices are operating at low prices. In 2004, the overall output demand of the market will still maintain an increase of more than 25%. Before the relationship between supply and demand has changed, it is difficult to increase the price of products. In the sub-industry, the market saturation of air-conditioning products is relatively low; driven by export demand in 2004, the national air-conditioner output growth is expected to reach 38%, which is much higher than the growth rate of refrigerator washing machines. Masteel (600808) was greatly affected by the macro-control (Wang Qianming) In addition to plate and wheel hoops in the company's products (the total output only accounts for about 15% of the company's total steel), the rest are steel products for construction. These products are subject to The impact of the macroeconomic regulation of the round was greater, and the price fall was generally larger. In terms of costs, the company’s import of iron ore, procurement of coke, and high cost of electricity directly undermined the company’s profitability; the thin sheet project for construction was “15. "The highlight of the structural adjustment was the production of hot-rolled sheet production lines on October 18, 2003 and the production of nearly 90,000 tons of hot-rolled coils in 2003. It is expected to reach 2 million tons this year, which will make the company's 2004 total output of steel products possible. Reached 7.5 million tons, an increase of approximately 35% over the same period of last year;