移动版

Gehua CATV (600037.SH):Buying Time After Being Oversold

发布时间:2015-07-24    研究机构:光大证券(香港)

Good company at good price amid overall market crash.

Gehua CATV’s share price slumped 64% over 15 June to 9 July,approaching the price level before the trade suspensionannounced on 9 March 2015. In contrast, SSE Composite Indexretreated only 27.3% during the same period. We believe the stockhas been oversold amid market downturns caused by surgingmargin trading accounts. Gehua CATV’s strategic upgrade effortsand policy-driven fundamentals improvement are not reflected incurrent stock price. However, as market sentiment steadies, goodbuying opportunities gradually emerge, in our view.

Starting from TV cinema to explore a Rmb100bn market.

On 14 June 2015, Gehua CATV announced it will establish ChinaTV Cinema Operation Company jointly with China Film Group andAlibaba to tap into the aftermarket beyond cinemas. Gehua willtransfer the 62% stake it owns in the JV to 30 cable TV networkoperators across the country to form a cable network alliancecovering 200m users. We expect that starting from the area of TVcinema, the cable network alliance can also step into fields like bigdata, TV games, etc, to explore a new market with income of overRmb100m.

Shanghai cultural reform ahead of Beijing, Gehua CATVmay benefit from favorable policies:Compared to Shanghai's cultural reform, Beijing as a pioneer in thecultural industry has taken no action. Anticipating Beijing will speedup cultural reform, Gehua CATV as a leading industry player islikely to benefit from favorable policies. We also expect proposedfees hike for cable TV after the price hike for Beijing subway andbus fares. The company’s net profit will grow by not less thanRmb275m, corresponding to EPS increasing by Rmb0.23.

Initial coverage with a buy rating:We are optimistic about the company's strategic upgrade and thegovernment’s favorable policies. 2015-17E EPS is expected to beRmb0.70, Rmb0.94 and Rmb1.17 respectively, corresponding to2015-17E PE of 43/32/26x. Considering the market capitalization tobe boosted by the new cable network alliance business, we initiatewith a Buy rating at target price of Rmb45.

Risk factors.

Less-than-expected supportive policies. Risk arising from the development ofnew business.

申请时请注明股票名称