匯豐銀行信貸策略產業(yè)把小麥從谷殼中分離

1、5 July 2019THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLE'S (EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF(THE "PRC")AND MACAO)After a painful 2018 highlighted by defaults and sharp price corrections, the sector has split into different layers of qualityAs value emerges, reduced suppl

2、y is another reason to revisit the sector, particularly in the yield range of 7-9%Bullish on HY oil, neutral on HY consumer; buy trading call on CARINC22uReks NgAnalyst, CorporatesTheand Shanghai Banking Corporation Limitedreks.ng hkuKeith ChanHead of Corporate Credit Research, Asia PacificTheand Sh

3、anghai Banking Corporation Limitedukei hkfchan.hkNavigating the minefieldTo many, it might be an easy call to underweight China high-yield (HY) industrials on a sector basis, citing the high default rate, weak financing capability versus property counterparts, and depressed margins stemming from fie

4、rce competition. The weak trading liquidity often makes things worse its not uncommon to see a large intraday swing even on days with limited relevant news. However, its unfair to judge every issuer on this basis. Some names in this report display qualities traditionally favoured by fixed income inv

5、estors, such as fast growth (Health & Happiness H&H), clear deleveraging efforts (West China Cement), valuable fixed assets (Golden Eagle), and industry leadership (Car Inc). We think some of these qualities are underappreciated as a result of the defaults in the sector. The reduced supply i

6、s another reason to revisit the sector as value emerges, which can be a good reason todiversify away from HY property given the recent noise in that sector.Sorting the wheat from the chaffWe define China HY industrials as all China HY issuers apart from property developers, local government financin

7、g vehicles (LGFVs), and Macau gaming operators. There are around 70 HY industrial issuers in the market with cUSD34.5bn in bonds outstanding less than a third of the size of China HY property market. Due to the material heterogeneity across many of the industrial sub-sectors, we take a bottom-up app

8、roach on a sub-sectoral and name basis rather than a top-down approach on the entire industrial sector. In this report, we focus on names that: 1) are listed and rated; 2) are transparent in terms of corporate communications and disclosures; 3) have healthy corporate governance; and 4) have manageab

9、le near-term liquidity risk balanced by available financing channels.Bullish on HY oil, neutral on HY consumer, buy CARINC22We are bullish on the HY oil sector on the back of the favourable supply-demand dynamics, which should create a sweet spot for the HY oil issuers. We have a neutral view on the

10、 HY consumer sector due to the still frail growth of China retail sales, in addition to expensive valuations. On a name basis, we reiterate our buy trading callon CARINC22. We initiate coverage of Anton Oilfield Services, H&H and Gome.With this report, Reks Ng also assumes primary credit coverag

11、e of Golden Eagle,Maoye and West China Cement.Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.Issuer of report: The Banking Corporation Limitedand ShanghaiView HSBC Gl

12、obal Research at:China Industrial HYSorting the wheat from the chaffFixed IncomeCreditChina獲取報告1、2、3、每周群內7+報告；當日華爾街日報、4、行研報告均為公開利歸原作者所有，起點財經僅分發(fā)做內部學習。掃一掃關注 回復：加入“起點財經”群。Fixed Income Credit5 July 2019Navigating the minefieldChina HY industrial sector is not warmly welcoming new joiners; issuance was o

13、nly 16% of that of China HY property sector in 1H19The defaults and sharp price corrections in 2018 mean that the sector has segmented into different layers of qualityThe limited supply is another reason to revisit the sector as value emergesuuu70 HY industrial issuers, USD34.5bn bonds outstandingWe

14、 define China HY industrials as all China HY issuers excluding property developers, LGFVs, and Macau gaming operators. There are around 70 HY industrial issuers with cUSD34.5bn in bonds outstanding in this market. Its less than one-third of China HY property market (USD125bn). Of theissuers, half ar

15、e listed and around 30% do not have international ratings, reflecting terally lowlevel of transparency and financing capabilities of industrial issuers.1. China HY industrial issuance (yearly)2. China HY industrial issuance (quarterly)18,00016,00014,00012,00010,0008,0006,0004,0002,000-6,0005,0004,00

16、03,0002,0001,000-20152016201720181H191Q15 4Q15 3Q16 2Q17 1Q18 4Q18Source: Bloomberg, HSBCSource: Bloomberg, HSBCIt can be easy to step on the landminesAnnual HY industrial issuance peaked during the 2017 boom at USD16bn, almost half the level in the HY property space. The divergence between the two

17、increased in 2018 as market turned sour. Industrial issuance was cut by half to USD8.8bn but HY property issuance rose to a record high of USD37.7bn, up 12% y-o-y. A slew of debut industrial issuers tapped the offshore dollar market in 4Q17-1Q18 before Asia credits finished the great tightening in e

18、arly 2018. A good proportion of them are now trading in the 70s (e.g. Yihua, Zhongrong International and Shandong Sanxing), while others defaulted (e.g. China Singyes, Gangtai). These “l(fā)andmines”prompted greater investor scrutiny across the sector, from debut issuers and extended to thefundamentally

19、 stronger credits. Coupled with the macreveragingand the tightenedonshore liquidity last year, even liquid benchmark HY industrial bonds have suffered from largeprice swings on negative news flow such as a cancellation of onshore bond issuance.2Yearly gross issuance (USDmn)Quarterly gross issuance (

20、USDmn)Fixed Income Credit5 July 20193. HY industrial is not a sector that welcomes new issuance4. USD6.5bn issuance in 1H19, dominated by the university sectorAuto1H19Conglomerate2018ConsumerEnergy2017Healthcare2016Ms and miningTMT2015Gross issance (USDmn)University-10,000 20,000 30,000 40,000Chian

21、HY property issuance China HY industrial issuanceSource: Bloomberg, HSBCSource: Bloomberg, HSBCThe market is already differentiating between the weak and the strongIts true that HY industrials face fundamental weakness on a sector basis. However, it might beunfair to apply the same tag to everyone u

22、nder this umbrella., some names in this reportare displaying qualities traditionally favoured by fixed income investors, such as fast growth (H&H), clear deleveraging efforts (West China Cement), valuable fixed assets (Golden Eagle), and industry leadership (Car Inc). Some of these qualities are

23、 underappreciated to various degrees influenced by the previous defaults in the sector. From a bond supply perspective, shrinking issuance also provides technical support in terms of bond prices. In 1H19, gross issuance was USD6.4bn, accounting for only 16% of China HY property issuance in the same

24、period. Most came from repeated issuers rather than debut issues (USD900m). Its fair to say the market is already differentiating between the stronger credits which can still repeatedly issueand the weaker ones which are scarcely traded after initial pricing.Premium versus the China HY propertyFor r

25、eference, we now compare the performance of the China HY industrial and property sectors. For each, we have compiled a yield index comprising 15 benchmark issues across the BB and B space, with bonds maturing from 20 to 23 (see Chart 5). The current industrial premium over property is 69bp, versus a

26、n average of 11bp over the past 1.5 years. It has come down from the high of 155bp at the start of 2019 when discussions about interest rate hikes, geopolitical tensions and a global growth slowdown were dominating the headlines. The first factor is no longer an issue following the coordinated easin

27、g by global central banks, while the latter two are still casting a shadow over the market, maybe even more than six months ago.Against this macro backdrop, we think the industrial-property premium is likely to exist for the foreseeable future. At the same time, we note the recent round of tightenin

28、g with regards toregulators curbing developers fund raising plans in the onshore market (see China property HY: Déjà vu, 5 June) so this story is not black and white. Importantly, the absolute level of the premium is arbitrary in nature and highly dependent on the index substituents. We sh

29、ould still appreciate the difference in premiums of individual bonds, considering the varioussub-sectors within the entire HY industrial sector.3Fixed Income Credit5 July 20195. Some premiums over the property counterparts12.0011.0010.009.008.007.006.005.004.00250200150100500-50-100Jan-18Mar-18May-1

30、8Jul-18Sep-18Nov-18Jan-19Mar-19May-19DiffChina HY industrialChina HY propertySource: Bloomberg, HSBCSorting the wheat from the chaffHere we again stress the importance of credit selection. In this report, we focus on names that:1) are listed and rated; 2) are transparent in terms of corporate commun

31、ications and disclosures; 3) have healthy corporate governance; and 4) have manageable near-term liquidityrisk balanced by available financing channels.6. Bullish on HY oil sector; neutral on HY consumer sector; buy CARINC2210.0MEONHE 7.75 21CARINC 8.875 229.0HKJHCC 5.35 23GCLNE 7.1 21EHICAR 5.875 2

32、2CHGRAU 7.9 20HKJHCC 7.5 228.0CARINC 6 21HKJHCC 7.45 22HKJHCC 4.7 21HKJHCC 7.875 21HILOHO 7.25 20 ANTOIL 9.75 20SNAGRP 7.5 21THSCPA 6.95 22CHIWIN 7.9 21FOUIHK 6.25 2021GOME 5 20VEYONG 7.57.0MAOIH 13.25 20HKJHCC 4.575 20TAIHUA 6.8 21TSINGH 5.375 23THSCPA 7.95 21ZOOMLI 6.125 22VNET 7.875 21THSCPA 7.9

33、21BJEAHM 6.5 226.0GERGHK 4.625 23BTSDF 7.25 21YINGDZ 6.25 23TSINGH 4.75 21CWAHK 5.25 22TSINGH 6 20 TSIGTF 5.375 21RSMACA 3.375 22VNET 7 20CHMOLY 5C.4H8IO2I2L 4.625 22CARINC 6.125 20YGCZCH 6 225.0ZHJMIN 5.5 22SDGFIN 5.3 PERPYZCOAL 6 21YGCZCH 4.75 20THSCPA 4.3 19YZCOAL 5.75 PERPTSSTEE 4.25 204.00.000.

34、501.001.502.002.503.003.50Duration (Yr)Source: Bloomberg, HSBC4Yield (%)Yield (%)DifferenceFixed Income Credit5 July 2019HY Consumer: Holding itsground?Same store sales growth largely flat y-t-d, echoing the decline in China retail sales growthIt might be too early to conclude that issuers are alrea

35、dy out of the woods despite the various initiatives put in placeWe have a neutral stance on HY consumer sector due to the still frail growth of China retail sales and expensive valuationsuuuRetail sales growth hit a multi-year low in April 2019While spending in the business sector has been generally

36、 weak, consumption has provided grounds for short-term optimism based on the latest retail sales surprises from both China and the US. For example, Chinas retail sales growth accelerated to 8.6% y-o-y in May, beating estimates on the back of extended Labour Day holidays and the resilient housing mar

37、ket.However, from a broader perspective, 5M19 (accumulated) retail sales growth was only 0.1% higher than in 4M19, when growth was the lowest since 2003. As shown in Figure 7, the deceleration in growth in retail sales is a decade-long trend. In recent years, e-commerce is the biggest challenge to t

38、raditional retailers, currently accounting for 18.9% of total retail sales of physical goods. At its peak in 3Q17, e-commerce recorded 40% y-o-y growth. Although this has started to slow, online retail sales still registered 18.2% y-o-y growth in 5M19, outpacing offline sales growth of 5.3% y-o-y. T

39、hese trends underscore the cross-currents facing issuers in the HYconsumer sector.7. China retail sales growth continues to slide21.019.017.015.013.011.09.07.05.0Source: National Bureau of Statistics of China, Bloomberg, HSBC5China retail sales YTD acc (yoy %)Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-1

40、2 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19May-19Fixed Income Credit5 July 2019Low-to-mid single-digit growth y-t-d for our issuers consumer productsThere has been a big difference in the performance of

41、 different product categories so far this year. Auto sales are the weakest, recording -2.0% y-o-y growth in 5M19, followed by jewellery at 2.7% y-o-y. However, besides these “big ticket” discretionary items, the overall sales of consumer staples remained healthy on a y-o-y basis daily commodities (+

42、14.5%), medicines (+11.0%), and grain & oil (+10.5%). For the HY consumer issuers, the more relevant product categories recorded low-to-mid single-digit growth in 5M19, including garments and footwear (+2.6%), jewellery (+2.7%) and household appliances (+6.4%); the best performer was cosmetics (

43、+11.3%). This might explain the lukewarm to disappointing single-store sales growth (SSSG)reported by Maoye (FY18: +0.1%), Golden Eagle (FY18: flattish) and Gome (1Q19: -4.75%).8. Cosmetics sales outperformed; garments, jewellery and household appliances weaker(RMBbn)5M19y-o-y (%)By distribution cha

44、nnel OnlineOffline3,86412,26918.25.3By point of sales CityCounty level or below13,7972,3378.08.9By product / service categoriesServices (Catering) GoodsGran, oil and foodstuff BeverageTobacco and liquor1,75614,378576801609.38.010.510.15.6Daily commodities23014.5MedicinesCultural and office appliance

45、s FurnitureCommunication appliances Petroleum and related products AutomobileBuilding and decoration materialsSource: National Bureau of Statistics of China, Bloomberg, HSBC243116711767991,5427311.03.1-2.04.2The way to “New retail”In a challenging retail environment, issuers have been takin

46、g a number of steps to fend off online competitors. The strategy shared by Maoye and Golden Eagle is to reposition their department stores into shopping malls. More distinctive services and lifestyle facilities are being provided to offer an enhanced shopping experience that appeals to and engages w

47、ith customers and offers alternatives to making purchases online. Other than improved traffic and customer loyalty, the success of these initiatives is being reflected in improved rental income, which is more resilient and stable than the traditional sales revenue. In FY18, Maoye and Golden Eagle re

48、ported rental revenue of RMB1.0bn and RMB772m, respectively, up 31% and 55%. Although relatively small,we regard this ramp-up in the rental portfolio as a quality increase in recurring income.Auxiliary income streams to complement the revenue mixAnother way to counter slowing sales growth is auxilia

49、ry income streams such as property sales. We expect Maoye and Golden Eagle to generate property sales of RMB2-3bn and RMB500-800m in FY19, respectively. This has been noted by the rating agencies. Moodys recent upgrade on Maoye cited the accelerated disposal of property inventory which had helpedsup

50、port cash flow generation and deleveraging. From our discussion with the companies, we6Household appliances and AV equipment3456.4Garments, footwear, hats, knitwear5462.6Cosmetics12011.3Gold, silver and jewellery1142.7Total retail sales16,1338.1Fixed Income Credit5 July 2019gather that the risk from

51、 extensive replenishing of land bank for pure property sales is limited, given the continued focus on the core retailing business. Meanwhile, home appliance specialty retailer Gome has also widened its revenue streams by offering high-margin smart home furnishing solutions, in addition to the tradit

52、ional sales of standalone home appliances.Management expects to see sales from this new product line double in FY19 versus 1Q19.When buyers turn to sellers tooFor issuers with a presence both offline and online, optimizing distribution channels is another key focus to direct the right products to th

53、e right place. For example, in February 2019 Gome launched ME Shop, a social-networking sales platform where ME shop owners can earn a profit by sharing group purchases with friends, without taking risks in inventory and supply chain management. Thus, the ME shop and the physical stores will bear th

54、e responsibility to attracttraffic, and later collected by the web / APP as a centralized distribution platform.Online-offline integration slowly in the backgroundMeanwhile, Gome plans to open 600-800 new county stores (stores in lower-tier cities) in 2019,most of which in a franchise business mfor

55、less capital outlay. H&H has also added 6,000+points of saless offline market in 1Q19, in addition to the 12,698 retail stores as ofDecember 2018. The theme of integrating online and offline is also evident in Alibabas retail ambitions. Since 2014, the retail giant has acquired retailers with an

56、 offline presence, includingIntime, Suning, Easyhome and more recently Red Star Macalline. We believe this online-offline integration will be a prevailing themes retail industry due to the importance of:1) gathering customer data for targeted marketing; 2) transforming offline stores to solution- and experience-based centres; 3) widening the product offering to fresh food, catering and home furnitu