Fundamental Analysis - Haitong Securities Co. Ltd

Haitong Securities Co., Ltd. (6837 HK)

[pic 2]Investment Summary

Economic Environment: The growth in China’s GDP and economy scale should provide a 9% growth rate in the following ten years and 5% thereafter.

Company Business Segments: Haitong has experienced significant growth among different divisions, especially in asset management and oversea business. With a long-term strategy of internationalization, a further upward growing trend can be expected in Haitong.

FCFE & Price Multiple Analyses: The Discounted Free Cash Flow to Equity model allows us to separate the growth of the company into two stages and forecast the future earnings. A two-dimension sensitivity testing allows us to see the price change of Haitong’s price change under different scenarios. We also use multiples analysis to compare P/E ratios with peers in different periods and historical performance with the market.

Possible Risk: Macroeconomic slowdown or recession, such as the slowdown of the growth of China’s GDP, business cycle, volatility in the stock market, etc. We have taken these factors into account and adjusted our forecast on the future performance of the company.

Company Profile

Haitong Securities Co., Ltd. ("Haitong Securities" or "Haitong") was founded in 1988 and was one of the earliest securities companies in mainland China. It was listed at Shanghai Stock Exchange in 2007 (600837-A) and Stock Exchange of Hong Kong Limited in April 2012 (6837-H), with registered share capital of RMB11.502 billion in 2015 and a recent close of HK$12.86 on 9th Oct . Benefitting from the expansion of Chinese security market over the past few years, Haitong Securities has been growing rapidly year by year, especially in 2014 and 2015. In the first half of 2015, both its revenue and profit increased by more than 200% (yoy) and the company generated total assets of RMB629.75 billion.