China Stock Roundup: ReneSola, eLong Reverse Losses, China Unicom 1H14 Net Income Surges - Analyst Blog

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Stocks had a mixed week after posting substantial gains on Monday. Indications that a comfortable pace of inflation would provide the government with greater flexibility regarding policy measures lifted the benchmark index at the beginning of the week.

Stocks declined on Tuesday as investors took a breather ahead of the release of key economic data. Speculation that the government would introduce additional stimulus to boost the economy lifted stocks on Wednesday.

However, fears that government measures to stimulate growth were proving to be inadequate led to losses on Thursday. ReneSola Ltd ( SOL ) and eLong Inc. ( LONG ) swung into the black during the second quarter while China Unicom Hong Kong Limited's ( CHU ) net income surged during the first half of 2014.

Last Week's Developments

Stocks gained last Friday after China's trade surplus touched a record high. Exports increased 14.5% year over year while imports declined 1.6%. As a result, July's trade surplus came in at an all-time high of $47.3 billion.

The Shanghai Composite Index increased 0.3% and gained 0.4% over last week. This marks the longest series of weekly gains since Dec 6. The Hang Seng China Enterprises Index declined 0.4% and lost 1.4% over last week. This was its largest five-day decline since April. The CSI 300 moved up 0.2%, ending the week nearly flat.


Markets and the Economy This Week

The Shanghai Composite Index gained 1.4% on Monday, its largest increase in a week. Speculation gained strength that a lower level of inflation would provide the government with greater flexibility regarding policy measures. The consumer-price index moved up 2.3% in July on year over year basis. The measure remained unchanged compared to last month and was lower than 3.5%, the target for 2014.

Financial shares led gains. Analysts were of the view that easing of property regulations would improve the sector's outlook. The Hang Seng China Enterprises Index surged 1.9% while the CSI 300 increased 1.5%. The Bloomberg China-US Equity Index gained 1.3%.

However, the benchmark index lost 0.1% on Tuesday, ahead of the release of key economic data. Analysts were of the view that market had posted gains at an unsustainable pace. This is why investors were taking a breather and consolidation was taking place. A sub-index of financial stocks lost 0.8%, leading the losses among the CSI 300's industry groups. The CSI 300 declined 0.4% while the Hang Seng China Enterprises Index lost 0.1%. The Bloomberg China-US Equity Index gained 0.1%.

Coal producers led gains for stocks on Wednesday, following speculation that the government would take additional measures to boost the economy. Industrial production and retail sales data for July was below most estimates. Additionally, aggregate financing came in at 273.1 billion yuan, lower than last month's level of 1.5 trillion yuan. A gauge of energy stocks within the CSI 300 moved up 1.1%, increasing the highest among the index's industry groups.

The Shanghai Composite and CSI 300 each added 0.1%. The Hang Seng China Enterprises Index gained 1.2% to close at its highest level for the year. The Bloomberg China-US Equity Index gained 1.4%.

The Shanghai Composite Index lost 0.7% on Thursday, suffering its worst decline in a week. Fears increased that government measures to boost economic growth were proving to be ineffective. Additionally, some analysts were of the view that the government would refrain from announcing additional stimulus because it was reconciled to a slower pace of growth. Financial and commodity stocks declined the most.

The CSI 300 declined 1% while the Hang Seng China Enterprises Index lost 1.1%. A sub-index of material stocks within the CSI 300 declined 2%, the most among the index's industry groups.

Stocks in the News

ReneSola Ltd reported earnings per American Depositary Share (ADS) of 1 cent in the second quarter of 2014, reversing the year-ago loss of 24 cents per ADS. The Zacks Consensus Estimate was a loss of 15 cents per ADS.

The upside was driven by lower operating expenses and higher margins.

ReneSola's net revenue of $387.1 million advanced 2.6% from the prior-year quarter but decreased 6.7% sequentially. The reported figure fell short of the Zacks Consensus Estimate of $390 million.

The sequential decline in sales was mainly due to lower shipment volume.

Total solar wafer and module shipments were 698.3 megawatt (MW), down 17.8% year over year and 1.7% sequentially. Its module shipments were 498.7 MW, up 14.9% year over year but down 4.3% sequentially. Wafer shipments stood at 199.6 MW, down by a considerable 51.9% year over year but up 5.6% sequentially.

Gross margin expanded to 14.7% from 8% in the year-ago period.

Operating expenses, representing approximately 12.0% of total revenue, dropped 1.3% year over year and 12.3% sequentially to $46.3 million during the quarter.

The company expects third quarter 2014 total solar module shipments between 530 MW and 550 MW, with overall gross margin in the range of 15% to 17%.

eLong Inc.  swung to the black, boosted by an increase in revenues which was attributable to growth in the hotel reservations business. The company reported earnings per American Depositary Share (ADS) of 14 cents in the second quarter of 2014, compared to net loss of 36 cents per ADS in the same period last year.

Net revenues moved up 25%, increasing from $38.2 million in the year-ago quarter to $47.1 million. This increase was powered by substantial gains in hotel commission revenue, which surged 28% from $32.4 million in the year-ago quarter to $41million. Hotel room nights jumped 44% from 5.8 million in the year-ago period to 8.3 million.

China Unicom Hong Kong Limited - the second largest mobile operator in China - announced first half 2014 net income of RMB6.7 billion ($1.1 billion). This was up 26.4% year over year on strong revenue growth and higher adoption of 3G. Earnings per share also increased 22.7% year over year to RMB0.27 (4 cents per share).    

Total revenue (excluding deferred fixed-line upfront connection fees) climbed 3.6% year over year to RMB149.57 billion ($24.3 billion) in the first half of 2014. Telecommunication service revenue, comprising roughly 81% of the total revenue, were RMB126.97 billion ($20.7 billion), up 9% year over year.

Mindray Medical International Limited ( MR ) posted second quarter adjusted earnings per share of 53 cents, down 1.9% year on year. However, earnings inched past the Zacks Consensus Estimate by a penny.

Reported earnings decreased 2% year on year to 50 cents per share.

Second-quarter net revenue stood at $334.5 million, reflecting an 8.9% gain from the year-ago quarter. International sales (contributing 54.4% to total revenue) continued to be stronger than domestic sales.

The company expects 2014 net revenue to grow at least 10% over 2013, lower than the earlier guidance of 15%.

The company now expects 2014 adjusted net income to decrease by mid-single digits over 2013 as against the prior projection of in-line figures.

Bitauto Holdings Limited ( BITA ) reported earnings per American Depositary Share (ADS) of 42 cents in the second quarter of 2014, beating the Zacks Consensus Estimate of 35 cents.  Revenues increased 54.5% from the same period last year to $84.2 million. Advertising and subscription revenue amounted to $75.5 million. Agent service revenue came in at $8.7 million.

Gross profit increased 64.3% year over year to $67.6 million. The company expects revenues for the third quarter to be in the range of $88.7- $91.9 million. Bitauto's non-GAAP profit projections for the third quarter are in the range of $20.2- $21.3 million.

Trina Solar Limited ( TSL ) has purchased a 49.9 MW solar PV project in the UK from Good Energy Group PLC. The plant was awarded planning consent in Jan 2014 and will use PV modules manufactured by Trina Solar. It is expected that the site will be completed ahead of the end of first quarter 2015.

The project will provide energy to around 14,000 homes in the UK per year. Jifan Gao, Chairman and CEO of Trina Solar said: "This new project represents a new step forward for Trina Solar in the UK following the completion and grid-connection of our first two projects that totaled an installed capacity of 23.8 MWp. This new project will further strengthen our leading market position in the UK, as well as in Europe."

Performance of Most Actively Traded US-listed Chinese Stocks

The table given below shows the price movements of 10 Chinese companies with the highest three-month average trading volume on U.S. exchanges. Price movements over the last five days and during the last six months have been included.

Ticker

Last 5 Day's Performance

6 Month Performance

JD

+8.9%

NA

DANG

+7.7%

+52.7%

TSL

-0.3%

-20.7%

SFUN

+16.2%

-24.1%

KNDI

-10.6%

+32.8%

YOKU

+14.3%

-26.2%

YGE

+5.7%

-41.8%

JASO

+2.8%

-5.6%

BIDU

+0.7%

+30.5%

NQ

-7.9%

-64.3%

Next Week's Outlook:

Stocks have had a mixed run this week, following a series of weak economic reports. While inflation data remains comfortable, industrial production, retail sales and aggregate financing came in below most estimates. This has led to speculation that additional measures will be implemented to boost the economy. On the other hand, a contrarian view has emerged, that government measures were proving to be ineffective.

Next week features economic reports on home prices and manufacturing. The tone of these reports has acquired special significance following the negative nature of this week's data. While some analysts believe that the government will refrain from further stimulus, others believe that weak data could trigger further policy measures.


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CHINA UNICOM (CHU): Free Stock Analysis Report

TRINA SOLAR LTD (TSL): Free Stock Analysis Report

RENESOLA LT-ADR (SOL): Free Stock Analysis Report

MINDRAY MEDICAL (MR): Free Stock Analysis Report

BITAUTO HOLDNGS (BITA): Free Stock Analysis Report

ELONG INC-ADR (LONG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: ADS , CHU , TSL , SOL , MR

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As of 5/28/2015, 04:15 PM


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