HK Stock Picks of the Month Come join us in this presentation as we share our views on these companies and why they have the potential to outperform the market in the longer term. Zhuzhou CSR is our top BUY in the railway sector. Our target price of HK$62.60 is derived from 24x 2015F PE, and is firmly supported by Zhuzhou CSR’s solid fundamentals (strong railway spending in 2015, strong order-winning momentum on China’s “One Belt One Road” strategy, as well as China’s enhanced competitiveness in the overseas rolling stock market based on the CSR-CNR merger). 2) Huaneng Renewables (958 HK) NDRC recently released its final plan for the on-grid tariff cut for wind power. Tariff cuts are much softer than rumoured previously and this will help alleviate much of investors’ concerns. The new tariffs will only be applied to the wind farms connected to the grid after 1 Jan 16, while operational projects with tariffs applied before the deadline will still enjoy the old tariffs. Huaneng Renewables is our top pick due to its heavy exposure to northeast and inner Mongolia (about 60%), soft tariff cuts for these areas is a load off. As the company has just issued 699m new shares and raised HK$1.7b in mid-Dec 14, we see no further dilution risks in the near term. 3) Longfor Properties (960 HK) Longfor lagged behind leading national and regional developers in the 2012-13 cycle and also missed its 2014 sales target. Given its weak base in the recent years, Longfor could achieve stronger growth of 10.0% in 2015. In view of its efforts to improve sales execution and landbanking capabilities in 2013-14, we expect Longfor to lead the recovery cycle this year, helped by the low base for comparison. Maintain BUY. Target price: HK$14.21.
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