www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.EquityResearchReportChinaIndustrialsInitiatecoverageonfourindustryleadersIndustrialsJune2019By:BonanLi(S1700518070001)Thefourcompaniesareglobalordomesticmarketleadersinindustrialsewingmachines,environmentalmonitoringsystems,andrailwayconstructionequipmentValuationsappearattractiveandthestockshaverelativelystrongdefensivequalitiesatatimeofgrowingtradetensionsanduncertaintyWeinitiatecoverageofJackSewingMachine,BeijingSDLTechnology,ChinaRailwayHi-TechIndustryandCRCCHigh-TechEquipment(allratedBuy);wepreferJackSewingMachineandChinaRailwayHi-TechIndustrySPOTLIGHT1Equities●IndustrialsJune2019ThemainpointsThisreportlooksatindustryleadersinthreesub-sectors:industrialsewingmachines,environmentalmonitoringinstruments,andrailwayconstructionequipment.Wefindcommonthemesintermsofdemandgrowth,marketsharetrajectory,theglobalcompetitivelandscape,anddefensivequalities.Weinitiatecoverageoffourstocks:JackSewingMachine,BeijingSDLTechnology(SDL),ChinaRailwayHi-TechIndustry(CRHIC),andCRCCHigh-TechEquipment(CRCCE)–allratedBuy.Wehighlightthefollowing:ThereissignificantpotentialformarketsharegainsforleadersinindustrialsewingmachinesinChina.Long-termgrowthshouldbesupportedbyanincreaseinexportstriggeredbytherelocationofmanufacturingbases.TheenvironmentalmonitoringinstrumentindustryinChinaishighlyfragmented.Theleadersshouldbeabletoincreasetheirmarketshare.Domesticmakersofrailwayconstructionequipmentarewell-positionedtobenefitfromChina’scontinuedinvestmentininfrastructureandrailwaysandalsogainmarketshare.Overall,weseeagoodbuyingopportunityforthefourstocks.Thevaluationofthefourstockslooksattractiveversushistoricallevels,giventhesolidearningsgrowthandrisingROEoutlook.Thecompaniesalsohaverelativelystrongdefensivequalitiesatatimeofgrowingtradetensionsanduncertainty.Whyreadthisreport?Weidentifythreeindustrialsub-sec...
