1、February 22, 2010 China: TechnologyGao Hua Securities Investment Research 1 February 22, 2010 China: Technology Healthy electronics sell through and ample inventory during CNY Robust sales but with ample inventory; WLAN liberalization? The PRC Ministry of Commerce reported Chinese New Year (CNY; Feb
2、 1319) national retail sales of Rmb 340bn, a yoy increase of 17.2%, above +13.7% yoy reported in CNY 2009 and the average +16.2% yoy for CNY 20052009. Consumer and communication electronics (including handsets) sales increased 15.4% and 19.2% yoy; vs. 17.8% and 18.1% yoy in 2009, respectively, drive
3、n by strong demand for moderately priced (Rmb1,500-2,500) 2G/3G smartphones, 3G handsets, and touch screen phones, 32”-46” LCD TVs, and the clunker/rural subsidy programs. According to our store visits in the Beijing area: 1) consumers have become interested in both 2G and 3G Smartphone (e.g. Samsun
4、g 5560C and Nokia 5233/5800) priced at Rmb1,500-2,500 with touch screen and almost any OS (Touch WIZ, S60, or WinMo). We did not see any Android Smartphones. The demand for feature phones was mostly flat yoy. Handset price cuts were relatively moderate. 2) To our surprise, Samsung 5560C has only WLA
5、N and not WAPI, the China WiFi standard. 3) HP and Lenovo were the top-selling PC brands. NB is selling better than DT, but DT sales were above expectations. We note that Lenovo offers the only AIO DT in stores. 3) LGE has cut its 42” LED TV ASP by Rmb3,000 to Rmb10,000 and offers a free 32” LCD TV.
6、 Local LED TV was priced at approximately Rmb7,000-8,000. 4) Despite reports of fairly good sell through, almost all handset, PC, and TV brands have sufficient in-store inventory vs. relatively low PC and TV inventory in the 2009 CNY. Low possibility for rush orders, price is the key for Smartphone
7、(1) We view strong demand as reassuring, but ample inventory suggests low possibility of post-holiday rush orders. (2) Previously, the Chinese government required any WLAN feature to be bundled with WAPI. In our view, the potential liberalization of WLAN should stimulate demand for WLAN in China. (3
8、) The demand for both 2G and 3G Smartphone has accelerated in China. We believe that low-ASP is the key while the choice of OS is trivial for now. Neutral to foundry, positive to Mediatek, ZTE, and Lenovo We view the healthy sell-through (though with ample inventory) as neutral to foundry and packag
9、ing stocks. Potential WLAN liberalization is positive to ZTE (Neutral) and Mediatek (Buy). The emerging demand for moderately priced 2G and 3G Smartphone in China is a meaningful long-term catalyst for ZTE and Mediatek, which is enabling sub Rmb1,000 smartphones. RATINGS/TP SUMMARY FOR OUR COVERAGE
10、Stock however, the distribution of Buys and Sells in any particular coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the potential return or the likelihood of t
11、he realization of the return. Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The return potential, price target and associate
12、d time horizon are stated in each report adding or reiterating an Investment List membership. Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http:/ The analyst assigns one of the following coverage views which repre
13、sents the analysts investment outlook on the coverage group relative to the groups historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage groups historical fundamentals and/or valuation. Neutral (N). The inv
14、estment outlook over the February 22, 2010 China: TechnologyGao Hua Securities Investment Research 5 following 12 months is neutral relative to the coverage groups historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to t
15、he coverage groups historical fundamentals and/or valuation. Not Rated (NR). The investment rating and target price have been removed pursuant to Gao Hua Securities policy when Goldman Sachs Gao Hua is acting in an advisory capacity in a merger or strategic transaction involving this company and in
16、certain other circumstances. Rating Suspended (RS). We have suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in e
17、ffect for this stock and should not be relied upon. Coverage Suspended (CS). We have suspended coverage of this company. Not Covered (NC). We do not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The i
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