20210409-招银国际-广汽集团-02238.HK-Bottom-out_in_2021E_7页_1mb

GAC Group (2238 HK) Summary

Core Content

GAC Group (2238 HK) announced its FY20 full-year results, with revenue rising by 6% YoY to RMB63.2bn and net profit falling by 10% YoY to RMB6.0bn. The company declared a total dividend of RMB0.18 per share, with a 31% payout ratio. CMB International Securities (CMBIS) has revised its target price to HK$11.1, representing a 62.8% upside from the previous target of HK$12.1. The recommendation remains BUY.

Key Financial Highlights

• Revenue (RMB mn):

  • FY18A: 72,380
  • FY19A: 59,704
  • FY20A: 63,157
  • FY21E: 67,697 (+7.19% YoY)
  • FY22E: 71,403 (+5.47% YoY)

• Net Profit (RMB mn):

  • FY18A: 10,900
  • FY19A: 6,616
  • FY20A: 5,964
  • FY21E: 7,972 (+34% YoY)
  • FY22E: 9,527 (+20% YoY)

• EPS (RMB):

  • FY18A: 1.07
  • FY19A: 0.65
  • FY20A: 0.58
  • FY21E: 0.77
  • FY22E: 0.92

• P/E (x):

  • FY18A: 5.33
  • FY19A: 8.78
  • FY20A: 9.85
  • FY21E: 7.37
  • FY22E: 6.17

• P/B (x):

  • FY18A: 0.74
  • FY19A: 0.70
  • FY20A: 0.68
  • FY21E: 0.64
  • FY22E: 0.59

• Yield (%):

  • FY18A: 6.52%
  • FY19A: 3.52%
  • FY20A: 3.17%
  • FY21E: 4.13%
  • FY22E: 4.93%

• ROE (%):

  • FY18A: 14.93%
  • FY19A: 8.44%
  • FY20A: 7.25%
  • FY21E: 9.14%
  • FY22E: 10.19%

Main Points

• Sales Mix and ASP:

  • In 2020, GAC Trumpchi saw a 14% decline in sales volume, but the sales structure improved significantly.
  • Sales volume of MPV with higher ASP increased by 25% YoY, leading to a rise in ASP to RMB107K from RMB97K in 2019.

• GAC Aion Performance:

  • GAC Aion recorded a 50% revenue growth in 2020, driven by a 43% sales volume increase.
  • On 29 Mar 2021, GAC Aion launched the compact SUV Aion Y, which is the first BEV equipped with GAC's magazine batteries.
  • Aion Y targets young customers with a new brand image and is expected to deepen brand recognition through expanded sales channels.

• Earnings Forecast:

  • CMBIS raised its earnings forecast for FY21E to RMB8.0bn, representing a 34% YoY growth.
  • The company expects a continued improvement in profitability due to new model launches and improved sales mix.

• Target Price Adjustment:

  • Target price was cut to HK$11.1 (based on 12.0x 2021E P/E) from HK$12.1 (based on 15.0x 2021E P/E), with a 62.8% upside from the initial TP.

• Japanese Joint Ventures:

  • GAC Honda and GAC Toyota are expected to maintain high growth, with GAC Honda's fourth plant set to begin production in Jul 2021 and GAC Toyota's fourth plant under construction.
  • Both brands saw strong sales and revenue growth in 2020, with GAC Honda selling 806K units (+2.7% YoY) and GAC Toyota selling 765K units (+12.2% YoY).

• Earnings Revision:

  • CMBIS revised its earnings forecast for FY21E to RMB8.0bn, a 10% increase from the old forecast.
  • For FY22E, the forecast was adjusted to RMB9.5bn, a 13% increase from the old forecast.

• Capital Market and Share Performance:

  • The stock has seen mixed performance over different timeframes.
  • The company has a market cap of HK$113,391 million and equity share of 3,099 million for 2238.HK.

Key Information

• Shareholding Structure:

  • Guangzhou Automobile Industry Group Co., Ltd: 72.96%
  • JPMorgan Chase & Co.: 3.28%
  • Brown Brothers Harriman & Co.: 1.80%

• Financial Summary:

  • The company has a strong focus on commercial services and financial services, which have shown consistent growth.
  • Net margin improved from 9% in FY20A to 13% in FY22E.
  • The company has a net cash position, with a net debt/equity ratio of "net cash" across all years.

• Key Ratios:

  • Gross profit margin increased from 4% in FY19A to 6% in FY21E.
  • ROE improved from 7% in FY20A to 10% in FY22E.
  • Current ratio decreased from 1.64 in FY18A to 1.16 in FY21E.
  • Quick ratio decreased from 1.48 in FY18A to 1.01 in FY21E.
  • Cash ratio decreased from 0.78 in FY18A to 0.33 in FY21E.

• Earnings Forecast vs Consensus:

  • CMBIS forecasts are slightly lower than the consensus for FY21E and FY22E in terms of revenue and gross profit, but higher for net profit and EPS.

• Investment Outlook:

  • The company is expected to benefit from the growth of its Japanese joint ventures and the expansion of its electric vehicle (EV) segment.
  • The GAC Tech Day in April 2021 will showcase cutting-edge technologies such as silicon-based cathode batteries and ADIGO 4.0 intelligent drive ecosystem.

Conclusion

CMBIS remains positive on GAC Group, reiterating the BUY recommendation due to improved sales mix, cost control, and the potential for growth in its EV segment and Japanese joint ventures. The target price has been adjusted downward, but the upside remains significant. The company is expected to see continued improvements in profitability and net margin, supported by new model launches and enhanced brand recognition.