20150911-DBS_Group-China_Auto_Sector_Improving_sales_sentiment_19页_945kb

报告摘要

Summary of Document: Improving Sales Sentiment in the Chinese Auto Industry

Core Content

The document provides an analysis of the performance of the Chinese auto industry in August 2015 and the first eight months of the year. It highlights the overall market trends, segment performance, and the valuation and recommendation for various auto manufacturers, dealers, and parts companies.

Main Points

1. Overall Sales Performance

Total unit sales in August 2015 fell by approximately 3% year-over-year (y-o-y) to about 1.66 million vehicles.
The passenger vehicle (PV) market declined by 3.4% y-o-y to 1.42 million units.
The commercial vehicle (CV) segment only eased slightly to 246,000 units.
On a month-over-month (m-o-m) basis, both PV and CV markets showed decent recovery of 11.8% and 4.9%, respectively, due to seasonality.
For the first 8 months of 2015 (8M15), the overall industry sales were flat at around 15 million units.
PV sales inched up by 2.6% to 12.78 million units, while CV sales remained relatively stable.

2. Segment Performance

SUV segment remained the strongest, with volume sales expanding by 46% y-o-y in August and 3.5 million units sold in 8M15, accounting for 27% of the PV market.
Chinese brands saw a 13.1% increase in August sales to 559,000 units, lifting their market share to 39.4%.
The SUV price index dropped by 3 percentage points to 85.4% year-to-date (YTD), indicating intense price competition.

3. Automaker Performance

Brilliance China is upgraded to Buy due to improving earnings outlook and attractive valuation. Its target price is set at HK$12.60, with an upside of 35%.
Guangzhou Auto is recommended as Buy, with a target price of HK$8.30 and upside of 59%.
Great Wall Motor and Geely Auto reported strong domestic sales growth in August, with 23% and 29% y-o-y respectively.
Dongfeng Motor and Guangzhou Auto showed positive performance in their Japanese joint ventures (JVs).
Changan Mazda emerged as a new star with 80% sales growth in 8M15.
Brilliance's BMW 5 series saw 22% growth, but BMW 3 series and X1 are in the run-out phase, leading to declining sales.
Changan-Ford and SAIC's foreign JVs experienced declines in sales due to high base in 2014 and weak market sentiment.

4. Market Sentiment and Outlook

The auto sector has underperformed the market due to economic slowdown and volatile stock market.
The sales sentiment is expected to improve ahead of the 4Q sales season.
Investors are advised to bottom fish as the market sentiment is anticipated to improve.
The de-stocking strategy by automakers is taking effect, preparing for new model roll-outs in 4Q.

Key Information

5. Valuation Table (Auto Manufacturers)

Company	Price (HK$)	Target Price (HK$)	Upside (%)	Recommendation	FY15 PE x	Market Cap (US$m)
Brilliance China (1114 HK)	9.34	12.60	35	Buy	9.2	6,061
Dongfeng Motor (489 HK)	9.48	11.35	20	Buy	5.2	10,537
Geely Auto (175 HK)	3.23	3.30	2	Hold	9.2	3,667
Great Wall Motor (2333 HK)*	23.50	48.10	105	Hold	5.4	9,223
Guangzhou Auto (2238 HK)*	5.23	8.30	59	Buy	6.0	4,342
BAIC Motor (1958 HK)^	6.68	n.a.	n.a.	NR	8.2	6,545
CQ Changan 'B' (200625 CH)^	13.70	21.80 #	59	NR	5.2	8,242
SAIC Motor 'A' (600104 CH)^	17.16	n.a.	n.a.	NR	6.5	29,667

6. Valuation Table (Auto Dealers)

Company	Price (HK$)	Market Cap (US$m)	PE x	Recommendation
China ZhengTong (1728 HK)	3.01	858	5.1	Buy
Dah Chong Hong (1828 HK)	2.78	657	7.3	Buy
ZhongSheng (881 HK)	2.99	829	4.1	Buy

7. Valuation Table (Auto Parts & Components)

Company	Price (HK$)	Market Cap (US$m)	PE 15F x	Recommendation
Minth Group (425 HK)*	14.82	2,112	10.5	Buy
Nexteer Automotive (1316 HK)*	7.66	2,468	11.8	Buy
Xinchen China (1148 HK)*	1.73	287	5.8	Buy
Xingda Int'l (1899 HK)^	1.59	308	7.6	NR

Conclusion

The Chinese auto market showed a mixed performance in August 2015, with SUVs leading the growth and Chinese brands gaining market share. While passenger vehicles faced downward pressure, commercial trucks showed positive signs. The de-stocking strategy by OEMs is taking effect, and the 4Q sales season is expected to boost sales sentiment. Some automakers, like Brilliance China and Guangzhou Auto, are recommended for investment due to improving fundamentals and attractive valuations.