中国汽车行业投资策略.pdf

Asia Pacific Equity Research 08 January 2013China Auto Industry Mind the tailwind and headwinds in 1Q-1H13 China Automobile ManufactureNick Lai AC(886-2) 2725-9864 nick.yc.lai@J.P. Morgan Securities (Asia Pacific) LimitedSee page 18 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.2013 will likely start with robust auto sales, a very strong tailwind from 4Q12. This is especially true for SUV and luxury segments–two areas we are most bullish on and expect further share price rally. This, however, may not apply to the truck sector where we expect valuations running ahead of fundamentals and recommend investors take profit, if not short. Strong tailwind to boost 1Q13 auto sector’s performance: PV (passenger vehicle) sales have stood above seasonality since 4Q12. Our analysis suggests that Dec-12 sales (to be released on Jan 10-11) will likely beat expectation again, or ~15% YoY and 10-15% MoM (vs. seasonality of 8% MoM). This will be a strong tailwind boosting 1Q or 1H13 auto sales. SUV and luxury segments should see superior sales performance as they did last year.  Recap of our positive view on SUV and luxury cars in 2013: 1.We expect SUV to grow 20% this year after 24% in 2012. By segment, local brands/lower-end should see strongest growth. In 2012, growth of local brand SUV was ~40% or nearly twice as fast as broader SUV. Despite numerous new SUV models to be launched this year, we believe only 3-5 models will be successful with meaningful shipment (i.e. over 5,000/month) in every segment. Our top picks are Geely Auto and Great Wall Motor. We raise GWM’s 2012/13 estimates and PT to HK$32 from HK$24. On Geely, we maintain our street-highest earnings forecast and PT (HK$6). 2.Luxury car growth will remain 2-3x higher than broader PV market. The growth may vary depending on brands; we believe another 10-20% growth is achievable if not exceeding for major players such as BMW and Audi after over 30% growth in 2012.  Truck stocks’ prices running ahead of fundamentals: Contrary to PV, we believe the rally in truck stocks (Weichai 78% and Sinotruk 63% from the trough in 2H12) on accelerated FAI approvals by NDRC in 4Q12 and expectation on improving demand has overly priced the upside, leaving risk from here on the downside including potential disappointment in 2012 results in March. Fundamentally, after 8% sales decline in 2012, we forecast CV (commercial vehicle) will only see moderate low single digits recovery in 2013. This does not support the 60-80% rally in the last few months.  Buy low, sell high or hold through the upcycle?: 1) Our view on SUV is simple–investors would be better off holding through the cycle than trying to identify entry and exit points during the cycle. On penetration, product pipeline and earnings, we believe there is more upside for Geely and Great Wall. 2) On luxury cars, LT top down theme is intact but near term we would caution on the potential downside risk to consensus earnings during result season in March especially in light of the recent rally. 3) On trucks, we would take profit or avoid Weichai Power and Sinotruk. Relative share price performance of China auto companiesCompany (rating)1M3MYTDBrilliance China (OW)9%11%11% DongFeng (UW)1%33%-18% GAC (Neutral)4%41%3%Geely (OW)6%25%117% Great Wall (OW)5%16%120% Baoxin (OW)22%32%-16% ZhengTong (OW)21%25%-27% Zhongshen g (UW)24%27%-12% Minth (Neutral)13%26%26% Sinotruk (UW)17%43%42% Weichai Power (UW)4%45%1% Source: Bloomberg2Asia Pacific Equity Research 08 January 2013Nick Lai (886-2) 2725-9864 nick.yc.lai@Equity Ratings and Price Targets Mkt CapRatingPrice Target CompanySymbol(HK$ mn)Price (HK$)CurPrevCurPrev Great Wall Motor Company Limited2333.HK71,622.4325.45OWn/c32.0024.00 Baoxin Auto Group Limited1293.HK15,258.096.99OWn/c8.507.00 China ZhengTong Auto Service Holding Limited1728.HK13,772.006.26OWn/c7.506.50 Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 08 Jan 13.Table of ContentsBuy low sell high or hold through the upcycle?....................3Recap of our view on 2013......................................................................................3 Earnings revision and new PTs................................................................................7 Recommendation ....................................................................................................8 Great Wall Motor Company Limited......................................12Company description.............................................................。