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1、Buy,Buy,Hold,Buy,Sell,Deutsche BankMarkets Research,AsiaChinaAutomobiles&Components,IndustryChinese AutoManufacturers,Date8 January 2013RecommendationChangeNora MinVincent Ha,CFA,Zooming into a better 2013;keepbuying BrillianceStill bullish overall on 2013,but be selective after rally at beginning o
2、f yearWe expect China passenger vehicle(PV)demand growth to return to a low-teen level,given a low base and improving auto purchasing sentiment.Toelaborate,we think:1)luxury car demand will continue to lead,2)there is roomfor local brands to pick up,and 3)demand for Japanese brands will recover.Alth
3、ough we also expect a rebound in commercial vehicles(CV)sales on abetter macro backdrop,we think the recent rally for related names has been,Research Analyst Research Associate(+852)2203 6247(+852)2203 Top picksBrilliance China(1114.HK),HKD10.42Companies FeaturedDongfeng Motor(0489.HK),HKD12.262011A
4、 2012E 2013E,excessive.Our top Buy is Brilliance.We downgrade Sinotruk to Hold and,P/E(x),9.0,10.4,8.0,maintain a Sell on BYD,after their share price rallies.Recent vehicle demand in China not as lacklustre as it appears first,Guangzhou Auto(2238.HK),HKD7.072011A 2012E 2013E,In October-November 2012
5、,China PV sales were up only 8%YoY,vs.7%YoY,P/E(x),10.3,21.0,10.7,growth in 9M12.Nonetheless,putting aside the adverse impacts on Japaneseauto brand sales,non-Japanese brand PV sales YoY growth in October-November was respectable,at 21%(vs.9M12s 8%).For the CV sector,October-November 2012 sales YoY
6、growth turned positive,at 4%.While themagnitude seems small and heavy-duty truck(HDT)demand still declined YoY,the sequential improvement from 3Q12s trough appears to be encouraging.,Brilliance China(1114.HK),HKD10.42 Buy2011A 2012E 2013EP/E(x)17.3 17.4 13.5Geely Auto(0175.HK),HKD4.182011A 2012E 201
7、3E,Market environment expected to become more favourable for vehicle demand,P/E(x),11.7,14.5,11.9,We think positive developments in the property sector,with Deutsche Banksexpectation of a 5-10%increase in 2013 Chinese property prices,as well as an,BYD(1211.HK),HKD23.15,2011A 2012E 2013E,improved out
8、look for Chinas A-share market,should support auto,P/E(x),53.0 650.5,38.9,consumption growth,in addition to a low base.We identify three investmentthemes:1)luxury car upgrade demand will remain,given less risk of a policyoverhang after the completion of the senior government official transition;2)sm
9、all car demand will improve with the countrys urbanization plan;and 3)agradual recovery of Japanese auto JV sales.For the CV segment,increasing,Weichai Power(2338.HK),HKD35.65 Hold2011A 2012E 2013EP/E(x)12.9 18.9 13.8Sinotruk(Hong Kong)(3808.HK),HKD6.49 Hold,fixed asset investments,a recovery in exp
10、orts and the implementation of a newemission standard at mid-year should ensure at least a mild recovery in 2013.Forecast adjustments;top pick Brilliance;Sinotruk downgraded to Hold;risks,P/E(x)Target price revisions,2011A 2012E 2013E13.0 83.7 26.9,We keep our Chinese 2013-14 PV sales forecasts almo
11、st untouched,while wecut our CV sales forecasts on a slower-than-expected recovery in 2H12.Wehave reduced forecasts for the manufacturers under our coverage,except forBrilliance and Geely,which exhibit strong sales momentum.As the Chineseauto manufacturers are trading,on average,at mid-cycle 11x FY1
12、3E P/E,evenafter the rally at the beginning of the year,we do not think their valuations arestretched.We like Brilliance the most,as its BMW JV sales are on track for abetter 2013,with more capacity to produce the new 3 series.We prefer Geelyto BYD(Sell)among the local brands,reflecting Geelys poten
13、tial sales growth,CompanyDongfengGACBrillianceGeelyBYDWeichaiSinotruk,New TPHKD13.9HKD6.7HKD12.4HKD4.8HKD14.4HKD36.5HKD6.1,Old TPHKD13.0HKD5.1HKD11.4HKD4.4HKD12.6HKD27.2HKD5.2,Upside13.4%-5.2%19.0%17.1%-37.8%2.4%-6.0%,outperformance on the SUV sales ramp-up and ballooning exports.We preferDongfeng t
14、o Guangzhou Auto(Hold)on the Japanese brands auto salesrecovery theme,given our optimism on the new Dongfeng Nissan Teana.In the,CV space,we think the recent share price rally has already reflected thepossible 2013 recovery ahead;hence,we downgrade Sinotruk to Hold alongwith a Hold on Weichai.On a r
15、egional basis,our top OEM Buys are HyundaiMotor(005380KS)and Brilliance,and we note that Hyundai will also benefitfrom the Chinese auto sales pick-up.Key downside sector risk:weaker-than-,This report changes ratings,targetprices and estimates for severalcompanies under coverage.For adetailed listing
16、 of these changes,seeFigure 25 on Page 13.,expected macro recovery dragging on sales.Key upside sector risk is faster-than-expected realization of macro recovery in boosting auto demand._Deutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research repo
17、rts.Thus,investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors shouldconsider this report as only a single factor in making their investment decision.DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072
18、/04/2012.,8 January 2013Automobiles we expect a mild margin downtrend.6Theme 1:Continuation of luxury car sales boom.8Theme 2:Local brand sales recovery.8Theme 3:Japanese brands sales recovery.9CV:Some dim light out of the tunnel.11Weaker-than-expected sales on slow 2H12 recovery.11We expect policy
19、loosening impact to materialize by mid-2013.11Stock implications.13Earnings and target price adjustments.13Sector valuation still reasonable,despite recent rally.14Stock recommendations,valuation and risks.15Our China Buys are also compelling on a regional basis.21Sector risks.23Better-than-expected
20、 auto purchase sentiment from early 2013.23Prolonged tightening in the Chinese economy.23,Page 2,Deutsche Bank AG/Hong Kong,trailers,8 January 2013Automobiles&ComponentsChinese Auto ManufacturersFine-tuning our forecasts forChinese vehicle salesWe expect 11.3%/9.8%growth in 2013/14 on normalizing gr
21、owthTo summarize,we now expect Chinese vehicle sales growth to rebound to 11.3%in2013,after two years of suppressed growth,especially following the previous yearssales decline in the CV segment.We remain slightly more upbeat on the PV segment,particularly for the SUV sub-segment,since we expect a co
22、ntinuation of strongupgrading demand amid a macroeconomic improvement.We anticipate vehicle salesgrowth to remain at a normalized level of 9.8%in 2014,with the subsiding of the lowbase effect.Figure 1:Chinese vehicle sales volumes and Deutsche Bank forecasts,(m units),2010,2011,2012E,2013E,2014E Rem
23、arks,Passenger vehicles(PV),Sedans,9.49,10.12,10.80,11.98,13.13 We believe demand for local brand cars troughed in 2H11/1H12 and,that this should help to ensure a YoY growth re-acceleration in 2013.,YoY%MPVsYoY%SUVs,27.0%0.4578.9%1.33,6.6%0.5011.7%1.59,6.7%0.50-0.5%2.00,10.9%0.5510.3%2.32,9.6%0.59 W
24、e expect MPV sales growth to normalize in 2013/148.8%2.60 We expect the SUV segments sales outperformance to continue,on,increasing demand to differentiate from typical sedan consumption.,YoY%Mini-cars,101.3%2.49,20.2%2.26,25.4%2.23,16.2%2.47,11.9%2.71 We think that demand for mini-cars troughed in
25、2012 and that long-,term demand should still be supported by rural economicdevelopment.,YoY%Total passenger vehiclesYoY%Commercial vehicles(CV)Heavy-duty trucks and tractor,27.8%13.7633.2%20101.02,-9.4%14.475.2%20110.88,-1.2%15.527.3%2012E0.64,10.7%17.3211.5%2013E0.71,9.5%19.039.9%2014E0.77 We now e
26、xpect overall truck sales to improve in 1H13,on a re-,acceleration of macroeconomic growth,particularly in fixed asset,YoY%,59.9%,-13.4%,-27.9%,11.4%,9.3%,investment and export activities.,Medium trucksYoY%Light trucksYoY%Mini-trucksYoY%Buses,0.274.9%2.0330.4%0.557.0%0.44,0.297.4%1.88-7.2%0.49-9.9%0
27、.49,0.28-3.2%1.83-2.5%0.549.0%0.50,0.3110.4%2.0210.3%0.599.6%0.55,0.349.6%2.219.5%0.649.2%0.60 Buses sales growth should remain relatively stable,with increasing,demand for passenger hauling on highways and for publictransportation in cities.,YoY%Total commercial vehiclesYoY%Aggregate vehicles sales
28、YoY%,25.1%4.3029.9%18.0632.4%,10.1%4.03-6.3%18.512.5%,3.0%3.79-6.0%19.314.4%,9.8%4.1810.3%21.5011.3%,9.2%4.589.4%23.609.8%,Source:China Association of Automobile Manufacturers(CAAM),Deutsche Bank estimates,Deutsche Bank AG/Hong Kong,Page 3,Oct-10,Oct-11,Jan-10,Jan-11,Jan-12,Oct-12,Apr-10,Apr-11,Apr-
29、12,Jul-10,Jul-11,May,Nov,Feb,Jan,Jun,Aug,Sep,Mar,Dec,Jul-12,Jul,Oct,Apr,400,8 January 2013Automobiles&ComponentsChinese Auto ManufacturersPV:lukewarm status quo butoutlook improvingRecovering demand hampered by Sino-Japanese disputeAfter a weak start in 1Q12,with a 1%YoY decline in PV sales volume,t
30、he Chinese automarket experienced a decent recovery in April-August,with consistent double-digitgrowth amid some improvements in the macroeconomic backdrop.Nonetheless,theeruption of the Sino-Japanese island dispute in September dragged Chinas PV demandYoY growth to merely 5%in September-November,wi
31、th a 45%YoY plunge in Japaneseauto JV brands sales volume during the period.,Figure 2:China monthly passenger,Figure 3:China monthly passenger,If it were not for the impact of,vehicle sales trend,vehicle sales by brand origin,the,Sino-Japanese,island,(Units)1,600,0001,400,0001,200,0001,000,000800,00
32、0600,000400,000200,0000,20052009,20062010,20072011,20082012,(000 units)End of major stimulus800700600500Japan earthquake3002001000,ChineseGermanUSJapaneseKoreanFrench,dispute,which draggedJapanese auto brands sales,we think the recovery pace ofChinese PV demand couldhave been stronger,Source:CAAM,So
33、urce:CAAM,Inventory level still higher than optimal level,but on easing trendOn our understanding,an official set of dealership inventory statistics with a consistenttrack record does not exist in China.In trying to study the inventory situation in animpartial way,the following are a few angles we a
34、dopt.To begin with,the ChinaAutomobile Dealers Association(CADA)from time to time discloses on its website adealership inventory index by surveying some of its dealer members.While the studiesmight not be fully comprehensive,the index does showcase an easing in dealershipinventory levels from the pe
35、ak in mid-2012.From time to time,Volkswagen also discloses dealership inventory levels for theindustry and its brands in its Chinese business update presentations.While thereappears to have been an increasing trend in PV inventory in China in 2012,inventoryseems to have peaked in September 2012,retr
36、eating slightly in October.All in all,while there seem to be some inconsistencies between the statistics of CADAand Volkswagen,for instance on the inventory increase pattern in 2012 and peakingtimes,there is a consistent observation in inventory levels easing towards year-end2012,which is encouragin
37、g,in our view.,Page 4,Deutsche Bank AG/Hong Kong,Feb-12,Mar-12,Apr-12,Jan-12,Jun-12,Oct-12,Jul-12,May-12,Nov-12,Aug-12,Sep-12,Feb-12,Mar-11,Sep-11,Sep-12,Nov-10,Oct-12,Apr-12,Jan-06,Jul-06,Jan-07,Jul-07,Jan-08,Jul-08,Jan-09,Jul-09,Jan-10,Jul-10,Jan-11,Jul-11,Jan-12,Jul-12,Jan-06,Jul-06,Jan-07,Jul-07
38、,Jan-08,Jul-08,Jan-09,Jul-09,Jan-10,Jul-10,Jan-11,Jul-11,Jan-12,Jul-12,in,in,8 January 2013Automobiles&ComponentsChinese Auto Manufacturers,Figure 4:China auto dealers inventory,Figure 5:Volkswagen brands and,While,there,are,some,index,industrys dealership inventory level,inconsistencies,Chinese,(x)
39、2.52.01.51.00.50.0,(months)3.02.52.01.51.00.50.0,IndustryFAW VWSkoda,AudiShanghai VW,auto dealers inventory databy CADA and Volkswagen,both of their data sets show aretreating in dealershipinventory in late 2012,Source:CADA,Source:Volkswagen Group China,CPCA,Domestic macro recovery to drive up auto
40、demand in 2013EAlthough we believe long-term Chinese auto demand will continue to grow decently,with increasing Chinese wealth and still-low auto penetration,we admit that short-termdemand is subject to cyclicality due to the macroeconomic situation.For instance,Chinese passenger vehicle sales growt
41、h was subdued in 2004,2008,and 2011-12E.This is attributable to the macro tightening in 2004,the global financial crisis in 2008and Chinas economic growth slowdown starting 2011,post stimulus measures in2009-10.Sentiment tended to be negatively affected during these periods,despiteongoing salary inc
42、reases,due partly to weakness in real estate and stock markets.In 2011 and early 2012,we believe weak economic growth and a tightening in theChinese property sector dragged passenger vehicle demand in the country,in contrastto 2009-10,during which an economy boosted by stimulus measures was accompan
43、iedby exponential auto demand growth.Going forward,we foresee that a troughing ofChinese economic growth in 3Q12,a partial fiscal policy loosening(with improvingfactors such as easing inflation),a pick-up in property transactions and prices,as wellas an improved outlook for Chinas A-share market,wil
44、l help to boost domestic autodemand.All in all,these lead to our forecast that Chinese auto sales growth will returnto a low-teen level in 2013,as shown in Figure 1.,Figure 6:China monthly passenger,Figure 7:China monthly passenger,We think that an improving,vehicle sales growth vs.property sales,ve
45、hicle sales growth vs.property prices,development,Chinas,150%100%50%0%,Passenger vehicle sales(LHS,YoY%)Residential floor space sold(RHS,YoY%),150%100%50%0%-50%,150%100%50%0%,Passenger vehicle sales(LHS,YoY%)Residential floor price(RHS,YoY%),40%30%20%10%0%-10%,property and stock markets,as well as a
46、 macroeconomicrecovery,will enhance wealthsentiment,thus supporting PVdemand,-50%,-100%,-50%,-20%,Source:CAAM,CEICDeutsche Bank AG/Hong Kong,Source:CAAM,CEIC,Page 5,Jan-06,Jul-06,Jan-07,Jul-07,Jan-08,Jul-08,Jan-09,Jul-09,Jan-10,Jul-10,Jan-11,Jul-11,Jan-12,Jul-12,Jan-06,Jul-06,Jan-07,Jul-07,Jan-08,Ju
47、l-08,Jan-09,Jul-09,Jan-10,Jul-10,1Q10,2Q10,3Q10,4Q10,1Q11,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,4Q12E,2013E,Jan-11,Jul-11,Jan-12,Jul-12,8 January 2013Automobiles&ComponentsChinese Auto Manufacturers,Figure 8:China monthly passengervehicle sales growth vs.SHCOMP IndexPassenger vehicle sales(LHS,YoY%),Figure
48、9:China monthly passengervehicle sales growth vs.CPIPassenger vehicle sales(LHS,YoY%),150%100%50%0%-50%,SHCOMP Index(RHS,YoY%),300%200%100%0%-100%,150%100%50%0%-50%,CPI(RHS reverse scale,YoY%),-4%-2%0%2%4%6%8%10%,Source:CAAM,CEIC,Source:CAAM,CEIC,Figure 10:China GDP growth vs.passenger vehicle sales
49、 volume growthReal GDP YoY growth(LHS)China PV sales volume YoY growth(RHS),14%12%10%8%6%4%2%0%,100%80%60%40%20%0%-20%,Source:CAAM,CEIC,Deutsche Bank estimatesCapacity issue is not acute;we expect a mild margin downtrendAnother repeatedly discussed market worry regarding the Chinese PV market ispote
50、ntial production overcapacity.In brief,after the exponential demand growth in2009-10,many new manufacturing facility expansion projects have been announcedsince 2009,and we now expect industry production capacity to grow at 12-20%in2012-14,vs.demand growth of 7-12%(as shown in Figure 11).As mentione
