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1、,Buy*,Buy*,Buy,Rating,HK$,HK$,HK$,HK$,HK$,HK$,HK$,Rmb,HK$,HK$,-54.1%,January 17,2013China:AutomobilesEquity Research2013 Outlook:Prefer luxury and SUV over HDT;adding Baoxin to CL-Buy,JAC up to Buy,More positive but utilization still a concern,Buy Baoxin,adding to CL;JAC up to Buy;,We raise our 2013
2、/14 car market growth estimatesfrom 7.8%/8.2%to 8.5%/8.5%on recoveringconsumer confidence,strong GDP outlook,anddealer destocking throughout 2H12.We remainconcerned,however,about lower utilization levels,Brilliance and 3)industry consolidation.We addBaoxin to our Conviction List on its strong,RELATE
3、D RESEARCHChina:Automobiles;Impact of anti-Japan protests onearnings/TPs;downgrade Great Wall H to Neutral,September 28,2012;STOCK VALUATION SUMMARY,in 2013E/14E.We revise 2013E/14E EPS by-82%to47%and 12-m TPs by 9%-181%.,expense control and underappreciated earningsboost from the NCGA acquisition.W
4、e downgrade,Valuation Summary-Auto ChinaTicker Company name Currency600104.SS SAIC Rmb1293.HK Baoxin HK$600741.SS Huayu Rmb,1/16/2013 12-month PotentialClose TP up/downside16.68 21.64 29.7%7.26 9.21 26.9%10.19 13.39 31.4%,Brilliance to Neutral as we think its secular growth,0489.HK Dongfeng600418.SS
5、 JAC,HK$Rmb,BuyBuy,12.566.71,14.717.67,17.1%14.3%,Q1:Will Chinas luxury fever continue?Yes Chinas luxury car market will grow 15-18%in 2013-15E on continued wealth expansion andthe mix shift towards entry-level luxury.,is fully priced in following the 49%price surgesince last May.We upgrade JAC to B
6、uy andChangan A/B to Neutral as we expect them tobenefit from higher SUV mix in 2013E.,1899.HK Xingda1728.HK Zhengtong1114.HK Brilliance200625.SZ Changan(B)0175.HK Geely000800.SZ FAW Car3808.HK Sinotruk2333.HK Great Wall(H)0881.HK Zhongsheng2238.HK GAC,NeutralNeutralNeutralNeutralNeutralNeutralNeutr
7、alNeutralNeutralNeutral,3.596.2110.345.024.107.866.1927.6511.307.25,4.016.8211.255.464.358.136.3627.8711.157.11,11.8%9.9%8.8%8.8%6.0%3.4%2.7%0.8%-1.4%-2.0%,0425.HK,Minth,HK$,Neutral,10.88,10.22,-6.1%,000338.SZ Weichai(A),Rmb,Neutral,24.53,21.83,-11.0%,Q2:Does SUV surge have room to run?,Sell Weichai
8、 H on rich valuation,000625.SZ Changan(A)601633.SS Great Wall(A)2338.HK Weichai(H),RmbRmbHK$,NeutralNeutralSell,6.6225.4634.35,5.6921.3125.92,-14.1%-16.3%-24.5%,Yes we expect the SUV market to grow 22-25%in 2013-15 on strong customer preference,extensive product offering,and fuel efficiency.Q3:Are H
9、D trucks more elastic to macro?No domestic HDT will grow only 5-6%in 2013-15E due to moderate recovery in FAI/logistics,long-term cargo shift from road to rail,drop-and-pull technology,and underutilized fleet.,Given our updated expectation for a moderateHDT market recovery in 2013-14,we find Weichai
10、Hs valuation too rich after the 46%price increasesince last September.We also see downside riskfor Weichais share in the HDT engine market assome major customers plan to source enginesinternally.We also expect the near-term earningscontribution from the hydraulics/forklifts divisionwill be limited.R
11、einstating Weichai H at Sell.,1211.HK BYD HK$Sell 26.90 12.35*Denotes the stock is on our regional Conviction List.Source:DataStream,Gao Hua Securities Research estimates,Yipeng Yang+86(10)6627-3189 Beijing Gao Hua Securities Company LimitedThe Goldman Sachs Group,Inc.,Goldman Sachs does and seeks t
12、o do business with companiescovered in its research reports.As a result,investors should be awarethat the firm may have a conflict of interest that could affect theobjectivity of this report.Investors should consider this report as only asingle factor in making their investment decision.For Reg ACce
13、rtification and other important disclosures,see the DisclosureAppendix,or go to Analystsemployed by non-US affiliates are not registered/qualified as researchanalysts with FINRA in the U.S.Global Investment Research,3,5,8,14,18,21,27,30,36,44,2,January 17,2013,China:Automobiles,ContentsExecutive Sum
14、mary:We prefer luxury and SUV over HDT in 2013We are more positive on Chinas car market outlook in 2013,but utilization still a concernQuestion 1:Will luxury fever continue?Yes adding Baoxin to Conviction ListBaoxin(1293.HK):Buy(adding to CL)for higher luxury mix,strong aftermarket growth,solid expe
15、nse control,and underappreciated acquisition of NCGABrilliance(1114.HK):Downgrade to Neutral on fair valuationQuestion 2:Does SUV surge have room to run?Yes driven by strong customer preference,extensive product offering,and fuel efficiencyJianghuai(600418.SS):Upgrade JAC to Buy on higher SUV exposu
16、re,strong cash return,and solid balance sheetChangan A(000625.SZ)/B(200625.SZ):Up to Neutral on strong product cycle&earnings potential from Ford JVQuestion 3:Dramatic rebound coming for HDT as in previous cycles?No we see only a moderate recovery for HDT in 2013Weichai H(2338.HK)/A(000338.SZ):Sell/
17、Neutral on slower earnings recovery vs.recent share price surge,China auto valuationsDisclosure AppendixThe prices in the body of this report are based on the market close of Jan 16,2013 for A/H stocks and US/EU/Japan stocks.The author would like to thank Yuqian Ding for her valuable contribution to
18、 this report.Exhibit 1:Valuation summary China Auto Coverage,4955,Valuation Summary-Auto China,1/16/2013 12 Month 12 Month,Potential,Ticker,Company Name,Currency,Rating,Close TP-new,TP-old,up/downside,Methodology,Key risks,600104.SS000800.SZ000625.SZ200625.SZ0489.HK2333.HK0175.HK1211.HK2238.HK3808.H
19、K2338.HK000338.SZ0425.HK1899.HK600418.SS600741.SS1293.HK1728.HK0881.HK1114.HK601633.SS,SAICFAW CarChangan(A)Changan(B)DongfengGreat Wall(H)GeelyBYDGACSinotrukWeichai(H)Weichai(A)MinthXingdaJACHuayuBaoxinZhengtongZhongshengBrillianceGreat Wall(A),RmbRmbRmbHK$HK$HK$HK$HK$HK$HK$HK$RmbHK$HK$RmbRmbHK$HK$
20、HK$HK$Rmb,Buy*NeutralNeutralNeutralBuyNeutralNeutralSellNeutralNeutralSellNeutralNeutralNeutralBuyBuyBuy*NeutralNeutralNeutralNeutral,16.687.866.625.0212.5627.654.1026.907.256.1934.3524.5310.883.596.7110.197.266.2111.3010.3425.46,21.648.135.695.4614.7127.874.3512.357.116.3625.9221.8310.224.017.6713.
21、399.216.8211.1511.2521.31,18.886.893.261.9411.5622.063.9610.925.154.28NANA9.402.705.4411.156.084.849.159.5318.30,29.7%PB-ROE:A Share3.4%Past 20 day avg.price-14.1%PB-ROE:A Share8.8%A-B premium17.1%PB-ROE:H Share0.8%PB-ROE:H Share6.0%PB-ROE:H Share-54.1%SOTP-2.0%PB-ROE:H Share2.7%PB-ROE:H Share-24.5%
22、PB-ROE:H Share-11.0%PB-ROE:A Share-6.1%PB-ROE:H Share11.8%PB-ROE:H Share14.3%PB-ROE:A Share31.4%PB-ROE:A Share26.9%PB-ROE:H Share9.9%PB-ROE:H Share-1.4%PB-ROE:H Share8.8%PB-ROE:H Share-16.3%PB-ROE:A Share,Higher price/margin erosion;weaker local brand salesProgress in the restructuring;higher/lower
23、vol of new models and priceHigher/lower vol/price of SUV/low-end sedan/minivanHigher/lower vol/price of SUV/low-end sedan/minivanLower price/volume;slower recovery of Nissan/Hondas salesHigher/lower price erosion;higher/lower volume in compact SUV/sedan;Higher/lower government subsidy;higher/lower v
24、ol/price of new modelsHigher vol/price of new car models;higher e-bus sales;higher subsidyHigher/lower vol.of new modelsHhigher/lower vol of HDT domestic/export marketStronger than expected export growth;ASP/MS gain on strict Implementation of Euro IV emission standardStronger than expected export g
25、rowth;ASP/MS gain on strict Implementation of Euro IV emission standardQuicker/slower Japanese brands vol.recovery;higher/lower pricingHigher/lower radial cord/sawing wire price erosionSUV volume/pricing due to competition;Lower than expected commercial vehicleHigher price erosion of components;weak
26、er sales volumePrice/margin erosion of new car sales;potential restriction from BMW on new car sales post NCGA acquisitionStrong/lower price/volume of luxury carStrong/lower price/volume of luxury car;Japanes brands recoveryHigher/lower vol./price;higher/lower electric vehicle expenditureHigher/lowe
27、r price erosion;higher/lower volume in compact SUV/sedan;,Notes:Priced as of market close on Jan 16,2013.*Denotes the stocks are on our Regional Conviction List.Source:Datastream,Gao Hua Securities Research estimates.Goldman Sachs Global Investment Research,1,2,3,3,January 17,2013,China:Automobiles,
28、Executive Summary:We prefer luxury and SUV over HDT in 2013We are more positive on China car market outlook in 2013,but utilization is still a concernWe raise our car market growth forecasts in 2013/14 from 7.8%/8.2%to 8.5%/8.5%and forecast a 2015 growth rate of 8%onrecovering consumer confidence,st
29、rong GDP growth outlook,and dealer destocking in 2H12.We are still concerned on the decreasein the passenger car industrial capacity utilization rate from 96%in 2011 to 75%in 2014E(See Exhibit 7),which might lead to weakprice/margin.Three questions for which segments will grow faster in 2013;we pref
30、er luxury and SUV over HDTExhibit 2:We prefer luxury and SUV over HDT in 2013.Buy Baoxin(CL)and JAC,Sell Weichai H,Key questionsWill the luxurysector continue tooutpace the overallcar market?Is SUV feversustainable?Will the HDT marketrebound rapidly likeit did in 2009?,ConclusionsYes,especially the
31、entry-level luxury segment Higher growth of customer base and affordability.More model localization will drive demand further.Luxury dealers will benefit from stable new car salesGPM,ramp-up of aftermarket,and consolidation.Yes,strong customer preferences drive the fever Clear customer preference fo
32、r SUVs.More extensive SUV product offerings.Better SUV fuel efficiency in China than the US.No,only moderate recovery estimated in 2013/14 Existing HDT fleet is huge,young,but underutilized.Long-term risks:GDP growth drivers change from FAIto consumption,cargo transport shifts from road to rail,Stoc
33、k implications Buy Baoxin,add to CL.Downgrade Brilliance to Neutralon fair valuation.Upgrade JAC to Buy.Upgrade Changan(A/B)toNeutral from Sell.Sell Weichai(H)on richvaluation.Neutral on Weichai(A),implementation of drop-and-pull technology.Source:Global Insight;Gao Hua Securities Research estimates
34、.Goldman Sachs Global Investment Research,4,January 17,2013,China:Automobiles,Q1:Will luxury fever continue?Yes Buy Baoxin(adding to CL)on strong expense control andunderappreciated earnings boost from NCGA acquisitionWe forecast Chinas luxury car market will grow 18%/15%/15%in 2013/14/15 due to exp
35、ansion of the upper and upper middle classas well as the mix shift towards entry-level luxury.China had the 4th highest number of high net worth individuals(net worth US$1mn)in the world in 2011 and we believe the further expansion of the upper and upper middle class will boost the seculargrowth of
36、the luxury market in China.We believe luxury car affordability will also increase as a result of increasing mix from entry-level luxury and more luxury models localized in China.We believe luxury dealers will benefit from:1)stable high GPM from luxurynew car sales;2)robust aftermarket growth;and 3)i
37、ndustry consolidation.We add Baoxin to our Conviction List due to its strongexpense control and underappreciated earnings boost from the NCGA acquisition(which we expect to contribute 47%of Baoxinssales volume growth in 2013E).We also downgrade Brilliance to Neutral as we believe its strong secular
38、growth is fully priced inpost the 49%price surge since May 2012.Q2:Does SUV surge have room to run?Yes upgrading JAC to Buy and Changan A/B to NeutralWe forecast the SUV segment to grow by 25%/25%/22%in 2013/14/15 on clear customer preferences and extensive productofferings.A 2012 survey by Tencent/
39、Sinotrust suggested that 75%of potential car buyers and 57%of existing car owners wouldselect an SUV as their first choice for a family car.In addition,SUV fuel efficiency is better in China than the US,so we see limiteddownside risks from potential legal restrictions or decrease in customer purchas
40、e intention due to fuel consumption considerations.We upgrade JAC to Buy from Neutral and Changan A/B to Neutral from Sell on their higher SUV mix in 2013E vs.2012.We like JACfor stronger volume growth,strong SUV product cycle,robust cash return,and solid balance sheet.JAC is currently trading at10.
41、5X/1.3X 2013E PE/PB,one of the lowest P/Es among A-share peers.Key risks include weaker-than-expected SUV volume/pricingdue to competition and lower-than-expected sales growth of commercial vehicles.We upgrade Changan(A/B)to Neutral from Sellmainly on strong product cycle and earnings contribution f
42、rom its JV with Ford.Q3:Is HDT more elastic to macro?No,not like previous cycles reinstating Weichai H at SellUnlike previous cycles,we forecast the domestic HDT market to grow only moderately in 2013/14/15 by 6%/6%/5%.We see arelatively slow recovery of FAI/logistic activities in the near term and
43、believe the negative long-term impacts from replacement ofrailway cargo transportation,drop-and-pull,and existing under-utilized HDT fleet will gradually kick in.In addition,we see downsiderisk for Weichais share of the HDT engine market as some major customers(e.g.,Foton/Hualing)are planning to sou
44、rce enginesinternally.We estimate the near-term earnings contribution from the hydraulics/forklifts division will be limited due to the strongcompetitive positions of the existing four international players in the construction machinery hydraulics components market inChina.As a result we find Weicha
45、i Hs valuation too rich after the 46%share price increase since September and hence move thestock to Sell from Not Rated.Weichai H is currently trading at 14.4X/2.0X 2013E PE/PB,one of the highest P/Es among the auto peers.The valuation also looks rich vs.the historical median 8.6X 12M forward P/E.T
46、he key risks include:engine ASP/MS gain on upgradeof emission standard to Euro IV since mid-2013E;stronger-than-expected Linde Hydraulics sales/profit growth;and stronger-than-expected HDT export from its subsidiary Shaanqi.Goldman Sachs Global Investment Research,2000,2001,2002,2003,2004,2005,2006,
47、2007,2008,2009,2010,2011,2012E,2013E,2014E,2015E,24.1%,-,5,January 17,2013,China:Automobiles,We are more positive on Chinas car market outlook in 2013,but utilization still a concernWe see strong near-term market rebound in 1Q13 due to steady dealer destocking through 2H12We increase car market grow
48、th in 2013E/14E from 7.8%/8.2%to 8.5%/8.5%and forecast a 2015 growth rate of 8%on recoveringconsumer confidence and strong GDP growth outlook.Based on China Automobile Dealer Association data,we see the average dealer inventory decreased gradually throughout 2H2012.Weak sales of Japanese brands in C
49、hina in the wake of anti-Japan protests since September 2012 helped non-Japanese brandsincrease sales volume and lower their dealer inventory.Meanwhile Japanese brands also took this opportunity to help their dealersdestocking by trimming production/wholesale volume to a level lower than retail volu
50、me.We believe industry production/wholesalevolume will be strong in 1Q2013 when dealers start restocking again.,Exhibit 3:We forecast car market to grow at 8.5%/8.5%/8.0%over 2013-15Passenger car sales volume in mn units,yoy growth in%,Exhibit 4:Dealer inventory days fell in 2H12Inventory parameter=
