《CHINESEAUTODEALERS：DEALERSHIPTOURTAKEAWAYIMPROVINGNEWCARSALESANDAFTERSALES1129.ppt》由会员分享，可在线阅读，更多相关《CHINESEAUTODEALERS：DEALERSHIPTOURTAKEAWAYIMPROVINGNEWCARSALESANDAFTERSALES1129.ppt（16页珍藏版）》请在三一办公上搜索。
1、Buy,Buy,Buy,Date,Deutsche BankMarkets Research,AsiaChinaAutomobiles&Components,IndustryChinese auto dealers,Date28 November 2012Forecast ChangeVincent Ha,CFANora Min,Dealership tour takeaway-improvingnew car sales and after-salesWhile client focus is still on new cars,interest level for after-sales
2、is on the riseOn our tour last week,we met with Baoxins and Yongdas(3669.HK,NR)senior management,and visited their luxury auto dealers in Wuxi,a second tiercity with a population of 6m.The major takeaway is that dealers seem to admitthe reality that high sales margin for new luxury cars is not susta
3、inablealthough they still expect some recovery in FY13E.Besides,investorsquestions revealed a rising interest on how dealerships differentiate,Research Analyst Research Associate(+852)2203 6247(+852)2203 Top picksBaoxin Auto Group(1293.HK),HKD5.90Companies FeaturedBaoxin Auto Group(1293.HK),HKD5.902
4、011A 2012E 2013E,themselves in the after-sales segment.Lastly,we were also impressed byluxury car ownership and demand in Wuxi,which implies ample room fordealers to grow beyond first tier cites.Our top pick is Baoxin.,P/E(x)EV/EBITDA(x)Price/book(x),22.813.05.2,14.911.23.1,9.26.72.3,New car sales,p
5、ricing and margin recovering with easing inventory pressureBased on what we learnt from Baoxin/Yongdas management and the dealers,Zhongsheng Group(0881.HK),HKD9.592011A 2012E 2013E,we visited,both new car pricing and margins have shown signs of recoverysince early 2H12E.There are no more cutthroat p
6、rice discounts at retail leveland ASPs in general have been stabilizing.Moreover,the dealer inventory,P/E(x)EV/EBITDA(x)Price/book(x),16.210.12.9,15.79.41.9,9.46.91.6,situation is also improving for both BMW and Jaguar/Land Rover(JLR)brands,whose inventory levels now stand at c.40-45 days at the sto
7、res we visited.TheYongda BMW dealer we visited also thinks that existing inventory levels arehigher mainly for a few high-end imported models.As such,BMWs futuresales mix trend in China is likely to skew towards locally-produced products,which we think should be positive for Brilliance China(1114.HK
8、,9.13HKD).,Zhengtong Auto Services(1728.HK),HKD5.25P/E(x)EV/EBITDA(x)Price/book(x),Hold2011A 2012E 2013E27.1 13.5 9.319.1 8.4 6.42.2 1.3 1.2,Dealers to make more effort on after-sales businessesOne positive sign we observed during the tour is that dealership groups haverealized the importance of the
9、 after-sales business and were keen tocommunicate to us their strategies and efforts to retain customers for after-sales.We think it is positive that Chinese auto dealership groups are puttingless emphasis on the once unsustainably-high new car sales margin,andbeginning to guide market attention tow
10、ards the robust after-sales businesses,which will become the core earnings growth driver in the long run.Last butnot least,the number of car buyers using auto financing at the dealers we,Target price upside(Based on 27 Nov prices)Company Target Upsideprice(HKD)Baoxin 7.5 29.5%Zhengtong 6.1 16.4%Zhon
11、gsheng 12.7 33.7%Related recent research,visited is higher than our expectations,suggesting that Chinese auto dealerswill manage to derive better-than-expected financial-service related incomethrough cooperation with banks and insurance companies.Top pick is Baoxin;key sector risks are better-/worse
12、-than-expected auto salesTo conclude,we believe that the worst is already behind us regarding Chineseauto dealer groups.Since Baoxin is completing the NCGA acquisition with theoriginal proposed financing,i.e.using less equity financing than our originalprudent forecast,we raise FY13-14E EPS given le
13、ss EPS dilution.We stillprefer Baoxin given its significant potential from the growth of its after-salesbusiness due to its younger store age,and the upcoming earningscontributions from its acquisition.Our DCF-derived target price of HKD7.5,implying 11.7x FY13E P/E should be well supported by the co
14、mpanys 49%,Chinese auto dealers-Selling thecar is only half the storyVincent Ha,Nora Min,6 Nov 2012,FY12-14E EPS CAGR.The key industry downside risk is an unexpectedslowdown in auto sales,especially for higher-margin luxury auto sales.The keyupside risk is stronger-than-expected auto sales resilienc
15、e that leads to betternew car pricing and margins.,This report changes estimates forBaoxin.For a detail listing of thesechanges,see Figure 2 on Page 5.,_Deutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors shouldbe aware
16、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)072/04/2012.,28 November 2012Automobi
17、les&ComponentsChinese auto dealersDB China auto dealer tripsummary:Day 1 in ShanghaiMeeting with Baoxins senior managementWe met with Mr.Yang Aihua,Chairman of Baoxin,and the companys new IR team.We summarize the subjects of our core discussion as follows:NCGA acquisitionAccording to Mr.Yang,the acq
18、uisition is expected to complete soon and the companywill probably issue the full circular by yearend(the circular was just issued today).Mr.Yang further elaborated on NCGAs long history of selling BMW cars in Northern China,and stressed that NCGA not only will contribute to new car sales in regions
19、 whereBaoxin has previously had no footprint,but will also significantly boost Baoxins after-sales throughput volume given the maturity of NCGAs stores,especially Beijing.Forinstance,some of NCGAs BMW stores are among the Top 10 in BMW Chinas after-sales revenue.Mr.Yang also mentioned that NCGA used
20、 to have a huge labor costburden due to an abundance of highly-paid employees.He therefore expected thepersonnel and administration costs for NCGA to be significantly reduced in FY13Ebecause numerous management team members will terminate their contracts withNCGA upon completion of the sale.After-sa
21、les businessMr.Yang also introduced to us Baoxins strategy to set up a more sophisticated salessystem to increase the companys revenue and earnings from after-sales business.Toelaborate,Baoxin has fully utilized and consolidated the maintenance records for carssold to customers.After-sales service c
22、onsultants will then proactively contactcustomers regarding maintenance based on this“follow-up”system.As aconsequence,the company is targeting to secure four maintenance services per car peryear,which is higher than the average 2.5 times-per-year maintenance interval forluxury cars in general.Meeti
23、ng with Yongdas senior managementAt Yongda,we met with Mr.Wang Zhigao,Vice Chairman,Mr.Wei Dong,DeputyGeneral Manager focused on sales,Mr.Dong Ying,Deputy General Manager and CFO,as well as the companys IR team.The following is a brief meeting summary:Mr.Wang mentioned that as a leading auto dealer
24、group in Eastern China with a long-standing history in Shanghai,Yongda strives to become a major dealer for BMW,JLR,Porsche and Audi.The company will increase its focus on organic growth for expansionwhile it will only consider M&As if the targets are selling Yongdas core brands.Recently,Yongda rece
25、ived its fourth authorization from Porsche to build up a store inNantong.As of today,Yongda still has the biggest number of Porsche stores amongHong Kong-listed Chinese auto dealer groups.In the non-new-car-sales businesses,Mr.Wang also highlighted Yongdas intention toexpand its auto rental business
26、 from Shanghai to other cities in Eastern China.Thecompany has set up a successful auto rental business model in Shanghai.All in all,Yongda believes that the long-term auto rental/leasing business is still under-penetratedin China,and has significant room for growth in the future.,Page 2,Deutsche Ba
27、nk AG/Hong Kong,28 November 2012Automobiles&ComponentsChinese auto dealersDay 2 in Wuxi,JiangsuProvinceBaoxin JLR store visitWe visited Baoxins JLR store,which opened in June 2012(the company also has a cityshowroom opened in June 2011 and new car sales were recorded since then).According to the sto
28、re manager,the set-up cost for the new store was about RMB50m(excluding land cost and initial inventory).Year-to-date,the store has sold about 700cars,out of which Evoque is the best selling model followed by Freelander.Sales ofLand Rover make up the overwhelming majority vs.sales of Jaguar.In addit
29、ion,thesales volume accounts for roughly one-fifth of JLR sales in Jiangsu Province.At themoment,the average discount level for new cars is about 5-6%on average.In terms of customer profile,the store manager mentioned that JLR buyers tend to haveexperience in owning other mainstream luxury brands su
30、ch as Audi and BMW.About20%of customers used auto financing when purchasing new cars.For after-sales,customers usually come back for maintenance three to four times a year on average,and average maintenance ASP is about RMB4,000 for regular services.The currentafter-sales structure is about 40%for m
31、aintenance and 60%for repair,and the storemanager expected the ratio to reverse in the long run when JLR ownership rises in thearea.Yongda BMW service center visitWe visited Yongdas BMW service center,which opened in March 2011.The store alsohas a new car sales area,but is smaller than a normal BMW
32、4S store.However,thesales area is strategically important according to Yongda because Wuxi will open asubway system and this store is close to the location of the future subway station.According to Yongda,it has two BMW service facilities in Wuxi,which command about70%market share for BMWs maintenan
33、ce service in the area.Despite the small sales area,the Wuxi store has sold about 600 cars YTD and about30%of customers use auto financing.Among the customers,about half bought cars forthe first time and another half either replaced their old cars or bought an additional carfor the family.According
34、to the store manager,inventory level stands at about 40 daysat the moment,as compared to about two months in 1H12.High-end imported modelswith high ASPs tend to have greater inventory pressure as compared to locallyproduced Brilliance BMW models.On a positive note from the store manager,carprices ha
35、ve been stabilizing,except for the 7 series,which still has price discounts ofabout RMB150,000-200,000.Nonetheless,the store manager also mentioned that thecompany received subsidies from BMW China for selling the 7 series.Currently,the new car sales mix between BMW import models and Brilliance BMWm
36、odels is about 50:50,but the store manager expects the volume contribution ofBrilliance BMW models to reach about 60%in FY13E on better sales momentum.Forafter-sales services,customers usually come back for maintenance at about 2.5 times ayear on average and maintenance ASP is about RMB4,000 on aver
37、age.Current after-sales service mix is about 30-40%for maintenance and 40-50%for repair,with the restbeing inspection services and others.,Deutsche Bank AG/Hong Kong,Page 3,10,2,3,4,3,28 November 2012Automobiles ample opportunities insecond and third tier citiesAfter our meeting with the dealership
38、groups management and some visits to stores ina second tier city,we think that the most difficult period of selling luxury cars at adepressed price is probably behind us and there is likely to be a mild recovery inmargins in FY13E as we originally expected.What is more,we also re-affirm theongoing s
39、trength of after-sales service demand and earnings contribution from our visitand think that investors should definitely pay attention to each auto dealer groupsdifferentiation in this area(please also refer to our sector FITT report dated 6 November2012).Last but not least,we are pleasantly surpris
40、ed by the strong interest in luxury autodemand in the bigger second tier cities like Wuxi,which should provide ample room forcompanies like Baoxin to grow their new car sales and after-sales services in addition totheir establishments in first tier cities.Wuxi city snapshotFigure 1:Wuxi city snapsho
41、t,PopulationProvince2011 GDP ranking by cityNumber of Audi storesNumber of BMW storesNumber of Benz storesNumber of JLR storesSource:Baidu,Company data,Deutsche BankPage 4,6.4mJiangsu,Deutsche Bank AG/Hong Kong,28 November 2012Automobiles&ComponentsChinese auto dealersValuation and risksBaoxin top B
42、uy with our optimism on post-merger outlookFY13-14E EPS upward revisionSince Baoxin is completing the proposed NCGA acquisition based on the originalproposed financing dated August,i.e.paying for the majority of the consideration withinternal cash and bonds and with only a small portion of new share
43、s.As such,wereduce our share count estimate post acquisition and that translates to a lower FY13-14E net profit(due to higher financing costs)but a 8.6-9.7%higher FY13-14E EPS dueto less EPS dilution.,Our FY12-13E EPS forecast for Baoxinare on the prudent end regardingcontributions by the NCGA busin
44、ess.FY14E EPS estimate probably because,is lower than consensus probably because wenew car sales margin recovery and initialWe are,however,above consensus with ourwe are more positive on the long-term outlook,for Baoxin.Figure 2:Baoxin changes in Deutsche Banks net profit and EPS forecast,2011,2012E
45、,2013E,2014E,Original net profit(RMBm)Revised net profit(RMBm)Change(%)Original EPS(RMB)Revised EPS(RMB)Change(%),601.9n.a.n.a.0.27n.a.n.a.,831.6806.4-3.0%0.320.32-1.2%,1,478.11,312.6-11.2%0.470.518.6%,2,028.51,818.2-10.4%0.650.719.7%,Source:Company data,Deutsche Bank estimatesFigure 3:Baoxin Deutsc
46、he Bank EPS forecast vs.consensus,(RMB)Deutsche Bank forecastConsensus forecastDifference(%),2012E0.320.37-13%,2013E0.510.53-4%,2014E0.710.694%,Source:Bloomberg Finance LP,Deutsche Bank estimatesPremium-to-US-peer valuation justified by leading growth prospectWe use DCF analysis to derive our target
47、 price for Baoxin(based on WACC of 10.2%,beta 1.5 and terminal growth of 1.0%(based on the long term growth rate which webelieve prudent).Our target price of HKD7.5 implies a FY13E P/E of 11.7x,or about a6%premium to the US auto dealer groups 11x mid-cycle forward P/E valuation.Wethink that such a p
48、remium is justified since we expect Baoxin to deliver an exponential49%FY12-14E EPS CAGR vs.lower growth for the US peers in general.In addition,theimplied target FY13E P/BV of 2.9x does not appear to be stretched,with about 29-30%sector leading sustainable ROE.With ample upside potential to our tar
49、get price,we rate Baoxin with a Buyrecommendation and the company is our top pick in the Chinese auto dealershipsector.,Deutsche Bank AG/Hong Kong,Page 5,Feb-12,May-12,Jan-12,Dec-11,Jun-12,Aug-12,Sep-12,Oct-12,Apr-12,Jul-12,Nov-12,Mar-12,Sep-10,Sep-11,Mar-10,Mar-11,May-10,May-11,Mar-12,Nov-10,Nov-11
50、,May-12,Sep-12,Jul-10,Jul-11,Jan-11,Jan-12,Jul-12,Nov-12,28 November 2012Automobiles&ComponentsChinese auto dealersFigure 4:Baoxin rolling forward P/E band,PE,Mean,Mean-SD,Mean+SD,2520151050,EPS growth%,CY12E17%,CY13E61%,Source:Company data,Bloomberg Finance LP,Deutsche BankRisksThe key downside ris
