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Equities Hong Kong/China Initial Coverage Company Report
BYD Co Ltd (1211 HK) 17 June 2015 China / Automobile Poised to Gain from Strong Product Line-up BYD has recently announced its plan to do a private A-share ACCUMULATE placement so as to expand capacities for Li-ion ferrous power Share Target batteries and to invest more in the R&D of new energy vehicles Upside Price Price (NEV). While the share issue is pending shareholders’ approval, BYD is poised to enjoy higher growth from the debut of its new HK$50.85 HK$56 10.1% NEVs this year. (as of 16 June 2015) Four new NEV models to roll out in 2015. The new plug-in hybrid vehicle Tang has been rolled out in June 2015 and is Jeff Wong priced at below Rmb300k. Subsequently, BYD will launch (852) 2530 8306 Song in 3Q15, and both Yuan and Shang in 4Q15. Including [email protected] the existing model Qin, there would be five EV models in
BYD’s product mix to fuel future growth. 52 Range (HK$) 18.7-62.3 DVD yield % 0.00 S3 and S1 SUVs to launch in 2H15. For the traditional vehicle segment, the company’s growth drivers in 2015 were mainly the SUVs S7 and S6. In 2H15, BYD will roll out two new Latest Key Data SUVs S3 and S1. With SUV being a relatively fast-growing FF no of shares (m) -H share 689 segment in the industry, we expect a mild increase or FF (%) -H share 75.25 FF market cap (HK$ m) 35,010
single-digit y/y growth in the ASP in 2015. 12M daily turnover (HK$ m) 330.53 12M volatility (%) 58.95 Plans to raise Rmb15bn. BYD announced it plans to raise at 12M Hi/Lo (HK$) 18.7-62.3 most Rmb15bn from a private A-share placement in June. We PEG FY15-17E (x) 2.0 believe the capital replenishment will help: a) strengthen the RoAE FY14 (%) 1.6 future NEV product pipeline as the company is still investing P/B FY15E (x) 3.9 heavily in R&D; and b) relieve the company’s financial burden Net debt/equity FY14 (%) 103.3 given its net gearing as of end of 2014 was 103%. We estimate the dilution effect on EPS would be around 8%. Performance (%) Valuation We estimate 2015 earnings to grow 400% y/y to 1M YTD 12M Absolute 5.5 67.5 19.2 Rmb2,171m, after factoring in a disposal gain from the sale of Relative to HSCEI 10.9 57.0 (6.7) Shenzhen BYD Electronic. Our target price of HK$56 is based on 2015e EPS and 50x target PE multiple. The current share price of HK$50.85 suggests there is a potential upside of 10%. Major Shareholders (%) We initiate with an Accumulate rating on the stock. Wang Chuan Fu 23.0 Xiangyang LV 9.7 Investment Summary FY-end Dec 2013 2014 2015E 2016E 2017E Price Chart Turnover (Rmb m) 49,768 55,366 69,940 80,885 84,682 (HK$) Turnover (HK$ m) Growth (%) 12.1 11.2 26.3 15.6 4.7 Net Profit (Rmb m) 553 434 2,171 2,610 3,253 BYD Co Ltd HSI 70.00 7,000 Growth (%) 579.6 (21.6) 400.9 20.2 24.6 60.00 6,000 EPS (RMB) 0.23 0.18 0.90 1.08 1.34 50.00 5,000 Growth (%) 579.6 (23.9) 400.9 20.2 24.6 40.00 4,000 PER (x) 173.2 227.6 45.4 37.8 30.3 30.00 3,000 OCF/Share (Rmb) 1.03 0.02 5.07 1.37 6.74 20.00 2,000 P/B (x) 4.4 3.9 3.6 3.3 3.0 10.00 1,000 EV/EBITDA (x) 22.0 19.4 13.7 13.1 11.3 DPS (Rmb) 0.05 0.00 0.00 0.00 0.00 0.00 0 Jan-14 May-14 Sep-14 Jan-15 May-15 Yield (%) 0.1 0.0 0.0 0.0 0.0 Source: Company data, CER estimate Source: Bloomberg, CER estimates
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Growth Outlook
Company overview
BYD is primarily engaged in the following three businesses:
Automobile segment (47% of 2014 sales): the R&D and manufacturing of: a) traditional fuel-power vehicles (with Internal Combustion Engines or ICE); and b) new energy vehicles. In 2014, the company focused on promoting its latest plug-in hybrid electric vehicle (PHEV) known as Qin. It also began receiving orders for DENZA, the pure electric vehicle (EV) jointly developed by BYD and Daimler. Around 29% of the segment sales is attributed to such NEVs. The company also promoted the use of electric buses and taxis both domestically and in the overseas and that accounts for 20% of segment sales. Aside from NEV, the traditional vehicle segment contributed half of the segment sales but is under intense competition and experienced decline in both sales volume and price levels. Currently, its best-selling model is a high-end SUV known as S7.
Handset components and assembly segment (44% of 2014 sales) BYD has a proprietary plastic metal hybrid (PMH) technology which has become more popular among the domestic and global handset manufacturers. The technology is versatile in meeting the needs of their high-end flagship models.
Rechargeable batteries and photovoltaic (PV) segment (9% of 2014 sales): BYD is actively developing new types of batteries with higher energy density, with an aim to extend the mileage of the NEVs it produces. One example is the lithium ferrous phosphate (LFP) batteries. The traditional lithium-ion and nickel batteries segment has somewhat deteriorated. The solar energy segment continues to book a significant loss due to intense price competition.
Sales volume targets to reach 150k-200k units in 2015, more than doubled y/y
In 2015, around 150k-200k of NEVs are expected to be sold in China, up 100% to 166% y/y, according to estimates from the China Association of Automobile Manufacturers (CAAM). Back in 2014, China produced and sold 83.9k and 75k units, up 4x and 3.2x respectively; in particular, plug-in hybrid EV (PHEV) grew fastest at 8.8x y/y to around 30k units. We expect popularity for NEV to continue to rise driven by mainly policy incentives.
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Figure 1: Production volume of NEV by type July 2014 – April 2015
60,000 CV: Plug-in hybrid CV: Pure electric 50,000 PV: Plug-in hybrid PV: Pure electric 40,000
30,000
20,000
10,000
0 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15
Source: Company data
Figure 2: Sales volume of NEV by type 2011 – 2014
NEV sales volume in China 80,000 74,763 70,000 60,000 50,000 40,000 30,000 17,642 20,000 8,159 12,791 10,000 0 2011 2012 2013 2014
Source: Company data
National and local policy incentives to remain supportive…
In May 2015 China's State Council announced the "China Manufacturing 2025" plan, which is seen as the first 10-year plan to upgrade the country's manufacturing industries to among the ranks of the developed countries. NEV is one of the 10 targeted industries and its development will involve nearly all of the nine key strategic objectives including: break-through development in key areas, domestic brand building and green manufacturing. Thus we expect further policy incentives to be announced to support the growth of the NEV industry.
On 21 July 2014, the State Council announced the “Guiding Opinions on Accelerating the Promotion and Application of New Energy Vehicles”. The plan is to let the local governments take up the responsibilities to promote the use of NEV. More importantly, at least 30% of the local government’s annual purchase in 2014-16 must include NEV.
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In addition to national policy incentives like purchase tax exemption, financial subsidies and government procurement like the above, the local governments are working to encourage drivers to switch to NEV as well. For instance, in Beijing, the local traffic management bureau announced in May 2015 that pure electric passenger vehicles will be exempted from the Weekday Peak Hour Traffic Restriction measures (temporarily from 1 Jun 2015 to 10 Apr 2016). Going forward, the public is also anticipating further exemptions on parking fees and toll fees. Increasingly, more drivers will be lured to owning a NEV.
Another implication is that other first tier cities are likely to replicate the model being adopted by Beijing. For example, Tianjin, Hangzhou and Chengdu could grant to drivers similar privileges like peak hour access and fee exemptions, thus creating room for more future demand.
… although subsidy reduction in 2017-20 might hurt consumer sentiment
Despite its supportive stance on NEV, the central government (MOF, MIIT, NDRC and MOST) announced its plan to reduce financial subsidy on 29 April 2015 (“Notice on the Promotion and Application of Financial Supporting Policy on New Energy Vehicles 2016-2020”). For 2016, pure electric passenger vehicles are entitled to the following subsidy and the size depends on the mileage:
100km ≤ mileage < 150km : Rmb 25,000 per vehicle
150km ≤ mileage < 250km : Rmb 45,000 per vehicle
250km ≤ mileage: Rmb 55,000 per vehicle
For pure electric commercial vehicles, the subsidy amount depends not only on mileage but also on efficiency of energy consumption and it varies from Rmb120k to Rmb500k per vehicle. Furthermore, fuel-cell vehicles, mini-vans, medium-to-large buses & medium trucks are entitled to Rmb200k, 300k and 500k subsidy per vehicle.
The key point from this notice is that the subsidy will be reduced by: a) 20% from the 2016 basis in 2017-18; and b) by 40% from the 2016 basis in 2019-20. Given the most popular NEV type is those with mileage between 150-250km, the reduction suggests the subsidy will be potentially cut from Rmb45,000 to Rmb27,000. We believe it could somewhat hurt the consumer sentiment. We also note that the extent of the cut is deeper than it was last proposed in December 2014.
Four new NEV models to be introduced in 2015
For 2015, the new plug-in hybrid vehicle Tang (唐) has been rolled out in June 2015 in the Shenzhen-Hong Kong-Macau International Auto Show. The selling price would be lower than Rmb300k. Shortly after, BYD will launch Song(宋) in 3Q15, and both Yuan (元) and Shang (商) in 4Q15. Including the existing model Qin (秦), there would be five PHEV models in BYD’s product mix.
For the traditional ICE vehicle segment, the company’s growth drivers in 2015 were mainly the SUVs S7 and S6. In 2H15, BYD will roll out two new SUVs S3 and S1. With SUV being a relatively fast-growing segment in the industry, we expect a mild increase or single-digit y/y growth in the ASP in 2015.
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One-off gain from disposal of Shenzhen BYD Electronic Components
On 12 February 2015, BYD announced it would dispose its 100% interest in Shenzhen BYD Electronic Components to Holitech (002217.CH), which is engaged in the making of LCD/camera/flexible printed circuits (FPC). Subsequently, the consideration was determined to be Rmb2.3 bn, of which 25% or Rmb575m will be paid in cash and 75% will be satisfied by 178.9m new Holitech shares at an issue price of Rmb9.64 per share.
The disposal was priced at 3-4x PB and that BYD is expected to book a one-off gain of around Rmb1.6bn in 2H15 under investment income on the P&L.
Capital replenishment to support capacity expansion for batteries and R&D of new vehicles
BYD announced it plans to raise at most Rmb15bn from a private A-share placement (consisting of fewer than 10 financial investors) on 4 June 2015. The issue price would be at least Rmb57.4. Accordingly, the number of new A shares to be issued would be at most 261.32m, accounting for 10.55% of the existing or 9.55% of the enlarged issued share capital.
The proceeds will be used in: a) capacity expansion for Li-ion ferrous power batteries (Rmb6bn); b) R&D of new energy vehicles (NEV) (Rmb5bn); and c) additional working capital and loan repayment (Rmb4bn).
We believe that the capital replenishment will help: a) strengthen the future NEV product pipeline as the company is still investing heavily in the R&D; and b) relieve the company’s financial burden given its net gearing as of end of 2014 was 103%.
We also note that the circular will be out on 3 July 2015 and the EGM will be held on 21 July 2015. Assuming 261.32m new shares were issued at Rmb57.4, we estimate that the dilution effect on 2015 EPS would be around 8%, without accounting for the potential earnings accretive effect from the proceeds to be raised.
Overseas expansion: extending its reach to Brazil
BYD is also diversifying its business and has quickly established its foothold in South America. On 15 July 2014, BYD announced its first South American production facility in Campinas, Brazil. The facility will serve as a manufacturing base for the long range pure electric transit bus, as well as the first fire-safe and recyclable iron-phosphate battery. During the initial stage, the maximum production capacity reaches 1,000 electric buses, including all of the batteries. Initial contributions to earnings is expected to be seen in 2016, although such contributions are likely to be small in the early stage.
On 23 May 2015, BYD announced further to establish another production facility for manufacturing solar panels and energy storage systems, which can help achieve zero emission goals in Campinas. In the second phase of the development, BYD plans to build a R&D centre for the photovoltaic, smart-grid and LED lighting business.
Overseas expansion: single largest overseas orders from the U.S.
On 29 April 2015. BYD announced that California’s Long Beach Transit will purchase up to 60 electric buses from them and it is the company’s biggest overseas order to date. More importantly, winning a sizeable order in the U.S. will make future overseas buyers more convinced of the quality because of the high
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CHINA / AUTOMOBILE / BYD Co Ltd safety and quality standards in the U.S. The first 10 of these buses will be delivered as early as this year.
We also note that BYD also won a contract to supply five electric buses to Kyoto back in February 2015. Currently, BYD is also negotiating with Uber over the sale of a few hundred electric taxis for New York and Chicago.
Earnings outlook of BYD Electronic remains robust
BYD’s 65.76%-owned, HK-listed subsidiary BYD Electronic (285.HK) is mainly engaged in the manufacturing of handset components such as casings, keypads and modules for handset manufacturers. The company also provides assembly service (including PCB assembly) to global handset manufacturers.
The rising popularity of metallic handset casings and their price levels are causing the company’s profit margins to improve. The growing complexity and variety in design also demand higher price levels in 2015. BYD Electronic has received strong orders and we expect supplies to Galaxy S6 alone would account for 10-20% of total sales in 2015. Overall, metallic handset casings are expected to account for 50% of BYD Electronic earnings in 2015, as opposed to only 40% in 2014.
In terms of the tablet ODM business, the one-stop service (involving whole-tablet design, component manufacturing and assembly service) is also growing with momentum and gross margin in 2015 is expected to see mild improvement, too.
Earnings outlook
With four new models coming out this year, we expect sales volume of plug-in hybrid EV (PHEV) to rise around 240% y/y to 50,000 units. Based on strong order flow domestic and abroad, sales volume of EV taxis and buses are estimated to increase by around one fold as well. Sales volume of the NEV segment are likely to increase by 202% y/y to 63,000 units. As BYD focuses on the high-growth SUV segment, we expect the traditional vehicle segment to see 12% growth y/y in 2015.
Total revenue in 2015 is estimated to grow 26% y/y to Rmb70bn, of which 57% is attributed to the automobile segment, 36% to the handset components and assembly segment, and 7% to rechargeable batteries and photovoltaic segment.
We expect to see greater gross margin improvement in the NEVs than in the traditional automobiles. With higher prices anticipated for the metal casings, the handset business should see margin improvement in 2015 as well; margin for the tablet ODM business, on the other hand, is likely to remain stable. Although the solar business was loss making in 2014 and a potential turnaround is still uncertain, it accounts for a small portion of the total sales. Overall, gross margin is expected to rise by 2.2%-pt and 1%-pt to 16% and 17% in 2015-16 respectively.
Government subsidy is a key item in that it accounts for 33% of the company’s EBIT in 2015. We expect it to grow 8% y/y to Rmb862m in 2015. We also expect R&D expense per sales to rise from 3.4% to 3.8% as the company enters a high-growth phase. As discussed previously, the company will book a disposal gain of Rmb1.6bn in 2H15 as other income of the P&L. As a result, we expect earnings to rise substantially by 401% y/y to Rmb2,171m in 2015 and by 20% y/y to Rmb2,610m in 2016.
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Table 3: Major assumptions Year end Dec 31 2013 2014 2015e 2016e 2017e Sales volume (units) New energy vehicles (NEV) 20,840 63,000 108,000 131,900 Plug-in Hybrid EV 14,747 50,000 90,000 115,000 EV taxi 3,560 8,000 11,000 10,000 EV bus 2,533 5,000 7,000 6,900 Traditional vehicles 352,160 395,000 390,000 380,000 Total 373,000 458,000 498,000 511,900
Sales volume - y/y growth New energy vehicles (NEV) NA 202% 71% 22% Plug-in Hybrid EV NA 239% 80% 28% EV taxi NA 125% 38% -9% EV bus NA 97% 40% -1% Traditional vehicles NA 12% -1% -3% Total NA 23% 9% 3%
Revenue by segment (Rmb m) Automobiles 25,291 26,270 39,630 52,425 53,753 NEV – Plug-in hybrid EV 415 3,227 11,160 19,485 22,408 NEV - Buses and taxis 810 4,103 7,063 11,593 10,337 Traditional vehicles 24,066 19,085 21,407 21,347 21,008 Rechargeable batteries and PV 5,018 4,980 5,229 5,386 5,548 Handset components and assembly 19,459 24,116 25,081 23,074 25,382 Total 49,768 55,366 69,940 80,885 84,682
Revenue by segment - as % of total Automobiles 51% 47% 57% 65%63% NEV – Plug-in hybrid EV 2% 12% 28% 37% 42% NEV - Buses and taxis 3% 16% 18% 22% 19% Traditional vehicles 95% 73% 54% 41% 39% Rechargeable batteries and PV 10% 9% 7% 7% 7% Handset components and assembly 39% 44% 36% 29% 30% Total 100% 100% 100% 100% 100%
Overall gross margin 13.1% 13.8% 16.0% 17.0% 16.5%
Source: Company data
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Figure 4: Sales volume breakdown by NEV and ICE vehicles Figure 5: Breakdown of EV sales volume by vehicle type 2014-17E 2014-17E
New energy vehicles ICE (Internal Combustion Engine) vehicles Plug-in hybrid EV EV tax i EV bus
600 100% 511.9 498k 475k 500 k 80%
400 373k 60% 300 40% 200 20% 100
0 0% 2014 2015E 2016E 2017E 2014 2015E 2016E 2017E
Source: Company data Source: Company data
Figure 6: Sales breakdown by business segment Figure 7: Breakdown of automobile sales by vehicle type 2014-17E 2014-17E
Handset components & assembly Plug-in hybrid EV EV taxis and buses ICE vehicles (Rmb bn) Rechargeable batteries & PV 90 Automobiles 100% 77.8 80.3 80 90% 68.0 80% 70 70% 60 55.4 60% 50 50% 40 40% 30 30% 20 20% 10 10% 0 0% 2014 2015E 2016E 2017E 2014 2015E 2016E 2017E
Source: Company data Source: Company data
Figure 8: Profit margins Figure 9: Government subsidy and R&D expense 2013-17E 2013-17E
Gross margin EBIT mar gin Net margin (Rmb m) Government grants R&D expense 18% 1,500 16% 1,000 14% 500 677 798 862 888 915 12% 0 10% -500 -1,279 8% -1,000 -1,865 -2,658 -2,456 6% -1,500 -2,750 4% -2,000 2% -2,500 0% -3,000 2013 2014 2015E 2016E 2017E 2013 2014 2015E 2016E 2017E
Source: Company data Source: Company data
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CHINA / AUTOMOBILE / BYD Co Ltd
Valuation and Risks
Valuation
Similar to its global peer Tesla Motors, BYD currently trades at much higher price multiples relative to its peers making traditional ICE vehicles (with internal combustion engines). In particular, BYD trades at 49x 2015 and 41x 2016 PE respectively, relative to only 8.9x and 7.4x PE of its peers. In fact, since 2005, BYD has been trading at a historical average PE of 62x and average PB of 2.8x.
Our target price of HK$56 is based on 2015e EPS and 50x target PE multiple, which is arrived at after applying a 20% discount to the historical average PE of 62x (2005 – now). The current share price of HK$50.85 suggests there is a potential upside of 10%. We initiate with an Accumulate rating on the stock.
Risks
Fierce competition from other global auto makers that are also expanding its share in the EV market in China
Subsidy reduction to take place in 2017-20 might potentially hurt consumer sentiment and weaken demand for NEV. The impact however is immaterial over the medium term and there could be other supportive policies on the consumer end.
Potential product recall or unexpected batteries issues.
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Table 10: Valuation summary Net PEG P/B Yield ROE Company Code Rating Curr Price* TP PER (x) gearing (x) (x) (%) (%) (%) (HK$) 14A 15E 16E 15-17E 15E 15E 14A 14A PRC peers (HK-listed) BYD Company 1211 HK Acc HKD 54.85 59.3 NA 49.0 40.8 2.2 3.9 0.0 2.3 103.3 Great Wall Motor - H 2333 HK Acc HKD 44.25 61.0 13.4 9.8 8.2 0.5 2.6 3.0 24.0 -10.1 Geely Auto 175 HK Acc HKD 3.8 4.0 18.7 11.5 10.3 1.1 1.4 1.1 8.3 -27.1 GAC Group - H 2238 HK Hold HKD 7.47 8.7 12.1 9.5 7.9 0.5 9.5 4.1 9.0 11.4 Brilliance China 1114 HK Acc HKD 11.04 13.0 8.2 8.2 6.3 0.3 2.0 1.5 31.9 1.1 Dongfeng Group 489 HK Buy HKD 11.28 14.0 6.1 5.9 5.5 0.8 0.9 2.4 17.4 -10.2 BAIC Motor 1958 HK Acc HKD 9.7 12.5 11.1 9.5 7.1 0.4 1.3 5.3 13.5 20.8 Weighted-average* 11.2 8.9 7.4 0.5 3.3 3.1 18.3 -1.5
PRC peers (A-share listed) Great Wall Motor - A 601633 CH NR Rmb 46.49 - 17.6 11.8 9.4 0.6 3.3 2.4 26.2 2.3 SAIC Motor Group 600104 CH NR Rmb 25.36 - 10.0 8.8 7.9 0.9 1.6 5.8 18.9 -11.2 Chongqing Changan Auto 000625 CH NR Rmb 22.31 - 13.8 9.7 8.0 0.5 3.0 1.7 34.0 21.5 FAW Car Co. Ltd 000800 CH NR Rmb 28.30 - NA 43.2 34.3 2.3 4.8 0.6 1.9 15.5 GAC Group - A 601238 CH NR Rmb 15.85 - 32.3 24.3 21.2 1.8 2.7 1.2 9.3 -10.3 Weighted-average 15.4 14.0 11.8 1.0 2.5 3.5 20.3 -1.3
Asian peers Honda Motor 7267 JP NR JPY 4075 - 12.8 13.0 11.7 1.0 1.1 2.2 10.5 76.7 Nissan Motor 7201 JP NR JPY 1258 - 13.6 11.7 10.1 0.9 1.1 2.6 9.6 -21.8 Suzuki Motor 7269 JP NR JPY 4253 - 22.2 22.0 19.7 1.7 1.6 0.6 8.7 -34.3 Toyota Motor 7203 JP NR JPY 8409 - 14.6 12.1 10.7 1.1 1.6 2.4 13.7 79.4 Hyundai Motor 005380 KS NR KRW 136500 - 5.0 NA 4.6 NA 0.6 2.6 10.4 45.2 Kia Motors 000270 KS NR KRW 46000 - 6.2 5.9 5.5 0.7 0.7 2.4 14.0 -11.6 Weighted-average 13.6 12.4 10.6 1.1 1.4 2.3 12.3 55.8
Global peers BMW AG BMW GR NR EUR 98.555 - 11.2 10.2 9.6 2.1 1.6 3.5 16.0 97.7 Daimler AG DAI GR NR EUR 82.013 - 12.6 10.8 9.6 1.2 1.8 3.5 16.1 -40.5 Volkswagen AG VOW GR NR EUR 208.02 - 9.5 8.6 7.7 0.8 1.1 2.8 12.2 115.3 Volvo AB VOLVB SS NR SEK 109.1 - NA 16.1 13.1 0.9 2.6 2.8 2.7 143.0 Tesla Motors TSLA US NR USD 250.38 - NA NA 78.1 NA 34.3 0.0 NA 63.9 Weighted-average** 11.0 10.4 9.2 1.2 1.5 3.2 13.5 64.2
Source: Bloomberg, Companies, CER estimates. Exclude: negative ratios, PE > 50x, growth rates over 50% is taken as 50%, PEG > 2.5 is taken as 2.5. *Excludes BYD. **Excludes Tesla Motors
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Figure 11: 12-month Forward PE band 2006 - Now
Price (HKD) 100
90 80x 80 70x 70 60x 60 50x 50 40x 40
30
20
10
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg, CER estimates
Figure 32: 12-month Forward PB band 2006 - Now
Price (HKD) HKD 100
90
80 5x 70
60 4x
50 3x 40
30 2x
20 1x 10
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Bloomberg, CER estimates
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Company Description
BYD Company Limited is primarily engaged in the manufacturing and sale of traditional and new energy vehicles. The company also researches, develops, produces and sells batteries, which are used in mobile phones, cordless phones, power tools and other portable electronic products.
Profit & Loss (Consolidated) Balance Sheet (Consolidated) FY-end 31 Dec (Rmb m) 2013 2014 2015E 2016E 2017E FY-end 31 Dec (Rmb m) 2013 2014 2015E 2016E 2017E Sales 49,768 55,366 69,940 80,885 84,682 Total assets 78,015 94,009 106,645 111,117 117,591 Cost of sales (43,252) (47,743) (58,750) (67,135) (70,710) Current assets 29,966 40,834 50,618 53,087 58,013 Gross profit 6,516 7,623 11,190 13,751 13,973 Cash & ST investments 4,511 3,950 9,161 5,211 13,826 Marketable securities & ST Other income 232 818 2,189 550 550 868 503 503 503 503 inv Operating expenses (5,752) (6,951) (9,652) (10,030) (9,484) Account & notes receivable 13,135 22,435 23,553 29,632 25,121 Operating profit 1,898 2,393 4,683 5,303 6,111 Inventories 8,221 9,978 13,200 13,286 13,835 Finance cost, net (793) (1,292) (1,465) (1,488) (1,505) Others 3,231 3,968 4,202 4,454 4,727 Share of P/L of assoc. & JCE (48) (122) (120) (100) (100) Non-current assets 48,049 53,175 56,027 58,031 59,578 Pre-tax profit 832 874 3,005 3,571 4,348 LT investments 1,093 1,449 1,731 2,071 2,478 Tax (56) (134) (451) (536) (652) Net fixed assets 34,147 36,379 37,204 37,466 37,224 Minorities (223) (306) (383) (425) (444) Others 12,809 15,347 17,092 18,495 19,877 Net profit 553 434 2,171 2,610 3,253 Total liabilities 53,158 65,114 75,579 77,265 80,300 EBITDA 5,430 6,605 9,167 9,939 10,820 Current liabilities 43,344 53,022 62,487 63,673 66,608 EBIT 1,898 2,393 4,683 5,303 6,111 Account payable 22,293 25,851 34,025 34,397 36,894 EPS (Rmb) 0.23 0.18 0.90 1.08 1.34 ST borrowings 16,172 19,173 20,173 20,673 20,773 DPS (Rmb) 0.05 0.00 0.00 0.00 0.00 Others 4,879 7,998 8,289 8,603 8,942 Source: Company, CER estimates Non-current liabilities 9,814 12,092 13,092 13,592 13,692 Long-term debts 8,652 10,979 11,979 12,479 12,579 Cash Flow (Consolidated) Others 1,162 1,113 1,113 1,113 1,113 FY-end 31 Dec (Rmb m) 2013 2014 2015E 2016E 2017E Total equities 24,856 28,894 31,066 33,852 37,290 Operating cash flow 2,436 38 12,298 3,332 16,343 Shareholders' equity 21,710 25,366 27,537 30,147 33,400 Net profit 553 434 2,171 2,610 3,253 Minority shareholders 3,147 3,529 3,529 3,705 3,891 Depreciation & amortization 3,533 4,212 4,484 4,636 4,709 Total liabilities + SH equities 78,015 94,009 106,645 111,117 117,591 Change in working capital (2,913) (6,106) 3,866 (5,760) 6,495 Net cash / (debt) (20,313) (26,202) (22,991) (27,941) (19,525) Others 1,263 1,499 1,776 1,847 1,886 Working capital (2,585) 2,532 (1,360) 4,373 (2,152) Investment cash flow (5,851) (7,901) (7,530) (6,649) (6,265) Total capital employed 49,681 59,046 63,218 67,004 70,642 Shareholders' equity + Net Capex (3,534) (1,340) (5,000) (4,500) (4,000) 24,856 28,894 31,066 33,852 37,290 Disposal 0 186 0 0 0 Minorities Net gearing (%) 93.6 103.3 83.5 92.7 58.5 Change in LT investment (192) (502) 0 0 0 Source: Company, CER estimates Change in other assets (2,126) (6,244) (2,530) (2,149) (2,265) Free cash Flow (3,415) (7,863) 4,768 (3,317) 10,078 Financing cash flow 4,508 7,271 442 (633) (1,463) Financial Summary Change in share capital 0 3,395 0 0 0 FY-end 31 Dec 2013 2014 2015E 2016E 2017E Net change in debt 6,220 5,314 2,000 1,000 200 Growth (%) Dividend paid 0 (146) 0 0 0 Revenue 12.1 11.2 26.3 15.6 4.7 Net impact of exchange fluctuation (68) 31 0 0 0 EBITDA NA 21.6 38.8 8.4 8.9 Net cash flow 1,093 (592) 5,211 (3,950) 8,615 EBIT 61.1 26.1 95.7 13.2 15.2 Source: Company, CER estimates Net profit 579.6 -21.6 400.9 20.2 24.6 EPS 579.6 -23.9 400.9 20.2 24.6 Margins (%) Gross 13.1 13.8 16.0 17.0 16.5 EBITDA 10.9 11.9 13.1 12.3 12.8 EBIT 3.8 4.3 6.7 6.6 7.2 Net 1.1 0.8 3.1 3.2 3.8 Others (%) Effective tax rate 6.8 15.3 15.0 15.0 15.0 Payout ratio 22.4 0.0 0.0 0.0 0.0 RoCE 2.2 1.5 7.0 7.7 8.7 Average RoE 2.3 1.6 7.2 8.0 9.1 Average RoA 0.7 0.5 2.2 2.4 2.8 Interest cover (x) 1.9 1.7 3.0 3.2 3.7 Source: Company, CER estimates
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