China Auto Sector

China / Hong Kong Industry Focus China Auto Sector

Refer to important disclosures at the end of this report

DBS Group Research . Equity 11 March 2016

Auto consumption vital to drive retail HSI: 19,984 market

 Supportive policies needed if automobile consumption slips; Jan-Feb PV sales expanded at mid-single digit ANALYST Rachel MIU +852 2863 8843 2016 directive calls for support for industry restructuring [email protected]  and NEV development  Laggards like Brilliance (1114 HK), Geely (175 HK) and Great Wall Motor (2333 HK) are catching up on low Recommendation & valuation valuation Company Price Target Recom FY16F Mkt Price PE Cap Mid-single-digit expansion in Jan-Feb PV market. Due to the HK$ HK$ x US$m Chinese New Year effect, February’s passenger vehicle (PV) A uto manufacturers sales dipped slightly by 1.5% y-o-y. Combining Jan-Feb’s Brilliance China 6.79 9.95 Buy 6.7 4,415 volume sales, the PV market expanded at 5% y-o-y, which is (1114 HK) decent in our opinion, considering that some advanced sales Dongfeng Motor 9.19 13.50 Buy 4.8 10,195 were recognised in Dec 15. We believe any slippage in sales (489 HK) momentum could prompt the government to roll out stimulus Geely Auto 3.19 3.30 Hold 8.2 3,614 measures to drive consumption, as automobile sales account (175 HK) for about one-quarter of the domestic retail market. SUV sales Great Wall Motor 6.54 5.60 Hold 5.9 10,477 surged 45% y-o-y in February, after January’s strong expansion (2333 HK) of 61% y-o-y. Automakers are rushing into the SUV market Guangzhou Auto 7.22 7.50 Buy 8.6 14,276 and aiming to secure larger market share, hence price (2238 HK) competition is intensifying. BAIC Motor 5.96 n.a. NR 7.1 5,829 (1958 HK)^ NPC meeting sets the directions for future development. The CQ Changan 'B' 13.84 n.a. NR 4.6 8,310 meeting laid down broad directions including areas like (200625 CH)^ stringent control of production capacity, promoting the SAIC Motor 'A' 19.47 n.a. NR 6.7 32,960 development of the 2nd hand car market, accelerating the (600104 CH)^ building of infrastructure for the electric car market and Auto dealers building more road infrastructure in the Tier 3/4 cities. All these China ZhengTong 2.83 4.30 Buy 5.3 805 should help to develop the industry at a healthy pace, since (1728 HK) China’s automobile penetration is rising over the years. Dah Chong Hong 3.07 3.70 Buy 8.2 724 (1828 HK)* Laggard auto stocks catching up on valuation. Several auto ZhongSheng 3.98 4.50 Buy 7.9 1,100 laggards have rallied recently on cheap valuations. The (881 HK)* earnings fundamentals of these companies have not changed Auto parts & components much but investors seem to be bottom-fishing some of these Minth Group 14.24 15.80 Buy 9.0 2,028 names on low valuation, including Brilliance (1114 HK), Geely (425 HK) (175 HK) and Great Wall Motor (2333 HK). Among the Nexteer Automotive 7.39 9.60 Buy 9.2 2,375 laggards, we have Buy ratings on Brilliance and Dongfeng (1316 HK) Motor (489 HK). We also keep our positive stance on auto Xinchen China 1.22 1.35 Buy 5.4 201 parts companies, Minth (425 HK) and Nexteer (1316 HK). (1148 HK) Xingda Int'l 1.37 n.a. NR n.a. 262 (1899 HK)^ ^ Consensus * TP & Rating under review Source: Thomson Reuters, DBS Vickers

ed-CK / sa- CW

Industry Focus China Auto Sector

Automobile sales crucial for domestic retail market NPC meeting – moving in the right direction

Chinese New Year has affected February auto sales. February The outcome of the NPC meeting is encouraging, and should passenger car sales dipped slightly by 1.5% y-o-y. Combining ensure a healthy development of the industry in the future. The Jan-Feb’s volume sales, the PV market expanded at 5% y-o-y, goal is to manage the supply and demand issues from three which is decent in our opinion, considering that some aspects, including new car sales, 2nd hand car market and advanced sales were recognised in Dec 15. We believe any vehicle scrap market. We have highlighted some main issues slippage in sales momentum could prompt the government to that would impact the automobile market, as follows: roll out stimulus measures to drive consumption, as automobile Tighter control on new production capacity and sales account for about one-quarter of the domestic retail  termination of production approvals of inefficient factories market. Possible measures include giving subsidies on car and plants, aiming to remove these operators from the purchase in the rural areas and extension of the vehicle system purchase tax cuts for another year. SUV sales surged 45% y-o- nd y in February, after January’s strong expansion of 61% y-o-y.  Development of the 2 hand car market This vehicle segment continues to draw interests from both the  Accelerating the construction of infrastructure to support automakers and consumers. But price competition is the main electric car (EV) development. By 2025, China intends to concern as automakers fight for market share. achieve new energy vehicle (NEV) sales penetration rate of 20% of total new volume sales, and the Chinese NEV auto On the other hand, commercial vehicle sales grew 3.9% y-o-y brands’ market share to reach >80% in February, with truck sales growing at 6.8%. CV sales were down marginally on a combined two-month basis.  Construction of 200,000km of new roads and expressways in the Tier 3/4 cities to increase car ownership Sino-foreign JV brand inventory coming down. Overall, the To tackle the pollution problem, the government plans to upward sales strength early this year has also helped to digest  scrap 3.8m highly polluting vehicles and to implement the the channel’s inventory level. On average, auto dealers are National V fuel standard nationwide holding slightly less than one month of inventory. Sino-foreign JVs posted a better improvement, with their inventory days falling from 1.67 months in Feb 15 to 0.84 month in Jan 16. Rating and target price review

Laggard auto stocks catching up on valuation. Several auto Auto inventory days laggards have rallied recently on cheap valuations. The earnings fundamentals of these companies have not changed months much but investors seem to be bottom-fishing some of these 2.5 names on low valuation, including Brilliance, Geely and Great Wall Motor. Among the laggards, we have Buy ratings on 2.0 Brilliance and Dongfeng Motor. We currently have a Hold rating on Great Wall Motor, as its Jan-Feb SUV sales were 1.5 slower than the overall SUV market’s growth. Other automakers are racing ahead in the SUV market and have 1.0 posted strong SUV volume growth in Jan-Feb, including GAC (+145%), BAIC (23-fold increase) and Changan Auto (+29%). 0.5 We will re-visit our assumptions on Great Wall Motor post its 0.0 FY15 results announcement.

We keep our positive stance on auto parts companies like Jul-12 Jul-13 Jul-14 Jul-15 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Oct-12 Oct-13 Oct-14 Oct-15 Apr-12 Apr-13 Apr-14 Apr-15 Minth and Nexteer, as these companies have better earnings fundamentals, underpinned by their diversified market and Source: CADA customer strategy.

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Industry Focus China Auto Sector

Auto sector share price performance

Share Price Performance (%) Company Code 1-day 1-month 3-month 6-month 1-year YTD 2014 2015 4Q15 Baoxin Auto 1293 HK 0.0 10.6 18.6 102.5 0.4 1.4 (40.5) 8.3 47.0 China Harmony 3836 HK (3.5) (16.1) (30.8) 13.0 (30.8) (28.5) 18.4 (15.8) 49.9 China Meidong 1268 HK 0.0 0.0 (9.5) (14.6) (56.3) (24.0) 9.8 (44.1) 19.0 China Yongda 3669 HK (2.6) (2.8) (32.4) 20.5 (2.6) (28.7) (26.8) 14.7 61.2 China ZhengTong 1728 HK (1.4) 4.0 (20.7) (6.0) (29.4) (20.7) (30.6) 3.5 11.6 Dah Chong Hong 1828 HK (1.0) 2.3 (21.7) 10.4 (22.9) (21.5) (27.8) (6.7) 25.7 Sparkle Roll 970 HK 2.0 13.0 (13.3) 44.4 40.5 (21.2) (47.7) 97.0 94.1 Zhongsheng 881 HK 0.0 7.6 (9.3) 33.1 (29.3) (15.1) (34.6) (33.0) 49.4 Minth 425 HK (0.1) 3.3 (11.0) (3.9) (5.4) (7.5) 0.0 (4.3) 11.4 Nexteer 1316 HK (0.4) 0.0 (12.5) (3.5) (4.2) (14.3) 49.9 29.8 10.5 Weichai Power 2338 HK (0.1) 17.2 7.9 (2.5) (40.0) (1.3) 4.6 (47.5) 19.3 Xinchen China 1148 HK (1.6) 8.9 (29.1) (29.5) (58.4) (31.5) (53.1) (27.0) 0.6 BAIC Motor 1958 HK (0.2) 24.9 (19.5) (10.8) (30.1) (23.2) n.a. (13.6) 14.3 Brilliance China 1114 HK (2.3) 4.3 (33.0) (27.3) (52.6) (30.4) (1.4) (21.7) 6.4 BYD 1211 HK (0.2) 11.6 (1.8) 17.8 13.3 (5.3) (20.1) 40.5 4.4 Dongfeng Motor 489 HK 0.2 1.2 (14.3) (3.1) (23.3) (11.3) (9.6) (5.6) 7.4 Geely Auto 175 HK (2.4) 6.3 (25.3) (1.2) (9.1) (22.8) (34.1) 67.2 11.9 Great Wall Motor 2333 HK (2.8) 20.4 (31.2) (16.5) (57.9) (27.6) 3.0 (38.6) 5.5 Guangzhou Auto 2238 HK 0.0 1.8 0.3 38.0 2.6 4.5 (16.7) (2.1) 9.5

HSI HSI (0.1) 3.6 (7.9) (7.3) (16.4) (8.8) 1.3 (7.2) 5.1 Source: Thomson Reuters

Monthly vehicle sales

'000 units Feb-15 J an-16 Feb-16 YoY MoM 2M15 2M16 YTD YoY As a % of growth growth growth total (%) (%) (%) vehicle (2M16)

China total vehicle sales 1,593 2,501 1,581 (0.8) (36.8) 3,913 4,081 4.3

Passenger Vehicles 1,397 2,229 1,377 (1.4) (38.2) 3,435 3,605 5.0 100% Sedan 809 1,111 667 (17.6) (40.0) 2,031 1,778 (12.4) 49% MPV 158 261 174 10.4 (33.3) 384 436 13.6 12% SUV 331 785 478 44.5 (39.1) 818 1,263 54.4 35% Cross 997157(42.0) (19.5) 202 129 (36.4) 4% Commercial Vehicles 197 272 204 3.9 (24.9) 478 476 (0.4) 100% Bus 30 41 22 (26.6) (46.7) 73 63 (13.4) 13% Truck 135 181 144 6.8 (20.6) 325 325 0.1 68% Tow Truck 11 17 17 61.0 (2.6) 25 34 36.6 7% Unfinished Bus 3 6 3 11.3 (45.8) 89 3.1 2% Unfinished Truck 19 26 18 (2.8) (31.4) 47 44 (5.1) 9%

Source: CEIC

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Industry Focus China Auto Sector

Monthly total vehicle sales in China Monthly total vehicle sales growth in China

m units % 3.0 140 120 2.5 100 80 2.0 60 1.5 40 20 1.0 0 (20) 0.5 (40) (60) 0.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 Jul/15 2011 2012 2013 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 2014 2015 2016 YoY growth MoM growth

Monthly PV sales in China Monthly PV sales growth in China

Monthly CV sales in China Monthly CV sales growth in China

m units % 0.6 200

0.5 150 0.4 100 0.3 50 0.2 0 0.1

0.0 (50) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jul/06 Jul/07 Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 Jul/15

2011 2012 2013 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 2014 2015 2016 YoY growth MoM growth

Source: CEIC

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Industry Focus China Auto Sector

Dongfeng - total monthly sales Dongfeng - total monthly sales growth

unit 140% 100% 400,000 120% 80% 100% 350,000 60% 80% 300,000 60% 40% 250,000 40% 20% 200,000 20% 0% 0% -20% 150,000 -20% 100,000 -40% -40% 50,000 -60% -60% -09 -10 -11 -12 -13 -14 -15 0 -09 -10 -11 -12 -13 -14 -15 y y y y y y y p p p p p p p Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-09 Se Se Se Se Se Se Se Jul Ma Ma Ma Ma Ma Ma Ma Jan Jun Oct Feb Sep Apr Dec Nov Mar Aug May 2013 2014 2015 2016 Y-o-Y growth (LHS) M-o-M growth (RHS)

GAC – total monthly sales GAC – total monthly sales growth

unit 200% 200,000 180,000 150% 160,000 100% 140,000 120,000 50% 100,000 0% 80,000 60,000 -50% 40,000 20,000 -100% 0 -13 r-11 y p Jul-12 Jul Jan-15 Jan-10 Jun-15 Jun-10 Jan Jun Oct-13 Feb-12 A Sep-11 Feb Oct Dec-12 Nov-15 Nov-10 Apr Sep Dec Nov Mar-14 Aug-14 Mar Aug Ma May 2013 2014 2015 2016 YOY growth MoM growth

Brilliance China – total monthly sales (BMW) Brilliance China – total monthly sales growth (BMW)

unit % 35,000 200 30,000 150

25,000 100 20,000 50 15,000 0 10,000 (50) 5,000 (100) 0 Jul Jan Jun Feb Oct Apr Sep Dec Nov Mar Aug May Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 2013 2014 2015 2016 YoY growth MoM growth

Source: Companies

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Industry Focus China Auto Sector

Geely – total monthly sales Geely – total monthly sales growth

unit 200% 70,000 150% 60,000 50,000 100%

40,000 50% 30,000 0% 20,000 -50% 10,000 0 -100% Jul Jan Jun Oct Feb Sep Apr Dec Nov Mar Aug May Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 2013 2014 2015 2016 YoY growth MoM growth

Great Wall Motor – total monthly sales Great Wall Motor – total monthly sales growth

unit 100% 120,000 80% 60% 100,000 40% 80,000 20% 60,000 0% -20% 40,000 -40% 20,000 -60% 0 Jul Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Feb-10 Oct-10 Feb-11 Oct-11 Feb-12 Oct-12 Feb-13 Oct-13 Feb-14 Oct-14 Feb-15 Oct-15 Feb-16 Jan Jun Feb Oct Apr Sep Dec Nov Aug Mar May 2013 2014 2015 2016 YoY growth MoM growth

Source: Companies

Automobile price index - Domestic made Vehicle inventory alert index

Jan 2004 = 100 % 110 80 100 70 90 60 80 50 70 40 60 30 50 20 10 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 PV Mini 0 Small Medium class

High class Luxury Jul-13 Jul-14 Jul-15 Jan-13 Jan-14 Jan-15 Jan-16 Oct-13 Oct-14 Oct-15 Apr-13 Apr-14 Apr-15 Source: CEIC Source: CADA, DBS Vickers

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Industry Focus China Auto Sector

NEV sales PV sales by country mix (Feb-16)

units Japanese 800,000 Brands German 700,000 12% Brands 600,000 20% 500,000 400,000 CAGR: 200% 300,000 200,000 Self-owned American 195% Brands Brands 100,000 46% 12% 0 2012 2013 2014 2015 2016F 2M15 2M16 Korean Brands Pure electric Plug in hybrid Other French 7% Brands Brands 0.1% 3%

Audi – monthly sales Audi – monthly sales growth

'000 units % 70 80 60 60 50 40 40 20 0 30 (20) 20 (40) 10 (60) 0 Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 Jul/15 Jul Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan Jun Feb Oct Apr Sep Dec Nov Mar Aug May 2013 2014 2015 2016 YoY growth MoM growth

BMW Group – monthly sales BMW Group – monthly sales growth

'000 units % 50.0 100 45.0 80 40.0 60 35.0 30.0 40 25.0 20 20.0 0 15.0 10.0 (20) 5.0 (40) 0.0 Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 Jul/15 Jul Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jan Jun Oct Feb Sep Apr Dec Nov Mar Aug May 2013 2014 2015 2016 YoY growth MoM growth

Source: CAAM, Companies

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Industry Focus China Auto Sector

Mercedes Benz – monthly sales Mercedes Benz – monthly sales growth

'000 units % 45 100 40 80 35 60 30 40 25 20 20 0 15 (20) 10 (40) 5 (60) 0 Jul Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 Jul/15 Jan Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Jan/16 Jun Feb Oct Apr Sep Dec Nov Mar Aug May 2013 2014 2015 2016 YoY growth MoM growth

Jaguar Land Rover – monthly sales Jaguar Land Rover – monthly sales growth

'000 units % 14.0 250 12.0 200 10.0 150 8.0 100 50 6.0 0 4.0 (50) 2.0 (100) 0.0 Jul Jun/10 Jun/11 Jun/12 Jun/13 Jun/14 Jun/15 Jan Jun Feb/10 Oct/10 Feb/11 Oct/11 Feb/12 Oct/12 Feb/13 Oct/13 Feb/14 Oct/14 Feb/15 Oct/15 Feb/16 Feb Oct Apr Sep Dec Nov Mar Aug May 2013 2014 2015 2016 YoY growth MoM growth

Source: Companies

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Industry Focus China Auto Sector

Peers valuation - Automakers Mkt PE PE Yield Yield P/Bk P/Bk EV /EBITDA ROE ROE Currency Price Cap Fiscal 16F 17F 16F 17F 16F 17F 16F 17F 16F 17F Company Name Code Local$ US$m Yr x x % % x x x x % % Hong Kong GZ Auto 'H'* 2238 HK HKD 7.22 14,276 Dec 8.6 7.8 3.5 3.8 1.0 0.9 5.8 5.2 11.6 11.8 Sinotruk (Hongkong) 3808 HK HKD 3.4 1,209 Dec 14.3 11.5 2.3 3.0 0.4 0.4 2.6 2.4 2.8 3.4 Dongfeng Motor 'H'* 489 HK HKD 9.19 10,195 Dec 4.8 4.5 2.6 2.6 0.7 0.6 2.7 2.3 15.3 14.3 Brilliance China* 1114 HK HKD 6.79 4,415 Dec 6.7 5.9 1.4 1.6 1.1 1.0 6.7 5.7 18.6 17.7 Great Wall Motor 'H'* 2333 HK HKD 6.54 10,477 Dec 5.9 5.3 6.5 7.2 1.1 1.0 4.2 3.9 22.0 20.9 BYD 'H' 1211 HK HKD 40.4 12,880 Dec 33.2 28.6 0.2 0.1 2.5 2.3 10.6 9.2 7.6 8.6 Qingling Motors 'H' 1122 HK HKD 2.3 735 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6.1 6.2 Geely Automobile* 175 HK HKD 3.19 3,614 Dec 8.2 7.3 1.8 2.1 1.1 1.0 4.3 3.6 13.8 13.9 BAIC Motor 'H' 1958 HK HKD 5.96 5,829 Dec 7.1 5.9 5.5 6.2 0.9 0.8 4.3 3.4 13.7 14.8 Average 7.9~ 6.9~ 3.0 3.3 1.1 1.0 5.1 4.5 12.4 12.4 China SAIC Motor 'A' 600104 CH CNY 19.47 32,960 Dec 6.7 6.3 7.2 7.9 1.1 1.0 4.2 5.1 16.7 16.4 Faw Car 'A' 000800 CH CNY 12.71 3,176 Dec 47.1 47.4 0.3 0.1 2.1 2.0 16.8 17.2 5.7 5.6 CQ Changan 'A' 000625 CH CNY 14.34 10,267 Dec 5.7 5.3 3.5 4.1 1.5 1.2 5.7 5.4 29.5 26.6 CQ Changan 'B' 200625 CH HKD 13.84 8,310 Dec 4.6 4.5 4.6 6.1 1.3 1.1 6.4 5.7 30.9 29.1 Beiqi Foton Motor 'A' 600166 CH CNY 5.25 2,688 Dec 17.2 37.5 1.7 0.8 1.0 0.9 11.4 18.0 1.8 2.4 Tianjin Faw Xiali 'A' 000927 CH CNY 5.55 1,359 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Dong Feng Auto 'A' 600006 CH CNY 6.21 1,907 Dec 20.7 n.a. 1.4 n.a. 1.8 n.a. n.a. n.a. n.a. n.a. Anhui J ianghuai 'A' 600418 CH CNY 9.79 2,199 Dec 9.9 8.6 2.6 2.8 1.4 1.2 5.7 5.2 15.0 15.3 Yutong Bus 'A' 600066 CH CNY 19.33 6,571 Dec 11.0 10.0 4.4 5.2 2.8 2.5 9.1 8.0 28.1 26.9 Haima Automobile 'A' 000572 CH CNY 4.46 1,126 Dec 20.3 n.a. 1.6 n.a. 1.0 n.a. n.a. n.a. n.a. n.a. Great Wall Motor 'A'* 601633 CH CNY 8.5 10,477 Dec 9.1 8.3 4.2 4.6 1.7 1.5 5.4 5.1 22.0 20.9 GZ Auto. 'A' 601238 CH CNY 18.85 14,276 Dec 25.0 19.8 1.2 1.3 2.9 2.6 83.3 70.7 12.5 13.4 BYD 'A' 002594 CH CNY 51.5 19,578 Dec 39.0 27.6 0.2 0.1 3.8 3.4 14.5 12.0 9.5 12.0 Average 17.8~ 17.5 2.8 3.3 1.9 1.8 16.2 15.2 17.2 16.9 US Ford Motor F US USD 13.19 52,360 Dec 6.7 6.4 6.5 6.7 1.5 1.1 5.3 5.1 26.9 22.3 General Motors GM US USD 30.54 47,169 Dec 5.6 5.3 4.8 5.1 1.0 0.9 2.6 2.6 21.0 18.6 Average 6.1 5.8 5.6 5.9 1.3 1.0 3.9 3.9 23.9 20.4 Korea Kia Motors 000270 KS KRW 47,900 16,057 Dec 6.5 6.1 2.7 3.0 0.7 0.7 2.9 2.7 11.6 11.3 Hyundai Motor 005380 KS KRW 148,000 34,939 Dec 5.7 5.4 3.1 3.5 0.6 0.5 5.6 5.4 10.2 10.0 Average 6.1 5.7 2.9 3.3 0.7 0.6 4.3 4.1 10.9 10.7 Japan Toyota Motor# 7203 J P JPY 6154 181,226 Mar 8.0 7.5 3.8 4.1 1.0 0.9 4.7 4.5 12.8 12.4 Honda Motor# 7267 J P JPY 3160 50,499 Mar 9.3 8.4 3.3 3.7 0.7 0.7 4.5 4.1 8.0 8.6 Nissan Motor# 7201 J P JPY 1100 43,871 Mar 7.7 7.0 4.2 4.7 0.8 0.8 4.2 3.9 11.3 11.2 Suzuki Motor# 7269 J P JPY 2998.5 14,842 Mar 12.2 11.1 1.3 1.4 1.1 1.0 3.2 3.0 9.2 9.5 Mitsubishi# 8306 J P JPY 535.6 66,950 Mar 6.6 6.4 4.0 4.3 0.4 0.4 n.a. n.a. 7.2 7.1 Average 8.8 8.1 3.3 3.6 0.8 0.7 4.1 3.9 9.7 9.8 Europe BMW BMW GR EUR 78.9 56,977 Dec 8.2 7.9 4.3 4.5 1.1 1.0 3.9 3.8 14.6 13.8 V olkswagen (Swx) V OW GR CHF 130.45 65,564 Dec 15.4 6.7 2.8 4.1 0.7 0.7 3.0 2.9 6.2 9.5 Saab 'B' SAABB SS SEK 271.5 3,516 Dec 19.1 16.1 2.2 2.5 2.1 1.9 9.6 8.8 11.0 12.5 Peugeot UG FP EUR 14.68 13,057 Dec 8.7 7.7 1.2 2.2 1.0 0.9 1.1 1.1 12.5 11.3 Porsche Aml.Hldg.Pref. PAH3 GR EUR 44.28 14,917 Dec 4.8 4.2 3.5 4.4 0.4 0.4 n.a. n.a. 4.8 7.9 Daimler DAI GR EUR 65.032 76,528 Dec 7.5 7.3 5.2 5.5 1.3 1.1 3.7 3.5 17.4 16.5 Fiat Chrysler Auto FCA IM EUR 6.77 9,569 Dec 5.2 4.1 0.3 0.9 0.7 0.6 1.8 1.7 13.4 14.4 Average 9.9 7.7 2.8 3.4 1.0 1.0 3.9 3.6 11.4 12.3 Indonesia Astra International ASII IJ IDR 6,900 21,296 Dec 15.3 13.5 3.0 3.4 2.4 2.2 10.8 10.4 16.6 17.2

# FY15: FY16; FY16: FY17 ~ Exclude outliners Source: Thomson Reuters, *DBS Vickers

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Industry Focus China Auto Sector

Peers valuation – Auto dealers

Mkt PE PE Yield Yield P/Bk P/Bk EV /EBITDA ROE ROE Currency Price Cap Fiscal 16F 17F 16F 17F 16F 17F 16F 17F 16F 17F Company Name Code Local$ US$m Yr x x % % x x x x % % Hong Kong Dah Chong Hong* 1828 HK HKD 3.07 724 Dec 8.2 7.0 3.7 4.3 0.6 0.6 6.8 6.0 7.4 8.2 ZhongSheng* 881 HK HKD 3.98 1,100 Dec 7.9 5.9 2.5 3.4 0.6 0.5 7.4 6.4 7.5 9.3 China ZhengTong* 1728 HK HKD 2.83 805 Dec 5.3 4.4 3.8 4.5 0.5 0.5 5.3 4.6 10.5 11.3 Baoxin Auto Group 1293 HK HKD 4.92 1,620 Dec 11.3 9.7 1.3 1.6 1.6 1.4 6.2 5.5 14.9 15.0 China Yongda 3669 HK HKD 4.17 795 Dec 6.5 4.4 3.5 6.6 1.0 0.8 4.2 3.3 16.7 20.6 China Meidong Auto 1268 HK HKD 0.76 106 Dec 3.6 2.8 8.2 10.0 0.7 0.6 n.a. n.a. 27.0 27.5 China Harmony Auto 3836 HK HKD 3.91 793 Dec 6.3 5.0 2.3 3.0 0.8 0.6 4.3 3.9 14.0 11.8 Sparkle Roll Group 970 HK HKD 0.52 200 Mar n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Auto Italia Holdings 720 HK HKD 0.21 141 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. New Focus Auto 360 HK HKD 0.38 224 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China Rundong Auto 1365 HK HKD 2.96 361 Dec 8.9 5.1 0.0 0.0 1.1 0.9 5.1 3.8 18.5 20.3 Sunfonda Group 1771 HK HKD 2.5 193 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Average 7.2 5.5 3.2 4.2 0.9 0.7 5.6 4.8 14.6 15.5

Other Asia Jardine Cyc.& Carr. J CNC SP SGD 39.17 11,197 Dec 14.3 12.8 2.8 3.0 1.9 1.8 5.9 5.5 14.2 14.7 Tan Chong Intl TCM MK HKD 2.29 594 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Zhejiang Material 600704 CH CNY 11.81 4,005 Dec 36.9 n.a. 0.8 n.a. 3.9 n.a. n.a. n.a. n.a. n.a. Power Diversity Auto 601258 CH CNY 2.8 2,786 Dec 7.0 n.a. 4.3 n.a. 0.7 n.a. n.a. n.a. n.a. n.a. Wuhu Yaxia Auto 002607 CH CNY 10.61 581 Dec 67.6 35.0 0.2 n.a. 3.4 3.0 n.a. n.a. 7.2 8.6 Sinomach Auto 600335 CH CNY 12.6 1,213 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China Grand Auto 600297 CH CNY 11.65 9,839 Dec 22.8 19.2 0.0 0.0 2.9 2.5 n.a. n.a. 13.0 13.6 Wuxi Coml.Mansion 600327 CH CNY 7.3 585 Dec 17.4 n.a. 1.8 n.a. 2.2 n.a. n.a. n.a. n.a. n.a. Shanghai Shenhua 600653 CH CNY 3.72 997 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Fujian Zhangzhou 000753 CH CNY 4.28 581 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Yulon Motor 2201 TT TWD 30.7 1,472 Dec 13.4 15.7 3.3 3.1 0.7 0.6 6.6 6.3 4.8 4.1 Hotai Motor 2207 TT TWD 355 5,909 Dec 18.2 17.0 3.6 4.0 4.6 4.0 12.3 11.5 24.0 21.8 Average 24.7 20.0 2.1 2.5 2.5 2.4 8.3 7.8 12.6 12.6

US Autonation AN US USD 50.07 5,369 Dec 11.7 10.6 0.0 0.0 2.1 1.8 7.4 6.9 18.6 17.4 Group 1 Auto GPI US USD 59.14 1,401 Dec 8.0 7.4 1.3 1.3 1.3 1.1 6.5 6.2 14.1 15.1 Asbury Auto ABG US USD 59 1,459 Dec 10.0 9.0 0.0 0.0 3.8 2.8 6.4 6.2 42.4 33.0 Carmax KMX US USD 50.99 9,980 Feb 15.0 14.0 0.0 0.0 3.0 2.6 10.5 10.1 20.8 14.4 Lentuo Intl LASLY US USD 0.004 0.13 Dec n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Average 11.2 10.2 0.3 0.3 2.5 2.1 7.7 7.3 24.0 20.0 Source: Thomson Reuters, *DBS Vickers

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Industry Focus China Auto Sector

Peers valuation – Auto parts

EV / Earnings Earnings Mkt PE PE P/Bk EBITDA ROE Growth CAGR Currency Price Cap 16F 17F 16F 16F 16F 16F 17F FY15-17 Company Name Code Local$ US$m x x x x % % % % Hong Kong listed Changan Minsheng 1292 HK HKD 6.95 145 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China Metal Intl.Hdg. 319 HK HKD 2.23 289 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. China V eh.Compns.Tech. 1269 HK HKD 2.78 198 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. F ortunet E-Commerce Gp. 1039 HK HKD 0.86 170 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Fuyao Glass Industry Gp. Co.'H' 3606 HK HKD 17.08 5,372 11.8 10.5 2.0 8.0 17.6 17.7 12.9 15.3 Huazhong In-V ehicle Hdg. 6830 HK HKD 0.88 182 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Launch Tech 'H' 2488 HK HKD 6.5 275 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Minth Group* 425 HK HKD 14.24 2,028 9.0 7.8 1.3 6.3 15.2 15.9 14.7 15.3 Nexteer Automotive Group* 1316 HK HKD 7.39 2,375 9.2 7.7 2.2 4.8 26.7 23.2 18.8 21.0 Perennial Intl. 725 HK HKD 1.75 45 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Shougang Ccrd.Cen.Hdg. 103 HK HKD 0.2 50 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Weichai Power 'H' 2338 HK HKD 8.47 4,361 14.4 11.6 0.8 3.8 5.6 (62.8) 24.2 (32.0) Wuling Motors Holdings 305 HK HKD 0.57 134 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Xinchen China Power Hdg.* 1148 HK HKD 1.22 201 5.4 4.7 0.5 2.3 8.8 15.1 14.4 14.8 Xingda Intl.Holdings 1899 HK HKD 1.37 262 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Xinyi Glass Holdings 868 HK HKD 4.48 2,228 8.0 6.6 1.2 7.1 15.2 18.9 21.5 20.2 Average 9.6 8.2~ 1.3 5.4 14.8 18.2~ 17.7~ 9.1 China listed Anhui Quanchai Engine 600218 CH CNY 9.15 518 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Avic Aero-Engine Cntls. 000738 CH CNY 28.19 4,959 134.2 117.5 6.5 77.5 5.4 42.5 11.1 25.8 Beijing Wkw Autv.Pas.'A' 002662 CH CNY 13.54 1,559 13.3 12.2 2.0 n.a. 15.4 67.7 9.6 35.6 Changchai 200570 CH HKD 4.8 347 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Fangda Special Stl.Tech. 600507 CH CNY 4.77 971 30.8 21.7 2.4 n.a. 8.4 37.3 41.2 39.3 Faway Auto Compns. 600742 CH CNY 21.77 707 5.6 n.a. 1.0 n.a. 12.7 49.3 n.a. n.a. Fengfan Stock 600482 CH CNY 30.17 2,485 53.6 42.2 6.6 n.a. 8.6 70.5 1.6 31.6 Fuyao Glss.Ind.Group 'A' 600660 CH CNY 13.84 5,191 11.5 10.2 2.0 7.9 18.2 16.9 13.5 15.2 Guihang Auto Components 600523 CH CNY 15.01 666 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Harbin Dongan Auto Enn. 600178 CH CNY 7.86 558 16.5 17.5 1.8 n.a. 9.8 104.7 (5.5) 39.1 Huayu Automotive Sys.'A' 600741 CH CNY 13.47 6,520 7.0 6.3 1.2 3.5 18.7 12.5 8.7 10.6 Jialeng Songzhi Auto 002454 CH CNY 13.78 894 14.1 12.4 1.8 n.a. 13.7 46.0 11.3 27.5 J iangnan Mould & Plastic 000700 CH CNY 18.24 1,004 17.0 14.7 2.5 n.a. 15.0 55.7 15.9 34.4 Jiangsu Pac.Precn.Frgg. 'A' 300258 CH CNY 12.4 514 19.4 16.5 2.3 n.a. 12.7 n.a. 17.5 n.a. Kunming Yunnei Pwr. 000903 CH CNY 6.38 783 17.9 12.8 1.3 n.a. 7.1 14.7 39.0 26.3 Liaoning Sg Autv.Gp. 'A' 600303 CH CNY 10 952 21.0 16.3 n.a. n.a. n.a. 541.3 29.2 187.8 Lingyun Industrial 'A' 600480 CH CNY 11.16 773 24.8 23.7 2.1 8.8 8.3 5.1 4.3 4.7 Ningbo Huaxiang Elt. 002048 CH CNY 17.4 1,416 22.2 14.1 1.9 n.a. 10.7 n.a. 56.3 n.a. Shanghai Aerospace Auto 600151 CH CNY 9.91 1,902 29.2 36.6 2.9 n.a. 9.8 24.3 (18.6) 0.6 Shanghai J iao Yun Group 600676 CH CNY 10.09 1,336 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Shenyang J inbei Autv. 600609 CH CNY 3.72 624 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sic.Chengfei Intg.Tech. 002190 CH CNY 29.69 1,574 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sichuan Haowu Erml.'A' 000757 CH CNY 8.44 585 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Steyr Motors 'A' 000760 CH CNY 10.94 1,325 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Wanxiang Qiangchao 'A' 000559 CH CNY 14.35 5,055 33.0 31.5 6.8 n.a. 18.8 16.3 15.2 15.8 Weifu High Tech.Gp. 200581 CH HKD 15.35 1,994 6.5 6.6 1.0 11.7 14.1 54.4 (1.2) 23.5 Xuchang Ynd.Drive Shaft 002406 CH CNY 8.5 732 47.2 42.5 2.1 n.a. 4.0 n.a. 12.2 n.a. Zhejiang Wanliyang Tnsm. 002434 CH CNY 23.05 1,805 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Zongshen Pwr. Machinery 001696 CH CNY 8.44 1,484 18.3 13.8 2.4 n.a. 12.2 39.9 32.0 35.9 China Autv.Sys. CAAS US USD 4.13 133 4.3 n.a. n.a. n.a. n.a. 15.5 n.a. n.a. China Yuchai Intl. CYD US USD 9.9 389 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sorl Auto Parts SORL US USD 1.74 34 2.5 n.a. n.a. n.a. n.a. 21.0 n.a. n.a. Average 23.6~ 19.5~ 2.7 21.9 11.8 67.3~ 15.4 34.6

~ Exclude outliners Source: Thomson Reuters, *DBS Vickers

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Industry Focus China Auto Sector

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Share price appreciation + dividends

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Industry Focus China Auto Sector

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