Lack of Growth Catalyst and Margin Concerns, Maintain "Sell" 缺乏增长催化剂及利润率令人担忧，维持“卖出”

股

票

研 [Table_Title] Company Report: Great Wall Motor (02333 HK) Toliver Ma 马守彰

究 (852) 2509 5317 EquityResearch 公司报告：长城汽车 (02333 HK) [email protected]

27 August 2019 [Table_Summary] Lack of Growth Catalyst and Margin Concerns, Maintain "Sell" 缺乏增长催化剂及利润率令人担忧，维持“卖出”

 GWM’s 1H19 net profit decreased 58.9% yoy to RMB1,517 million, 公 Rating:[Table_Rank ] Sell consistent with preliminary results but below our expectations. The Maintained 司 worse-than-expected results were mainly dragged by weak auto sales and

decrease in gross margin. In 1H19, sales volume decreased 2.5% yoy to 报评级：卖出 (维持) 460,269 units. ASP was down 13.8% yoy on more sales towards NEV and 告 export sales. As a result, gross margin was down by 5.2 ppts to 15.9% yoy in 1H19. 6[Table_Price-18m TP目标价] : HK$3.65 CompanyReport Revised from 原目标价: HK$4.00  We have revised downwards net profit forecasts for 2019 to 2021 by 20.0%/ 16.6%/ 14.9%, respectively. We have reduced our sales expectation Share price 股价: HK$4.930

on Haval, WEY and ORA brands based on the current run rate. We have also lowered our gross margin assumptions by 1.8 ppts in 2019 to 2021, respectively. Gross margin should continue to be under pressure as Stock performance competition remains fierce and new factory commencements will increase 股价表现

fixed costs. GWM should also maintain its competitive pricing policy to [Table_QuotePic60.0 % of return]

defend market share. 50.0

40.0

 1H19 results reveal mostly negative surprises, with both ASP and gross

证 margin having dropped more than expected. This is alarming as 1) sales mix 30.0

券告 supposedly improved in 1H19 with more Haval F7 sales, but ASP dropped 20.0

and 2) costs are difficult to cut down as advertising and R&D expenses are 10.0

研报

deemed to be necessary to market its multiple brand strategy. Moreover, the 0.0

model pipeline is relatively weak, with 4 new models to be expected by 2020. 究究 (10.0) We maintain our investment rating as "Sell" and reduce TP to HK$3.65. 报 (20.0)

研 TP represents 7.3x 2019 PER and 7.0x 2020 PER. Aug-18 Nov-18 Feb-19 May-19 Aug-19

告 HSI Index GREAT WALL MOT-H  券长城汽车 2019 年上半年净利润同比下降 58.9%至人民币 1,517 百万元，与业绩快报一致，

EquityResearch Report 但低于我们的预期。差于预期的业绩主要是受到汽车销售疲弱和毛利率下降所拖累。证 2019 年上半年，销量同比下降 2.5%至 460,269 辆。由于新能源汽车和出口销售增加， [Table_PriceChange] 平均售价同比下跌 13.8％。因此，2019 年上半年毛利率同比下降 5.2 个百分点至 15.9%。 Change in Share Price 1 M 3 M 1 Y

[Tab 股价变动 1 个月 3 个月 1 年

 我们将 2019 年至 2021 年的净利润预测分别下调 20.0%/ 16.6%/ 14.9%。我们根据当前 Abs. % (10.4) (8.7) 0.4 le_I 的销售速度下调了对哈弗、WEY 和欧拉品牌的销售预期。我们还将 2019 年至 2021 年的绝对变动 % Rel. % to HS Index 毛利率假设分别下调 1.8 个百分点。由于竞争仍然激烈和新工厂投产将增加固定成本，毛 (0.8) (2.8) 9.6 汽nfo1 相对恒指变动 % 利率应继续承受压力。长城汽车还应保持其有竞争力的定价政策，以捍卫市场份额。 Avg. Share price(HK$) 车 5.0 5.5 5.1 ] 平均股价（港元）  2019 年上半年业绩显示较多的负面因素，其中平均销售价格和毛利率的下降幅度均超过及 Source: Bloomberg, Guotai Junan International. 零我们的预期。我们认为这是令人担忧的，因为 1）销售组合在 2019 年上半年是有所改善，哈佛 F7 的销售有所增加，但平均售价反而下跌；及 2）成本难以削减，是由于为发展多部品牌战略，广告和研发费用被公司视为必须的。此外，车型周期相对较弱，预计到 2020 件年将只有 4 个新车型。我们维持投资评级为“卖出”，将目标价下调至 3.65 港元。目标价行相当于 7.3 倍 2019 年市盈率和 7.0 倍 2020 年市盈率。业

Automobiles & Components Sector AutomobilesComponents & Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE [Tab 年结Profit ] 收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 le_I 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%)

2017A 101,169 5,027 0.551 (52.3) 7.4 5.397 0.8 0.170 4.1 10.4 nfo2 2018A 99,230 5,207 0.571 3.6 7.6 5.773 0.7 0.290 6.7 10.2 中] 2019F 97,405 4,024 0.441 (22.8) 9.8 6.037 0.7 0.180 4.2 7.5 2020F 103,611 4,200 0.460 4.3 9.4 6.290 0.7 0.211 4.9 7.5 长外 2021F 106,495 4,351 0.477 3.7 9.1 6.563 0.7 0.207 4.8 7.4 城运总股数 9,127.3 大股东汽 [Table_BaseData]Shares in issue (m) (m) Major shareholder Wei Jian Jun 34.9% 输 Market cap. (HK$ m) 市值 (HK$ m) 44,997.6 Free float (%) 自由流通比率(%) 车 65.1 个月平均成交股数净负债股东资金 3 month average vol. 3 (‘000) 25,628.2 FY19 Net gearing (%) FY19 / (%) Net Cash

52 Weeks high/low (HK$) 52 周高/低 (HK$) 7.260 / 3.960 FY19 Est. NAV (HK$) FY19 每股估值（港元） 13.1

Source: the Company, Guotai Junan International. Great Wall MotorHK) Wall Great (02333

See the last page for disclaimer Page 1 of 8

[Table_PageHeader]Great Wall Motor (02333 HK)

1H19 RESULTS REVIEW

] 1 r a M t h g i R _ e l b a T [

Great Wall Motor’s ("GWM" or the "Company") 1H19 net profit decreased 58.9% yoy to RMB1,517 million, consistent

with preliminary results, but below our expectations. The worse-than-expected results were mainly dragged by weak auto sales and decrease in gross margin. Key takeaways are as follows:

 In 1H19, sales volume decreased 2.5% yoy to 460,269 units. The disclosed sales volume is inconsistent with the

monthly sales data due to more stringent accounting recognition policy. The difference was mainly due to sales made to 27 August2019 ride-hailing and export companies, of which ownership tittle is not fully transferred.

 ASP significantly decreased by 13.8% yoy in 1H19. The significant decrease was mainly due to more sales towards the ORA brand, which is priced relatively cheaper than the overall Haval series. Moreover, export sales will also be priced slightly lower to increase competitiveness.

 Gross margin reduced 5.2 ppts to 15.9% yoy. During the period, the Company increased quick sales and promotional discounts due to a generally weak auto environment with early implementation of China 6 emission standards.

 Administrative expense increased 24.3% yoy and R&D expenses increased by 8.9% yoy in 1H19. Administrative

expense was mainly driven by the increased depreciation and amortization expense and] consultation2 r a M t feeh g s. i R _ e l b a T [

 Selling expense per revenue ratio was down by 0.7 ppts yoy. The decrease was mainly due to changes in classification of transportation expenses. On the other hand, advertising expense increased significantly by 37.7% yoy as to promote its multi-branding strategy.

 Similar to the prior period, no interim dividend was announced for 1H19.

Table-1: Summary of 2018 Financial Results of GWM (in RMB mn, except per share item) 1H19 1H18 yoy 2Q19 2Q18 1Q19 yoy QoQ Key financials

Total Revenue 41,377 48,678 (15.0%) 18,749 22,106 22,627 (15.2%) (17.1%) (02333 HK)

Operating income 40,317 47,958 (15.9%) 18,231 21,729 22,085 (16.1%) (17.5%) Interest income 988 712 38.9% 501 370 487 35.6% 2.9% Fee and commission income 71 9 682.5% 17 0 55 #DIV/0! (69.7%) Cost of sales 34,813 38,415 (9.4%) 15,750 17,547 19,063 (10.2%) (17.4%)

Gross profit 6,563 10,264 (36.1%) 2,999 4,559 3,564 (34.2%) (15.9%) 长城汽车 Business tax and surcharges 1,336 1,787 (25.2%) 619 786 717 (21.3%) (13.6%) Selling expenses 1,470 2,077 (29.2%) 427 907 1,043 (53.0%) (59.1%) Administrative expenses 841 677 24.3% 437 52 404 746.5% 8.2% R&D expenses 918 843 8.9% 0 0 426 #DIV/0! (100.0%) Finance expenses / (income) 243 454 (46.4%) 145 240 98 (39.6%) 47.9% Operating profit 1,779 4,355 (59.1%) 983 2,612 937 (62.4%) 5.0% Non-operating income 137 82 67.4% 96 52 41 84.5% 131.1% Non-operating expenses 12 3 361.0% 10 1 1 690.4% 663.4% Great Wall Motor Profit before taxation 1,905 4,434 (57.0%) 928 1,859 977 (50.1%) (5.0%) Income tax expenses 354 718 (50.7%) 170 229 184 (25.8%) (7.5%) Net profits 1,551 3,717 (58.3%) 758 1,630 793 (53.5%) (4.4%) Net profit attributable to parent 1,517 3,696 (58.9%) 744 1,615 773 (53.9%) (3.8%) Minority interest 34 21 63.3% 14 15 20 (4.4%) (28.5%) Basic EPS (RMB) 0.17 0.40 (58.9%) 0.08 0.18 0.08 (53.9%) (3.8%) Operating Data

Sales volume(unit) 460,269 471,939 (2.5%) 176,427 214,892 283,842 (17.9%) (37.8%) Domestic Sales 434,319 449,716 (3.4%) 163,092 201,959 271,227 (19.2%) (39.9%) Export 25,950 22,223 16.8% 13,335 12,933 12,615 3.1% 5.7% ASP(RMB) 87,594.27 101,618.69 (13.8%) 103,337.22 101,116.15 77,808.96 2.2% 32.8% Margins and ratios (%) ppt ppt ppt

Gross profit margin(%) 15.9% 21.1% (5.2) 16.0% 20.6% 15.8% (4.6) 0.2 OP Margin(%) 4.3% 8.9% (4.6) 5.2% 11.8% 4.1% (6.6) 1.1 Net profit margin(%) 3.7% 7.6% (3.9) 4.0% 7.3% 3.4% (3.3) 0.6 Selling costs to revenue 3.6% 4.3% (0.7) 2.3% 4.1% 4.6% (1.8) (2.3) Admin costs to revenue 2.0% 1.4% 0.6 2.3% 0.2% 1.8% 2.1 0.5 Effective tax rate 18.6% 16.2% 2.4 18.3% 12.3% 18.8% 6.0 (0.5) Source: the Company, Guotai Junan International.

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See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

COMPANY UPDATE

] 1 r a M t h g i R _ e l b a T [

Model concentration. It is not uncommon to see brands rely on only a few models to sustain sales growth, as competition has

made it harder for models to create strong sales. GWM is no exception, mainly relying on the H6, F7, VV6 and Wingle series. These models comprised over 57.1% of sales in 1H19. While sales of the H6 decreased 16.5% yoy in 1H19, sales of the F7 and VV6 contributed an extra 99,273 units in sales in the first half. Along with the contribution from the new ORA brand, small margin growth is still possible. However, we are cautious that GWM might lose its growth momentum soon when the full-year effect from

the F7 and VV6 fades out in the second half. We believe that GWM intends to maintain strong sales from these models through 27 August2019 launching new variations, such as the new H6, F7x and VV6 GT.

Figure-1: GWM’s SUV Market Share Figure-2: Haval H6/ F7 Sales Mix

15.5% H6 F7 80.0% 14.5% 70.0% 13.5% 60.0% 12.5% 50.0% 11.5% 40.0% 10.5% 30.0%

9.5% ] 2 r a M t h g i R _ e l b a T [ 20.0% 8.5% 10.0%

7.5% 0.0%

Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 19 Jul 18

Jul 12 Jul 13 Jul 15 Jul 16 Jul 17 Jul 19 Jul 14 Jul 18

Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19

Nov13 Nov14 Nov16 Nov17 Nov18 Nov15

Mar 13 Mar 14 Mar 15 Mar 17 Mar 18 Mar 19 Mar 16

Nov13 Nov14 Nov15 Nov16 Nov17 Nov18 Nov12 Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

Flat sales to continue, on the following reasons: 1. The downward revision of the full-year sales target already reveals that the management expects flat sales in 2019, or a

0.9% yoy decrease in 2H19. We concur with the management’s decision, as setting more reasonable expectation could (02333 HK)

improve inventory management and avoid excessive selling expense if stocks are not moving quick enough. 2. Uncertain model pipeline. As mentioned above, GWM launched variations of the current model in order to increase product

offering. However, we do not foresee other strong models coming out that could give GWM a leap forward in the short term. 长城汽车 3. Industry sales for SUVs have normalized. Sales of SUVs have normalized since 2H18, ending a decade-long outperformance trend. As a result, it means that growing in the current environment based on the Company’s product portfolio will be more difficult than 5 years ago when GWM was fast to introduce SUVs.

Table-2: Model Pipeline Great Wall Motor Model Launch date Mode of upgrade Vehicle types WEY P8 GT 2Q19 New Mid-size SUV WEY VV7 GT 2019 New Mid-size SUV H6 Coupe 1Q19 Facelift Compact SUV ORA R2 2019 New Mini car F7x 1Q19 New Compact SUV Great Wall P-Series 3Q19 New Pickup truck Source: Autohome, the Company, Guotai Junan International.

Figure-3: China Auto Sales by Vehicle Type Figure-4: GWM Sales Volume and Growth

Sedan MPV SUV Crossover 2017 2018 units 2019 2018 yoy 80% 160,000 2019 yoy 25% 20% 60% 140,000 15% 120,000 40% 10% 100,000 5%

20% 0% 80,000 -5%

0% 60,000 -10% Report 40,000 -15%

-20% -20%

Jun-15 Jun-16 Jun-17 Jun-19 Jun-18

Mar-16 Mar-17 Mar-19 Mar-18

Dec-15 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-15 20,000 -25% -40%

- -30%

Company

Jul

Apr Oct

Jan Jun

Feb Mar

Aug Sep Nov Dec -60% May Source: CAAM, Guotai Junan International. Source: the Company, Guotai Junan International. See the last page for disclaimer Page 3 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

EARNINGS FORECAST

] 1 r a M t h g i R _ e l b a T [

We have revised downwards on our net profit forecasts for 2019 to 2021 by 20.0%/ 16.6%/ 14.9%, respectively. The

following are key changes in assumptions:

Haval sales: We have reduced our sales expectation based on current run rate. Models such as the H6, H2 and F5 were below our previous expectations. We maintain F7 sales expectations despite the launch of the F7x in April.

27 August2019 WEY brand: We remain cautious on this brand, as upscaling has proved to be challenging and a long-term mission for self-owned brands. Despite launching the VV7 GT in 3Q19, and coming with two variants (traditional gasoline and PHEV), we do not see the VV7 significantly improving the brand in the short term.

ORA: The ORA brand also lost sales momentum, particularly the first ORA model, the iQ. Sales of the iQ dropped to 394 units in July 2019. Therefore, we have reduced sales assumptions for the iQ. In 4Q19, the Company will launch the ORA R2; we expect sales to be 1,000 to 2,000 units for the first 3-6 months, as seen from the previous ORA models.

Gross margin: We have significant reduced gross margin by 1.8 ppts in 2019 to 2021, respectively. The reduction reveals our conservative outlook for margin recovery. We believe that the Company will maintain its competitive pricing strategy to defend its market share. This should continue as the Company has a number new product lines, such as the F-series, Pick-up P-series,

] 2 r a M t h g i R _ e l b a T [ ORA brand and WEY brand. All of abovementioned product lines are relatively new and the Company is still exploring the right market segments. Competition is to remain strong, meaning pricing pressure should remain in our forecast period. Moreover, depreciation expense is likely to increase as Chongqing new factory is to commence production on the Pickup P-series.

Figure-5: GWM Gross Profit and Gross Margin Figure-6: GWM Net Profit and Net Margin

Gross profit Gross margin Net profit net margin RMB mn RMB mn 13.1% 10,000 27.3% 30.0% 4,500 14.0% 12.3% 12.2% 11.6% 9,000 26.6% 26.4% 28.0% 4,000 11.4% 11.5% 25.3% 10.5% 12.0% 24.5% 24.5% 8,000 26.0% 3,500 9.6% 9.5% (02333 HK)

22.9% 7,000 22.4% 22.1% 24.0% 8.4% 10.0% 21.5% 3,000 7.9% 7.8% 6,000 20.6% 22.0% 7.3% 19.6% 2,500 8.0% 5,000 20.0% 5.7% 17.0% 16.0% 2,000 6.0% 4,000 16.2% 15.8% 18.0% 3.9% 4.0% 长城汽车 15.1% 1,500 3.4% 3,000 14.7% 16.0% 2.6% 4.0% 1,000 2.1% 2,000 14.0% 1.3% 2.0% 1,000 12.0% 500

0 10.0% 0 0.0%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 2Q19 3Q14 4Q14 1Q15 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q18 4Q18 1Q19 2Q15 3Q15 4Q15 1Q16

Great Wall Motor Source: CAAM, Guotai Junan International. Source: the Company, Guotai Junan International.

Table-3: Major Financial Data and Forecast Changes New Old Changes 2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F Vehicle sales Pick-up Truck 140,000 160,000 170,000 150,000 160,000 170,000 (6.7%) 0% 0% SUV (HAVAL) 746,000 754,600 744,600 794,000 766,600 726,600 (6.0%) (1.6%) 2.5% Sedan (C30) 3,500 3,000 2,000 4,000 3,000 2,000 (12.5%) 0% 0% WEY 100,200 94,400 94,400 101,000 94,400 94,400 (0.8%) 0% 0% ORA 60,000 82,000 92,000 70,000 82,000 92,000 (14.3%) 0% 0% Total 1,049,700 1,094,000 1,103,000 1,119,000 1,106,000 1,085,000 (6.2%) (1.1%) 1.7% Financials (RMB mn) Revenue 97,405 103,611 106,495 103,836 104,747 104,757 (6.2%) (1.1%) 1.7% Gross Profit Margin 16.1% 16.3% 16.4% 17.9% 18.1% 18.2% (1.80)ppt (1.84)ppt (1.78)ppt

Profit from operation 3,893 4,093 4,306 5,217 5,218 5,319 (25.4%) (21.6%) (19.0%) Net Income (Loss) 4,024 4,200 4,351 5,031 5,041 5,113 (20.0%) (16.7%) (14.9%)

Basics EPS (RMB) 0.441 0.460 0.477 0.551 0.552 0.560 (20.0%) (16.6%) (14.9%) Report Source: the Company, Guotai Junan International.

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See the last page for disclaimer Page 4 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

Table-4: Summary of Financial Forecasts 2017A 2018A 2019F 2020F 2021F

] 1 r a M t h g i R _ e l b a T [ Vehicle sales Pick-up truck 119,846 138,000 140,000 160,000 170,000 yoy 13.5% 15.1% 1.4% 14.3% 6.3% SUV - Haval 938,282 766,062 746,000 754,600 744,600 yoy 0.0% -18.4% -2.6% 1.2% -1.3% Sedan 12,033 5,976 3,500 3,000 2,000 yoy -61.0% -50.3% -41.4% -14.3% -33.3% WEY 86,427 139,506 100,200 94,400 94,400 yoy n.a. 61.4% -28.2% -5.8% 0.0%

ORA - 3,515 60,000 82,000 92,000 27 August2019 yoy n.a. n.a. 1607.0% 36.7% 12.2% Total 1,156,588 1,053,059 1,049,700 1,094,000 1,103,000 yoy 7.6% -9.0% -0.3% 4.2% 0.8% Financials (RMB mn)

Revenue 101,169 99,230 97,405 103,611 106,495 yoy 2.6% -1.9% -1.8% 6.4% 2.8% Gross profit margin 19.0% 17.9% 16.1% 16.3% 16.4% yoy (ppts) -22.8% -5.8% -10.0% 1.0% 1.0% Profit from operations 5,854 6,232 3,893 4,093 4,306 yoy -52.3% 6.5% -37.5% 5.1% 5.2% Net income (Loss) 5,027 5,207 4,024 4,200 4,351 yoy -52.4% 3.6% -22.7% 4.4% 3.6% Basics EPS (RMB) 0.55 0.57 0.44 0.46 0.48 yoy -52.4% 3.6% -22.7% 4.4% 3.6% Source: the Company, Guotai Junan International.

] 2 r a M t h g i R _ e l b a T [ VALUATION

1H19 results reveal mostly negative surprises, with both ASP and gross margin having dropped more than expected. This is alarming as 1) sales mix supposedly improved in 1H19 with more Haval F7 sales, and 2) cost is difficult to cut down as advertising and R&D expenses are deemed to be necessary to market its multiple brand strategy. Moreover, the model pipeline is relatively weak with 4 new models expected by 2020. We maintain our investment rating as "Sell" and reduce TP to HK$3.65. TP represents 7.3x 2019 PER and 7.0x 2020 PER.

Figure-7: PER of GWM Figure-8: PER Range of GWM

(x) Fo rward P/E Avg (x) GWM 13.27 15.0 +1 S.D. -1 S.D. 14.00

12.65 (02333 HK) 12.19 +2 S.D. -2 S.D. 11.64 13.0 11.01 12.00 10.54 10.55 9.52 9.54 11.0 10.00 10.14

9.27 长城汽车 7.67 8.84 9.00 9.0 8.00 8.13 7.84 8.01 7.02 6.99 7.63 7.0 6.00 6.90 5.87 5.97 6.25 5.54 5.85 5.0 4.00 4.46 4.61 4.27 4.00 2.00

3.0 Great Wall Motor

0.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ap r-11

Dec - 11

Ap r- 17

Ap r- 12 Ap r- 13 Ap r- 15 Ap r- 16 Ap r- 18 Ap r- 19

Ap r- 14

Aug -11

Dec - 17

Dec - 10 Dec - 12 Dec - 13 Dec - 15 Dec - 16 Dec - 18

Dec - 14

Aug - 17

Aug - 10 Aug - 12 Aug - 13 Aug - 15 Aug - 16 Aug - 18 Aug - 19 Aug - 14 YTD

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

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See the last page for disclaimer Page 5 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

Table-5: Peers Comparison Last price PE PB ROE(%) D/Y(%) EV/EBITDA

] 1 r a M t h g i R _ e l b a T [ 17A 18F 19F 20F 17A 18F 19F 20F 18F 18F 18F Company Stock Code Currency Dongfeng Motor-H 489 HK HKD 7.01 3.9 4.2 4.1 4.0 0.4 0.4 0.4 0.4 9.7 4.8 17.9

Geely Automobile 175 HK HKD 11.80 7.1 11.0 8.9 8.7 2.1 1.8 1.6 1.4 19.7 2.5 5.1

Brilliance China 1114 HK HKD 7.41 5.4 5.0 4.4 4.2 1.1 0.9 0.8 0.7 18.9 3.9 n.a.

Great Wall Mot-H 2333 HK HKD 4.93 7.3 10.1 9.1 8.6 0.8 0.7 0.7 0.7 8.0 4.3 6.9

Qingling Motor-H 1122 HK HKD 1.86 8.7 n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a. n.a.

Byd Co Ltd-H 1211 HK HKD 39.00 35.4 32.5 28.1 26.0 1.8 1.7 1.6 1.5 5.3 0.7 11.2

Guangzhou Auto-H 2238 HK HKD 7.56 6.0 6.5 5.9 5.5 0.9 0.8 0.8 0.7 13.3 5.5 11.8 27 August2019

Baic Motor-H 1958 HK HKD 4.44 6.8 6.8 6.2 5.8 0.6 0.6 0.6 0.6 10.8 5.4 0.8

Weichai Power-H 2338 HK HKD 11.10 8.7 8.5 8.6 8.3 2.0 1.8 1.6 1.4 19.0 4.9 4.1

Sinotruk Hk Ltd 3808 HK HKD 11.72 6.3 6.9 6.7 6.2 1.1 1.0 0.9 0.8 14.8 5.9 2.4

Simple Average 9.6 10.2 9.1 8.6 1.1 1.1 1.0 0.9 13.3 4.2 7.5 Weighted Average 12.2 12.6 11.2 10.5 1.4 1.2 1.1 1.0 12.8 3.7 7.9

Dongfeng Auto-A 600006 CH CNY 4.7 16.8 17.9 16.6 17.2 1.3 n.a. n.a. n.a. 7.1 2.2 n.a.

Great Wall Mo-A 601633 CH CNY 8.2 14.5 17.2 14.2 12.2 1.4 1.4 1.3 1.2 9.3 2.0 7.2

Faw Car Co Ltd-A 000800 CH CNY 9.0 94.9 n.a. n.a. n.a. 1.8 1.8 1.7 1.6 6.3 n.a. n.a.

Saic Motor-A 600104 CH CNY 24.03 7.8 7.9 7.4 7.0 1.2 1.1 1.0 0.9 13.5 5.6 5.6

Chongqing Chan-A 000625 CH CNY 8.18 58.4 n.a. 20.7 15.1 0.8 0.8 0.8 0.8 4.1 1.7 9.3

Weichai Power-A 000338 CH CNY 11.05 10.2 9.7 9.3 8.5 2.2 1.9 1.7 1.5 18.7 4.3 4.0 ] 2 r a M t h g i R _ e l b a T [

Beiqi Foton-A 600166 CH CNY 2.06 n.a. 34.3 22.2 18.2 0.9 0.9 0.8 0.8 3.8 0.5 n.a.

Anhui Jianghua-A 600418 CH CNY 4.87 n.a. 15.7 17.9 11.5 0.7 0.7 0.7 0.6 2.9 1.7 4.9

Cnhtc Jinan T-A 000951 CH CNY 14.45 10.7 7.9 7.0 5.8 1.6 1.4 1.3 1.1 17.7 6.2 n.a.

Zhengzhou Yut-A 600066 CH CNY 13.30 12.8 12.3 11.1 10.5 1.9 1.6 1.5 1.4 13.5 4.7 7.3

Xiamen King Lo-A 600686 CH CNY 7.39 28.2 20.7 25.1 28.4 1.4 1.1 1.1 n.a. 5.4 n.a. n.a.

Jiangling Moto-A 000550 CH CNY 15.03 136.6 21.6 12.9 10.3 1.2 1.2 1.2 1.1 9.5 3.0 0.1

Yangzhou Yax-A 600213 CH CNY 9.33 155.5 n.a. n.a. n.a. 10.9 n.a. n.a. n.a. n.a. n.a. n.a.

Zhongtong Bus-A 000957 CH CNY 6.92 112.2 14.4 10.6 9.4 1.5 n.a. n.a. n.a. n.a. n.a. n.a.

Simple Average 49.7 16.5 14.9 0.0 2.1 1.3 1.2 0.0 9.3 3.2 5.5 Weighted Average 26.7 12.1 12.8 11.0 1.7 1.4 1.3 1.2 11.4 2.9 4.8

Nissan Motor Co 7201 JP JPY 648.80 3.4 8.0 14.5 8.3 0.5 0.5 0.5 0.5 3.1 6.1 3.3

(02333 HK)

Toyota Motor 7203 JP JPY 6,869.00 8.2 10.6 8.5 8.1 1.1 1.0 0.9 0.9 11.6 3.4 11.4

Honda Motor Co 7267 JP JPY 2,453.00 4.2 7.1 6.5 6.0 0.5 0.5 0.5 0.5 7.8 4.7 7.3

Mazda Motor 7261 JP JPY 865.70 4.7 8.6 8.9 7.6 0.5 0.4 0.4 0.4 5.3 4.0 2.9

Mitsubishi Heavy 7011 JT JPY 3,905.00 n.a. 12.9 12.1 9.9 0.9 0.9 0.9 0.8 7.4 3.7 6.3 长城汽车

Fuji Heavy Indus 7270 JP JPY 2,739.00 9.5 14.2 9.4 8.7 1.4 1.3 1.2 1.1 13.3 5.3 3.4

Suzuki Motor 7269 JP JPY 4,004.00 8.2 10.1 9.9 9.0 1.4 1.3 1.2 1.1 13.0 1.9 4.2

Hino Motors Ltd 7205 JP JPY 811.00 9.1 8.5 8.6 7.6 0.9 0.9 0.8 0.7 9.7 3.8 5.1

Isuzu Motors 7202 JP JPY 1,093.00 8.1 7.3 7.7 7.1 0.9 0.9 0.8 0.7 10.7 3.5 4.6

Simple Average 6.9 9.7 9.6 8.0 0.9 0.9 0.8 0.8 9.1 4.0 5.4 Great Wall Motor Weighted Average 7.0 10.2 9.0 8.0 1.0 0.9 0.9 0.8 10.4 3.8 9.0

Hyundai Motor 005380 KS KRW 124,500.00 22.1 8.4 7.3 6.6 0.4 0.5 0.5 0.4 5.9 3.6 9.2

Ford Motor Co F US USD 8.82 9.5 6.9 6.3 5.5 1.0 1.0 0.9 0.9 10.0 6.8 2.2

Navistar Intl NAV US USD 22.48 6.5 6.2 6.9 7.3 n.a. n.a. n.a. n.a. (8.4) 0.0 5.5

Paccar Inc PCAR US USD 63.19 10.1 9.3 11.1 10.9 2.5 2.3 2.1 1.7 20.7 4.3 10.0

Volkswagen Ag VOW GR EUR 144.20 6.1 5.3 4.9 4.8 0.7 0.6 0.5 0.5 11.6 4.8 1.8

Bayer Motoren Wk BMW GR EUR 59.64 5.5 7.2 6.3 6.1 0.7 0.7 0.6 0.6 10.4 5.6 2.2

Daimler Ag DAI GR EUR 41.44 6.1 7.8 6.0 5.6 0.7 0.7 0.6 0.6 11.1 6.8 2.4

Man Se MAN GR EUR 48.02 10.5 n.a. n.a. n.a. 1.2 n.a. n.a. n.a. 7.0 n.a. n.a.

Renault Sa RNO FP EUR 50.83 4.2 5.6 4.7 4.1 0.4 0.4 0.4 0.3 7.9 6.3 1.9

Volvo Ab-B VOLVB SS SEK 125.90 10.3 7.5 9.2 9.1 2.1 1.9 1.7 1.6 19.9 5.3 4.9

General Motors C GM US USD 16.72 12.5 4.5 4.9 4.8 4.9 2.8 2.1 1.8 46.9 0.0 4.4

Tata Steel Ltd TATA IN INR 338.05 2.6 3.8 6.7 5.5 0.7 0.6 0.5 0.5 8.3 3.1 5.1 Simple Average 8.5 6.4 6.5 6.2 1.3 1.1 1.0 0.9 12.8 4.3 4.2

Weighted Average 7.9 6.5 6.2 5.8 0.9 0.8 0.8 0.7 12.0 5.3 3.3

Global Simple Average 18.7 11.0 10.2 4.9 1.5 1.2 1.0 0.6 11.8 3.9 5.8 Report

Global Weighted 9.0 9.0 8.3 7.5 1.0 1.0 0.9 0.8 11.4 4.4 6.3 Source:Average the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 6 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

Financial Statements and Ratios [Table_IncomeStatement] [Table_BalanceSheet] Income Statement Balance Sheet

] 1 r a M t h g i R _ e l b a T [

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F

Total Revenue 101,169 99,230 97,405 103,611 106,495 PPE 27,718 28,994 30,006 30,625 30,085 Cost of sales (81,967) (81,481) (81,725) (86,765) (89,007) Construction in progress 4,879 4,406 5,559 6,713 7,521 Gross profit 19,203 17,749 15,680 16,846 17,488 Intangible Assets 3,269 3,391 3,253 3,269 3,298 Deferred tax assets 691 677 694 715 738 Business tax and surcharges (3,906) (3,627) (3,786) (4,027) (4,139) Investments 126 261 290 327 374 Selling expenses (4,406) (4,575) (3,214) (3,370) (3,312) Other 4,571 7,946 4,728 5,125 5,372 Administrative expenses (4,963) (3,420) (4,359) (4,813) (5,190) Total Non-current Assets 41,254 45,674 44,531 46,775 47,387 Financial expenses/incomes (218) 123 (514) (591) (681) 27 August2019 Impairment loss on assets (317) (137) (173) (156) (131) Cash & Cash Equivalents 4,831 7,682 4,616 3,057 2,402 Gains/(losses) from changes in 175 (140) 18 (61) (22) Inventories 5,575 4,445 6,269 6,656 6,828 fair value Trade and other Receivables 49,949 3,343 10,675 11,355 11,671 Investment income 287 259 241 265 292 Prepayments 580 441 302 163 25 Operating Profit 5,854 6,232 3,893 4,093 4,306 Others 8,359 50,215 54,919 60,093 65,784 Total Current Assets 69,293 66,126 76,781 81,324 86,709 Non-operating income 391 253 556 597 588 Non-operating expenses (12) (8) (42) (44) (46) Total Assets 110,547 111,800 121,312 128,098 134,097 Profit Before Tax 6,233 6,477 4,407 4,646 4,848 Income Tax (1,190) (1,229) (352) (414) (463) Trade payables 34,552 32,318 33,161 35,405 36,218 profit After Tax 5,043 5,248 4,055 4,233 4,385 Advances from customers 5,458 0 5,650 6,009 6,177 Tax payables 2,308 2,551 2,651 1,804 1,902 Non-controlling Interest (16) (40) (31) (33) (34) Salaries payables 1,872 2,061 2,023 2,152 2,212 Shareholders' Profit / Loss 5,027 5,207 4,024 4,200 4,351 Short Term Borrowing 13,038 12,800 15,000 17,000 19,000 Other current liabilities 1,653 4,888 4,798 5,104 5,246 Basic EPS 0.551 0.571 0.441 0.460 0.477 Total Current Liabilities 58,881 54,618 63,283 67,474 70,754

] 2 r a M t h g i R _ e l b a T [ Dividend per share (RMB) 0.170 0.290 0.180 0.211 0.207 Deferred income 1,964 2,083 2,044 2,175 2,235 Total Non-current Liabilities 2,408 4,493 2,929 3,218 3,437

[Table_CashFlowStatement] Cash Flow Statement Total Liabilities 61,289 59,112 66,212 70,691 74,191

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Total Shareholders' Equity 49,135 52,525 54,905 57,180 59,645 EBT 5,043 5,248 4,055 4,233 4,385 Minority Interest 123 164 195 227 261 Depreciation & Amortization 3,088 3,795 3,053 3,132 3,136 Total Equity 49,258 52,689 55,100 57,407 59,906 BPS(RMB) 5.397 5.773 6.037 6.290 6.563 Adjustments from other G/L 4 (58) 12 11 14 Investment losses/(gains) (124) (219) (241) (265) (292) Changes in working capital (9,618) 9,625 (2,593) 1,586 543 Financial Ratios Change in deferred tax assets 292 272 (56) 110 37 and liabilities 2017A 2018A 2019F 2020F 2021F Finance costs paid 97 577 514 591 681 Profitability Analysis

Other adjustment 0 0 (4,732) (5,587) (5,392) Gross profit margin(%) 18.98 17.89 16.10 16.26 16.42 (02333 HK)

Cash from Operating Activities (1,077) 19,698 186 3,965 3,244 EBITDAR(%) 8.61 8.74 7.43 7.30 7.36

OP margin(%) 5.79 6.28 4.00 3.95 4.04 Acquisition of PPE (5,822) (6,662) (5,000) (5,000) (3,500) Net profit margin(%) 4.97 5.25 4.13 4.05 4.09 Proceeds from sale of PPE 65 416 162 214 264 ROE(%) 10.41 10.22 7.47 7.47 7.42 Net change on available-for-sale 137 (135) (29) (37) (47) ROA(%) 4.96 4.68 3.45 3.37 3.32 长城汽车 financial assets Net received/(Paid) from Growth Analysis subsidiaries and other business 0 69 19 29 39 Rev growth(%) 2.59 -1.92 -1.84 6.37 2.78 entities OP growth(%) -52.31 6.45 -37.54 5.15 5.20 Others 2,547 (3,727) 1,997 (548) (232) Net profit growth (%) -52.35 3.58 -22.73 4.39 3.60 Cash from Investing Activities (3,073) (10,040) (2,851) (5,341) (3,475) EPS(%) -52.35 3.58 -22.73 4.39 3.60

BPS(%) 4.02 6.96 4.58 4.19 4.35

Share Issuance 0 0 0 0 0 Great Wall Motor

Net change in borrowings 10,112 (4,378) 2,059 2,159 2,159 Liquidity and solvency 16.01 3.68 9.80 15.18 20.55 Dividends paid (3,362) (2,042) (1,644) (1,925) (1,886) Gearing ratio(%) 16.01 3.68 13.08 18.75 22.40 Others (661) (80) (514) (591) (681) Cash ratio 0.08 0.14 0.07 0.05 0.03 Cash from Financing Activities 6,089 (6,501) (99) (357) (408) Quick ratio 1.08 1.13 1.11 1.11 1.13

Free cash at the beginning of the 1,892 3,827 6,597 3,832 2,099 year Efficiency Analysis Net Changes in Cash 1,940 3,157 (2,765) (1,733) (639) Inventory turnover days 26 22 28 28 28 Other adjustment (5) (386) 0 0 0 Receivable turnover days 163 98 40 40 40 Free cash at the end of the year 3,827 6,597 3,832 2,099 1,460 Payable turnover days 133 137 133 131 134

Cash at Beg of Year 2,154 4,831 7,682 4,616 3,057 Restricted cash and bank 1,005 1,085 784 958 942 balance Cash at End of Year 4,831 7,682 4,616 3,057 2,402

Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 7 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral 中性 Relative Performance is -5% to 5%; 27 August2019 or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ]

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),JXR (01951 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),CAM SCSMALLCAP (03157

HK),HAITIANTIAN (08227 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization (02333 HK)

of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. 长城汽车 (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

Great Wall Motor DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in

any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

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Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 8 of 8