3Q19 Fundamentals Uplifted but Valuation Unattractive 2019年3季度基本面提振但估值不吸引

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]

28 October 2019 [Table_Summary] 3Q19 Fundamentals Uplifted but Valuation Unattractive 2019年3季度基本面提振但估值不吸引

 GWM’s 3Q19 net profit increased 506.8% yoy to RMB1,400 million, 公 Rating:[Table_Rank ] Reduce above market and our expectations. The better-than-expected results were Upgraded 司 mainly due to improvement in revenue, in which volume was up yoy by 12.4%

and ASP up by 7.4% in 3Q19. Such improvement was contributed mainly 报评级：减持 (上调) from the Haval F7. On the other hand, GP margin was up by 3.5 ppts yoy and 告 2.6 ppts qoq. All in all, leading net profit per car rose to RMB6,073. 6[Table_Price-18m TP目标价] : HK$5.35 CompanyReport  Our main concerns lie with growth sustainability in 2020. We are worried Revised from 原目标价: HK$3.65 about the fundamental improvement in 2020 as diminishing effect from the F7 and uncertainty on new car contributions, which also concerns SUVs. Share price 股价: HK$6.230

Moreover, the Company's strong reliance on SUVs may limit its growth potential due to pressure from JV brands. Stock performance  We have revised upwards net profit forecasts for 2019 to 2021 by 14.9%/ 股价表现 13.7%/ 13.1%, respectively. We have fine-tuned our volume forecast, [Table_QuotePic] expecting GWM to meet management forecasts this year. We have also 80.0 % of return increased GP margin expectation in 2019 to 2021 after a rebound in 3Q19. 70.0 60.0  We upgrade our investment rating to "Reduce" and increase our TP to

证 50.0 HK$5.35 on earnings upgrade. The TP represents 9.5x 2019 PER and 9.2x

券告 2020 PER. Despite strong improvement in 3Q19, we remain cautious on 40.0

growth in 2020 as the F7's full-year effect will diminish in 2020, and new 30.0 研报

products will only be launched next year, with uncertainty on whether it can 20.0

究究 bring in the same success as the F7. On the other hand, GWM is currently is 10.0 trading at a high valuation which is 2 S.D. above average, and we think is 报 0.0

研 unjustified. Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

告长城汽车第季度净利润同比增长至人民币百万元，好于市场和 HSI Index GREAT WALL MOT-H

 券 2019 年 3 506.8% 1,400

EquityResearch Report 我们的预期。业绩好于预期主要是由于收入增长，其中 2019 年第 3 季度的销量同比增长

证 12.4%及平均售价同比增长 7.4%。改善主要来自哈弗 F7。另一方面，毛利率同比上升 3.5 [Table_PriceChange] 个百分点和环比上升 2.6 个百分点。总的来说，单台净利润上升至人民币 6,073 元。 Change in Share Price 1 M 3 M 1 Y

[Tab 股价变动 1 个月 3 个月 1 年

 我们主要关注的是 2020 年的增长可持续性。我们担心 2020 年的基本面改善是因为 F7 的

Abs. % 18.7 13.3 40.0 le_I 影响减弱，以及 SUV 中新车贡献的不确定性。此外，公司对 SUV 的依赖会因合资品牌的绝对变动 % 压力而限制其增长潜力。 Rel. % to HS Index 15.1 18.6 31.2 汽nfo1 相对恒指变动 % Avg. Share price(HK$) 车  我们将 2019 年至 2021 年的净利润预测分别上调 14.9%/ 13.7%/ 13.1%。我们微调了销 5.3 5.2 5.2 ] 平均股价（港元）量预测，预计长城汽车今年将达到管理层的目标。在 2019 年 3 季度反弹之后，我们提高及 Source: Bloomberg, Guotai Junan International. 了 2019 年至 2021 年的毛利率预测。零部  我们上调投资评级至“减持”，因调高盈利预测而上调目标价至 5.35 港元。目标价相当于 9.5 倍 2019 年市盈率和 9.2 倍 2020 年市盈率。尽管 2019 年第 3 季度有强劲改善，但我件们仍然对 2020 年的增长持谨慎态度，因 F7 的全年效应将在 2020 年消退，并且明年才推行出的新产品也不确定能否带来与 F7 一样的成功。另一方面，公司目前估值高于均值的两业个标准差，我们认为估值过高。

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) 9.4 5.397 1.0 0.170 3.3 10.4 nfo2 2018A 99,230 5,207 0.571 3.6 9.6 5.773 0.9 0.290 5.3 10.2 中] 2019F 99,382 4,623 0.506 (11.4) 11.1 6.076 0.9 0.207 3.7 8.6 2020F 104,018 4,774 0.523 3.4 10.7 6.364 0.9 0.240 4.3 8.4 长外 2021F 106,389 4,925 0.540 3.3 10.4 6.673 0.8 0.234 4.2 8.3 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) 56,863.1 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) 21,510.1 FY19 Net gearing (%) FY19 / (%) 12.0

52 Weeks high/low (HK$) 52 周高/低 (HK$) 7.260 / 4.020 FY19 Est. NAV (HK$) FY19 每股估值（港元） 5.6

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)

3Q19 RESULTS REVIEW

] 1 r a M t h g i R _ e l b a T [ Great Wall Motor’s ("GWM" or the "Company") 3Q19 net profit decreased 506.8% yoy to RMB1,400 million, above our

expectations. The significant increase was mainly due to all-round improvement in profitability and having benefited from weak

3Q18 results. Key takeaways are as follows:

 Revenue increased by 18.0% yoy to RMB21,202 million. The increase was mainly due to an increase in sales volume of 12.4% yoy and a 7.4% yoy increase in ASP. The improvement mainly came from the F7 and the increase in sales

proportion towards its coupe version (F7x) and the China 6 emission standard version has helped price increase. 28 October 2019  Gross margin was 18.5% in 3Q19, the best in the last five quarters. The better production efficiency also helped on improving gross margin, up by 3.5 ppts yoy and 2.6 ppts qoq.  Operating margin was up by 6.4 ppts yoy to 7.5%in 3Q19. Besides the strong gross profit, the Company also benefited from stronger cost control, with selling and administrative expense ratio reduced yoy by 1.3 ppts and 1.8 ppts, respectively. R&D expense was RMB557 million, and the management revealed that capitalization rate was about 50% to 60%; we expect this to stay in this range in the future.  The strong improvement has also been boosted by a significantly weak 3Q18, which was hurt by a number of events including the weakening auto market which started around Jul. 2018, huge price discount, low utilization and unusually large increase in marketing expense due to the FIFA World Cup. All of the abovementioned dragged margins to the lowest level since its listing.

 Net profit per car increased significantly, up by 440.0% yoy and 71.2% qoq to RMB6,073.] 2 r a M t h g i R _ e l b a T [

Table-1: Summary of 1-3Q19 Financial Results of GWM (in RMB mn, except per share item) 1-3Q19 1-3Q18 yoy 3Q19 3Q18 2Q19 yoy QoQ Key financials

Total Revenue 62,578 66,645 (6.1%) 21,202 17,966 18,749 18.0% 13.1% Operating income 61,500 65,513 (6.1%) 21,183 17,555 18,231 20.7% 16.2% Interest income 1,006 1,111 (9.4%) 18 400 501 (95.5%) (96.4%) Fee and commission income 71 21 246.0% 0 12 17 (100.0%) (100.0%) Cost of sales 52,082 53,674 (3.0%) 17,269 15,259 15,750 13.2% 9.6% Gross profit 10,496 12,971 (19.1%) 3,933 2,707 2,999 45.3% 31.1% Business tax and surcharges 2,056 2,567 (19.9%) 719 780 619 (7.8%) 16.2% Selling expenses 2,351 3,050 (22.9%) 881 972 427 (9.4%) 106.5% Administrative expenses 1,294 1,385 (6.6%) 453 708 437 (36.0%) 3.7% R&D expenses 1,474 1,170 26.0% 557 328 492 69.9% 13.2% Finance expenses / (income) 108 603 (82.1%) -135 150 145 (190.5%) (193.3%) Operating profit 4,884 5,406 (9.7%) 1,601 209 983 664.8% 62.8% (02333 HK) Profit before taxation 3,585 4,707 (23.8%) 1,680 273 928 515.8% 81.0% Income tax expenses 633 748 (15.4%) 280 31 170 815.8% 64.5% Net profits 2,951 3,959 (25.4%) 1,400 242 758 478.0% 84.7%

Net profit attributable to parent 2,917 3,927 (25.7%) 1,400 231 744 506.8% 88.2% 长城汽车 Basic EPS (RMB) 0.32 0.43 (25.7%) 0.15 0.03 0.08 506.8% 88.2% Operating Data

Sales volume(unit) 724,113 676,688 7.0% 230,575 205,173 209,696 12.4% 10.0% Domestic Sales 673,719 640,670 5.2% 210,486 201,959 192,006 4.2% 9.6% Export 50,394 36,018 39.9% 20,089 12,597 17,690 59.5% 13.6% ASP(RMB) 84,931.98 96,814.30 (12.3%) 91,872.18 85,563.18 86,942.41 7.4% 5.7% Margins and ratios (%) ppt ppt ppt

Gross profit margin(%) 16.8% 19.5% (2.7) 18.5% 15.1% 16.0% 3.5 2.6 Great Wall Motor OP Margin(%) 7.8% 8.1% (0.3) 7.5% 1.2% 5.2% 6.4 2.3 Net profit margin(%) 4.7% 5.9% (1.2) 6.6% 1.3% 4.0% 5.3 2.6 Selling costs to revenue 3.8% 4.6% (0.8) 4.2% 5.4% 2.3% (1.3) 1.9 Admin costs to revenue 2.1% 2.1% (0.0) 2.1% 3.9% 2.3% (1.8) (0.2) Effective tax rate 17.7% 15.9% 1.8 16.6% 11.2% 18.3% 5.5 (1.7) Source: the Company, Guotai Junan International.

Figure-1: GWM Gross Profit and Gross Margin Figure-2: 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 12.3% 12.2% 14.0% 11.6% 9,000 26.6% 26.4% 28.0% 4,000 11.4% 11.5% 25.3% 12.0% 24.5% 10.5% 8,000 24.5% 26.0% 3,500 9.6% 9.5% 22.9% 7,000 22.4% 22.1% 24.0% 8.4% 10.0% 21.5% 3,000 7.9% 7.8% 20.6% 7.3% 6,000 19.6% 22.0% 6.6% 8.0% 18.5% 2,500 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% 15.1% 1,500 3.4%

3,000 14.7% 16.0% 2.6% 4.0% Report

2.1% 2,000 14.0% 1,000 1.3% 2.0% 1,000 12.0% 500

0 10.0% 0 0.0%

Company

1Q15 3Q15 4Q15 2Q16 3Q16 1Q17 2Q17 4Q17 1Q18 3Q18 4Q18 2Q19 3Q19 3Q14 4Q14 1Q15 2Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 4Q18 1Q19 2Q19 3Q19 1Q16 4Q16 3Q17 2Q18 1Q19 3Q15 4Q15 2Q18 3Q18 2Q15 Source: CAAM, Guotai Junan International. Source: the Company, Guotai Junan International. See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

COMPANY UPDATE

Challenges on the horizon – 2020. We remain doubtful on the Company’s growth strategy,] 1 in r thea shortM t termh g ati least.R _ e l b a T [

1. Improvement in fundamentals in 2020 may not be certain – We believe that 3Q19 results showed that the Company has

bottomed out. The improvement mainly came from one model, the F7, raising both sales volume and ASP. This year, the F7, which was launched in 4Q18, is benefiting from the full-year effect. We believe the question to answer now would be whether the recovery will continue in 2020. The reason is because the F7 is one year older, losing the new car impact (price and volume boost). Also, new factory utilization rate could be low for Russia and Chongqing. Capacity of the Russia plant is

150,000 units and Chongqing is 160,000 units, currently designed to produce the F7 and the Great Wall P-series, 28 October 2019 respectively. Large fixed costs are to be recognized for Chongqing plant, which is expected to give profitability challenges in 4Q19 onwards as the Great Wall P-series will be on sale in Oct. 2019.

2. Strong reliance on SUVs may not be wise – Next year, the Company will continue to rely on SUVs, with two brand new SUVs planned for launch based on the new platform. It is expected that one will be in compact SUV and one will be a small-sized SUV. Similar to the previous launch, we believe that the launch of compact SUVs will definitely hurt sales of the H6/ F5/ M6. What is worse is that industry sales for SUVs have normalized and other JV brands are increasing their products in SUVs this year, which is hurting GWM to a certain degree. In fact, SUV market share has been declining since Jan. 2019, as they are similar to most self-owned brands due to competition from Japanese and German brands. The Company mentioned to benefit from eating up market share of weaker brands, but the market share trend (Figre-5) shows otherwise.

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

Only a new pickup truck, the Great Wall P-series, will launch in Oct. 2019, however, the effect may not be as strong as an SUV due to the limited market size of pickup trucks.

3. Growth was weak for the new growth strategy. GWM has two strategies that aim to capture new growth opportunities – 1) the Premium brand – WEY to capture consumption upgrade and 2) ORA - New energy vehicles (NEV) to capture the trend of electric vehicles. However, it is noted that both brands weakened soon after launch. ORA sales in 3Q19 was significantly lower than in 1H19, an opposite trend compared to the Haval SUV. The reason is probably uncontrolled by GWM as the

overall industry was hampered by decreasing financial subsidy. On the other hand, WEY sales was only supported by the

VV6; other older models like the VV5 and VV7 sales declined over 70% yoy in 1-9M19.

Figure-3: China Auto Sales by Vehicle Type Figure-4: GWM Sales Volume and Growth (02333 HK) Sedan MPV SUV Crossover 2017 2018

units 2019 2018 yoy 80% 2019 yoy 160,000 25% 20% 60% 140,000 15% 长城汽车 40% 120,000 10% 100,000 5% 20% 0% 80,000 -5% 0% 60,000 -10% 40,000 -15% -20% Great Wall Motor

-20%

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

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

Dec-15 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Sep-15 20,000 -25% -40%

- -30%

Jul

Apr Oct

Jan Jun

Mar Feb

Aug Sep Nov -60% Dec May Source: CAAM, Guotai Junan International. Source: the Company, Guotai Junan International.

Figure-5: GWM’s SUV Market Share Figure-6: SUV Sales Mix by Brand

15.5% 5.2% 14.5% 3.9% Self-owned 13.5% 4.5% 5.0% 12.5% Japan 18.5% 11.5% 12.7% Germany

10.5% 52.2% Korea 59.7% 9.5% 16.5% America 8.5% French

7.5% Report 18.3%

Czech

Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Jan 19

Sep13 Sep14 Sep15 Sep16 Sep17 Sep18 Sep19

May14 May15 May16 May17 May18 May19

Company Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Note: Outer ring: Sep. 2019; Inner ring: Dec. 2018 See the last page for disclaimer Page 3 of 8 [Table_PageHeader]Great Wall Motor (02333 HK)

Table-2: Model Pipeline Model Launch date Mode of upgrade Vehicle types

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

ORA R2 2019 New Mini car Great Wall P-Series 3Q19 New Pickup truck New SUV 1 2020 New Small-size SUV New SUV 2 2020 New Compact SUV Source: Autohome, the Company, Guotai Junan International.

EARNINGS FORECASTS

We have revised upwards our net profit forecasts for 2019 to 2021 by 14.9%/ 13.7%/ 13.1%, respectively. The following are 28 October 2019 key changes in assumptions:

Haval sales: We have fine-tuned the sales forecast of the Haval, with more sales volume improvement coming from the Haval M6 in 2019.

WEY brand: We have slightly reduced over our forecast period as sales performance was worse than expected.

ORA: ORA brand has been losing sales momentum since 3Q19. The ORA R1’s average monthly sales in 3Q19 was 1,500, vs. 3,500 in 2Q19.

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

Pickup trucks: We have added our forecast for the brand new pickup truck – the Great Wall P-series, leading to a significant increase in 2020 and 2021.

Gross margin: Gross margin improvement is the main reason for the earning forecast increase. GWM has been benefiting from increased sales volume and ASP and utilization in 3Q19. We believe such a trend to continue in 4Q19, mainly contributed from the F7.

Table-3: Major Financial Data and Forecast Changes New Old Changes 2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Vehicle sales (02333 HK)

Pick-up Truck 145,000 200,000 210,000 140,000 160,000 170,000 3.6% 25.0% 23.5% SUV (HAVAL) 773,600 751,000 734,600 746,000 754,600 744,600 3.7% (0.5%) (1.3%) Sedan (C30) 3,500 3,000 2,000 3,500 3,000 2,000 0% 0% 0%

WEY 99,900 87,300 93,300 100,200 94,400 94,400 (0.3%) (7.5%) (1.2%) 长城汽车 ORA 49,000 57,000 62,000 60,000 82,000 92,000 (18.3%) (30.5%) (32.6%) Total 1,071,000 1,098,300 1,101,900 1,049,700 1,094,000 1,103,000 2.0% 0.4% (0.1%) Financials (RMB mn) Revenue 99,382 104,018 106,389 97,405 103,611 106,495 2.0% 0.4% (0.1%) Gross Profit Margin 16.8% 17.0% 17.2% 16.1% 16.3% 16.4% 0.7 ppt 0.7 ppt 0.8 ppt 4,689 4,863 5,078 3,893 4,093 4,306 20.4% 18.8% 17.9% Profit from operation Great Wall Motor Net Income (Loss) 4,623 4,774 4,925 4,024 4,200 4,351 14.9% 13.7% 13.2% Basics EPS (RMB) 0.506 0.523 0.540 0.441 0.460 0.477 14.8% 13.7% 13.1% Source: the Company, Guotai Junan International.

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Company

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 119,846 138,000 145,000 200,000 210,000

yoy 13.5% 15.1% 5.1% 37.9% 5.0% SUV - Haval 938,282 766,062 773,600 751,000 734,600 yoy 0.0% -18.4% 1.0% -2.9% -2.2% 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 99,900 87,300 93,300 yoy n.a. 61.4% -28.4% -12.6% 6.9%

ORA - 3,515 49,000 57,000 62,000 28 October 2019 yoy n.a. n.a. 1294.0% 16.3% 8.8% Total 1,156,588 1,053,059 1,071,000 1,098,300 1,101,900 yoy 7.6% -9.0% 1.7% 2.5% 0.3% Financials (RMB mn) Revenue 101,169 99,230 99,382 104,018 106,389 yoy 2.6% -1.9% 0.2% 4.7% 2.3% Gross profit margin 19.0% 17.9% 16.8% 17.0% 17.2% yoy (ppts) -22.8% -5.8% -6.0% 1.0% 1.0% Profit from operations 5,854 6,232 4,689 4,863 5,078 yoy -52.3% 6.5% -24.8% 3.7% 4.4% Net income (Loss) 5,027 5,207 4,623 4,774 4,925 yoy -52.4% 3.6% -11.2% 3.3% 3.2% Basics EPS (RMB) 0.55 0.57 0.51 0.52 0.54 yoy -52.4% 3.6% -11.2% 3.3% 3.2% Source: the Company, Guotai Junan International.

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

We upgrade our investment rating to "Reduce" and increase our TP to HK$5.35 on earnings upgrade. The TP represents 9.5x 2019 PER and 9.2x 2020 PER. Despite strong improvement in 3Q19, we remain cautious on growth in 2020 as the full-year effect on the F7 will diminish in 2020, and new products will only launch next year, with uncertainty on whether they can bring in the same success as the F7. On the other hand, the Company is currently is trading at a high valuation which is 2 S.D. above average, and we think it is unjustified.

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

(x) Fo rward P/E Avg (x) 15.0 GWM 13.27 +1 S.D. -1 S.D. 14.00 12.87

12.65 (02333 HK) 12.19

+2 S.D. -2 S.D. 11.64 13.0 11.01 12.00 10.54 9.52 9.54 11.0 10.00 10.14 9.55 9.27 7.67 8.84 长城汽车 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

Jun - 11

Oc t-11

Feb -11

Jun -17

Jun -13 Jun -15 Jun -16 Jun -18 Jun -19 Jun - 12

Jun -14

Oc t-17

Oc t-10 Oc t-12 Oc t-13 Oc t-15 Oc t-16 Oc t-18 Oc t-19

Feb -17

Oc t-14

Feb -12 Feb -13 Feb -16 Feb -19 Feb - 15 Feb - 18 Feb -14 YTD

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

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Company

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 7.96 4.5 4.5 4.4 4.2 0.5 0.5 0.4 0.4 10.3 4.7 17.0

Geely Automobile 175 HK HKD 14.68 8.8 13.6 10.8 10.2 2.6 2.3 2.0 1.7 19.4 2.1 6.7

Brilliance China 1114 HK HKD 8.82 6.4 6.1 5.4 5.0 1.3 1.1 1.0 0.8 18.8 3.7 n.a.

Great Wall Mot-H 2333 HK HKD 6.23 9.2 12.9 11.2 10.9 1.0 0.9 0.9 0.8 8.1 3.5 7.4

Qingling Motor-H 1122 HK HKD 1.88 8.8 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 39.20 35.5 37.0 31.0 27.2 1.8 1.7 1.6 1.6 4.9 0.6 11.4

Guangzhou Auto-H 2238 HK HKD 8.30 6.5 8.1 7.1 6.7 1.0 0.9 0.9 0.8 12.1 4.7 17.9 28 October 2019

Baic Motor-H 1958 HK HKD 4.94 7.6 8.2 7.1 6.5 0.7 0.7 0.7 0.7 9.8 4.7 1.1

Weichai Power-H 2338 HK HKD 12.80 10.0 9.8 9.5 9.5 2.3 2.0 1.8 1.6 19.8 4.3 4.3

Sinotruk Hk Ltd 3808 HK HKD 12.40 6.7 7.2 7.0 7.0 1.2 1.1 1.0 0.9 14.9 5.4 2.7

Simple Average 10.4 11.9 10.4 9.7 1.3 1.3 1.1 1.0 13.1 3.8 8.6 Weighted Average 12.6 14.2 12.2 11.3 1.5 1.4 1.3 1.2 12.9 3.3 9.1

Dongfeng Auto-A 600006 CH CNY 4.6 16.5 18.2 16.6 16.9 1.3 n.a. n.a. n.a. 7.1 2.2 n.a.

Great Wall Mo-A 601633 CH CNY 8.7 15.2 17.4 14.7 12.7 1.5 1.4 1.4 1.3 9.7 2.2 7.6

Faw Car Co Ltd-A 000800 CH CNY 8.2 86.5 n.a. n.a. n.a. 1.7 1.6 1.5 1.4 4.5 0.1 n.a.

Saic Motor-A 600104 CH CNY 23.68 7.7 8.6 7.9 7.4 1.2 1.1 1.0 0.9 12.8 5.4 6.4

Chongqing Chan-A 000625 CH CNY 7.42 53.0 n.a. 17.0 11.9 0.8 0.8 0.8 0.7 3.8 1.9 7.0

Weichai Power-A 000338 CH CNY 12.00 11.1 10.1 9.7 9.2 2.4 2.1 1.8 1.6 17.5 4.1 4.2 ] 2 r a M t h g i R _ e l b a T [

Beiqi Foton-A 600166 CH CNY 2.03 n.a. 33.8 21.8 20.3 0.9 n.a. n.a. n.a. 3.4 0.5 n.a.

Anhui Jianghua-A 600418 CH CNY 5.22 n.a. 25.1 18.3 12.3 0.8 0.7 0.7 0.7 3.1 1.7 6.1

Cnhtc Jinan T-A 000951 CH CNY 16.21 12.0 9.2 8.3 7.1 1.8 1.6 1.4 1.2 16.3 3.9 n.a.

Zhengzhou Yut-A 600066 CH CNY 13.92 13.4 13.1 12.0 11.1 2.0 1.7 1.6 1.5 13.3 4.4 8.3

Xiamen King Lo-A 600686 CH CNY 7.25 27.7 19.3 31.5 27.9 1.3 n.a. n.a. n.a. n.a. n.a. n.a.

Jiangling Moto-A 000550 CH CNY 15.55 141.4 29.9 19.0 16.5 1.3 1.3 1.3 1.2 6.7 1.8 2.0

Yangzhou Yax-A 600213 CH CNY 9.02 150.3 n.a. n.a. n.a. 10.5 n.a. n.a. n.a. n.a. n.a. n.a.

Zhongtong Bus-A 000957 CH CNY 6.62 107.3 13.8 10.2 8.9 1.4 n.a. n.a. n.a. n.a. n.a. n.a.

Simple Average 48.6 18.5 16.1 0.0 2.1 1.4 1.3 0.0 8.9 2.6 5.9 Weighted Average 25.0 13.1 13.0 11.3 1.8 1.4 1.3 1.2 11.0 2.8 5.0

Nissan Motor Co 7201 JP JPY 680.60 3.6 8.3 17.7 9.4 0.5 0.5 0.5 0.5 2.7 5.7 3.7

(02333 HK)

Toyota Motor 7203 JP JPY 7,483.00 8.9 11.5 9.3 8.9 1.2 1.1 1.0 0.9 11.4 3.1 12.1

Honda Motor Co 7267 JP JPY 2,950.00 5.0 8.5 8.1 7.5 0.7 0.6 0.6 0.6 7.6 3.8 8.1

Mazda Motor 7261 JP JPY 1,002.50 5.5 9.9 11.2 9.6 0.5 0.5 0.5 0.5 4.9 3.5 3.6

Mitsubishi Heavy 7011 JT JPY 4,416.00 n.a. 14.6 13.3 11.3 1.1 1.0 1.0 1.0 7.7 3.4 6.6 长城汽车

Fuji Heavy Indus 7270 JP JPY 3,040.00 10.6 15.8 10.4 9.7 1.5 1.5 1.3 1.2 13.4 4.7 4.0

Suzuki Motor 7269 JP JPY 5,053.00 10.3 12.8 14.4 12.6 1.7 1.7 1.5 1.4 11.2 1.5 5.8

Hino Motors Ltd 7205 JP JPY 993.00 11.1 10.4 11.2 9.8 1.1 1.1 1.0 0.9 8.9 3.1 6.0

Isuzu Motors 7202 JP JPY 1,261.50 9.4 8.4 9.3 8.5 1.1 1.0 0.9 0.9 10.3 3.0 5.3

Simple Average 8.0 11.1 11.6 9.7 1.0 1.0 0.9 0.9 8.7 3.5 6.1 Great Wall Motor Weighted Average 7.8 11.3 10.3 9.2 1.1 1.0 1.0 0.9 10.1 3.4 9.7

Hyundai Motor 005380 KS KRW 121,500.00 21.6 9.9 7.6 7.0 0.4 0.5 0.4 0.4 5.8 3.6 9.1

Ford Motor Co F US USD 8.72 9.4 7.0 6.4 5.6 1.0 1.0 1.0 0.9 10.2 6.9 2.3

Navistar Intl NAV US USD 31.47 9.1 7.8 10.7 11.0 n.a. n.a. n.a. n.a. (6.8) 0.0 6.7

Paccar Inc PCAR US USD 76.90 12.3 11.3 13.9 13.7 3.1 2.9 2.7 2.3 21.0 3.7 12.1

Volkswagen Ag VOW GR EUR 171.75 7.3 6.3 5.9 5.6 0.8 0.7 0.6 0.6 11.3 4.0 2.1

Bayer Motoren Wk BMW GR EUR 69.93 6.5 8.5 7.5 7.2 0.8 0.8 0.7 0.7 10.3 4.7 2.0

Daimler Ag DAI GR EUR 53.29 7.9 11.0 8.2 7.5 0.9 0.9 0.8 0.8 10.4 4.8 2.3

Man Se MAN GR EUR 40.12 8.7 n.a. n.a. n.a. 1.0 n.a. n.a. n.a. n.a. n.a. n.a.

Renault Sa RNO FP EUR 49.16 4.0 6.2 5.0 4.4 0.4 0.4 0.4 0.3 7.2 6.0 2.2

Volvo Ab-B VOLVB SS SEK 146.90 12.0 8.8 11.6 11.2 2.4 2.2 2.1 1.9 17.7 4.4 6.0

General Motors C GM US USD 23.04 17.2 6.2 7.1 6.8 6.8 3.9 3.2 2.8 45.2 0.0 5.6

Tata Steel Ltd TATA IN INR 365.00 2.8 4.1 7.6 6.0 0.7 0.6 0.6 0.6 8.0 2.9 5.8 Simple Average 9.5 7.6 8.0 7.5 1.6 1.3 1.2 1.1 13.0 3.9 4.8

Weighted Average 8.8 8.0 7.5 7.1 1.1 1.0 0.9 0.9 11.7 4.5 3.6

Global Simple Average 19.1 12.7 11.5 5.7 1.7 1.3 1.2 0.7 11.7 3.4 6.4 Report

Global Weighted 9.6 10.3 9.5 8.6 1.2 1.1 1.0 0.9 11.1 3.8 6.8 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 99,382 104,018 106,389 PPE 27,718 28,994 30,006 30,625 30,085 Cost of sales (81,967) (81,481) (82,672) (86,354) (88,141) Construction in progress 4,879 4,406 5,559 6,713 7,521 Gross profit 19,203 17,749 16,710 17,664 18,247 Intangible Assets 3,269 3,391 3,253 3,269 3,298 Deferred tax assets 691 677 704 735 767 Business tax and surcharges (3,906) (3,627) (3,863) (4,043) (4,135) Investments 126 261 290 327 374 Selling expenses (4,406) (4,575) (3,279) (3,383) (3,308) Other 4,571 7,946 4,821 5,145 5,367 Administrative expenses (4,963) (3,420) (4,447) (4,832) (5,185) Total Non-current Assets 41,254 45,674 44,634 46,814 47,411

Financial expenses/incomes (218) 123 (516) (591) (681) 28 October 2019 Impairment loss on assets (317) (137) (175) (157) (131) Cash & Cash Equivalents 4,831 7,682 5,262 3,902 3,408 Gains/(losses) from changes in 175 (140) 18 (61) (22) Inventories 5,575 4,445 6,342 6,624 6,762 fair value Trade and other Receivables 49,949 3,343 10,891 11,399 11,659 Investment income 287 259 241 265 292 Prepayments 580 441 302 163 25 Operating Profit 5,854 6,232 4,689 4,863 5,078 Others 8,359 50,215 54,919 60,093 65,784 Total Current Assets 69,293 66,126 77,716 82,182 87,637 Non-operating income 391 253 566 600 587 Non-operating expenses (12) (8) (43) (45) (46) Total Assets 110,547 111,800 122,350 128,996 135,049 Profit Before Tax 6,233 6,477 5,212 5,418 5,619 Income Tax (1,190) (1,229) (553) (606) (656) Trade payables 34,552 32,318 33,546 35,237 35,866 profit After Tax 5,043 5,248 4,659 4,811 4,963 Advances from customers 5,458 0 5,764 6,033 6,171 Tax payables 2,308 2,551 2,651 2,133 2,218 Non-controlling Interest (16) (40) (36) (37) (38) Salaries payables 1,872 2,061 2,064 2,160 2,210 Shareholders' Profit / Loss 5,027 5,207 4,623 4,774 4,925 Short Term Borrowing 13,038 12,800 15,000 17,000 19,000 Other current liabilities 1,653 4,888 4,895 5,124 5,240 Basic EPS 0.551 0.571 0.506 0.523 0.540 Total Current Liabilities 58,881 54,618 63,920 67,688 70,704

] 2 r a M t h g i R _ e l b a T [ Dividend per share (RMB) 0.170 0.290 0.207 0.240 0.234 Deferred income 1,964 2,083 2,086 2,183 2,233 Total Non-current Liabilities 2,408 4,493 2,970 3,226 3,435

[Table_CashFlowStatement] Cash Flow Statement Total Liabilities 61,289 59,112 66,891 70,914 74,138

Year end 31 Dec (RMB m) 2017A 2018A 2019F 2020F 2021F Total Shareholders' Equity 49,135 52,525 55,259 57,845 60,635 EBT 5,043 5,248 4,659 4,811 4,963 Minority Interest 123 164 200 237 275 Depreciation & Amortization 3,088 3,795 3,053 3,132 3,136 Total Equity 49,258 52,689 55,459 58,082 60,910 BPS(RMB) 5.397 5.773 6.076 6.364 6.673 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 (2,388) 1,220 421 Financial Ratios Change in deferred tax assets 292 272 (24) 67 17 and liabilities 2017A 2018A 2019F 2020F 2021F Finance costs paid 97 577 516 591 681 Profitability Analysis

Other adjustment 0 0 (4,593) (5,367) (5,441) Gross profit margin(%) 18.98 17.89 16.81 16.98 17.15 (02333 HK)

Cash from Operating Activities (1,077) 19,698 1,168 4,356 3,630 EBITDAR(%) 8.61 8.74 8.09 8.01 8.09

OP margin(%) 5.79 6.28 4.72 4.67 4.77 Acquisition of PPE (5,822) (6,662) (5,000) (5,000) (3,500) Net profit margin(%) 4.97 5.25 4.65 4.59 4.63 Proceeds from sale of PPE 65 416 162 214 264 ROE(%) 10.41 10.22 8.55 8.41 8.28 Net change on available-for-sale 137 (135) (29) (37) (47) ROA(%) 4.96 4.68 3.95 3.80 3.73 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 0.15 4.67 2.28 entities OP growth(%) -52.31 6.45 -24.76 3.70 4.42 Others 2,547 (3,727) 1,906 (476) (208) Net profit growth (%) -52.35 3.58 -11.22 3.27 3.16 Cash from Investing Activities (3,073) (10,040) (2,942) (5,270) (3,451) EPS(%) -52.35 3.58 -11.22 3.27 3.16

BPS(%) 4.02 6.96 5.26 4.73 4.87

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) (1,888) (2,188) (2,135) Gearing ratio(%) 16.01 3.68 11.83 17.08 20.38 Others (661) (80) (516) (591) (681) Cash ratio 0.08 0.14 0.08 0.06 0.05 Cash from Financing Activities 6,089 (6,501) (345) (621) (657) Quick ratio 1.08 1.13 1.12 1.12 1.14

Free cash at the beginning of the 1,892 3,827 6,597 4,478 2,944 year Efficiency Analysis Net Changes in Cash 1,940 3,157 (2,119) (1,534) (478) 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 4,478 2,944 2,466 Payable turnover days 133 137 133 133 134

Cash at Beg of Year 2,154 4,831 7,682 5,262 3,902 Restricted cash and bank 1,005 1,085 784 958 942 balance Cash at End of Year 4,831 7,682 5,262 3,902 3,408

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%; 28 October 2019 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),CHINA MINSHENG BANKING CORP.- H SHARES (01988 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI

INVESTMENT (02886 HK),CAM SCSMALLCAP (03157 HK),HAITIAN ANTENNA (08227 HK),Guotai Junan and its group companies (02333 HK)

do not hold equal to or more than 1% of the market capitalization 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