股
票
研 [Table_Title] Company Report: Nexteer (01316 HK) Toliver Ma 马守彰
究 (852) 2509 5317 EquityResearch 公司报告： 耐世特 (01316 HK) [email protected]
1 March 2018 [Table_Summary] Steering towards a Bright Future, Initiate with “Accumulate” 驶向光明未来，首次给予“收集”
Nexteer operates in manufacturing and selling of steering systems. The [Table_Rank] 公 Company has a strong presence in the US due to its long history with Rating: Accumulate Initial General Motors. The growing demand for high quality electric power steering 司 systems (“EPSS”) in China has helped the Company to break into the 报 评级： 收集 (首次覆盖) Chinese market. Its strong research capabilities and its partnership with 告 Continental AG has put the Company in a strong position in the next product cycle in the field of ADAS / AD. 6[Table_Price-18m TP 目标价] : HK$19.33 CompanyReport We expect Nexteer to deliver 7.8% revenue CAGR from 2016 to 2019. Top-line growth is mainly driven by stronger EPSS sales, and we expect Share price 股价: HK$17.440
China to remain as the fastest growing region in our forecasted period.
We expect Nexteer to deliver CAGR of 17.9% from 2016 to 2019 for Stock performance shareholders’ profit. Besides revenue growth, we expect Nexteer to 股价表现 continue steady margin expansion due to the sales mix of advanced EPSS [Table_QuotePic] and effective cost control measures. 120.0 % of return
We initiate with "Accumulate" investment rating for Nexteer, with TP of 100.0
HK$19.33, representing 17.5x 2017 PER, 14.9x 2018 PER, 4.6x 2017 PBR 证 80.0 and 3.7x 2018 PBR. Nexteer is focused on the steering market and is one of 券 告 the most profitable listed companies in its market globally; therefore we think 60.0
研 报 our valuation is reasonable. Our valuation is above its HK market peers, but 40.0
closer to the global peers’ average.
究 究 20.0 耐世特制造和销售转向系统。由于公司与通用汽车有着悠久的历史渊源，在美国业务占比 报 ResearchReport 0.0
研 大。随着中国对高品质电动助力转向系统(EPSS)的需求不断增长，有助于公司打入中国市
告 场。其强大的研究能力和与大陆集团(Continental)的合作使其在先进驾驶员辅助系统 (20.0)
券 Feb-17 May-17 Aug-17 Nov-17 Feb-18
自动驾驶 领域处于强势地位。
Equity (ADAS) / (AD)
HSI Nexteer 证
我们预计耐世特 2016-2019 年收入复合年增长率为 7.8%。EPSS 销售额的强劲增长推动
[Tab 收入增长，预计中国仍将是我们预测期内增长最快的地区。
Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y
le_I 我们预计耐世特 2016-2019 年的股东净利润将实现 17.9%的复合增长率。 除收入增长外， 股价变动 1 个月 3 个月 1 年 汽 我们预计耐世特将继续保持稳定的利润率，主要由于其先进的 EPSS 销售组合和有效的成 nfo1 Abs. % 3.6 4.7 71.1 车 本控制。 绝对变动 % ] 及 Rel. % to HS Index 9.1 (1.4) 41.4 我们首次给予公司“收集”评级，目标价 19.33 港元，分别对应 17.5 倍 2017 年市盈率和 相对恒指变动 % 零 14.9 倍 2018 年市盈率，4.6 倍 2017 年市净率和 3.7 倍 2018 年市净率。耐世特专注转向 Avg. Share price(HK$) 16.8 17.6 14.1 平均股价（港元） 部 系统，是全球同业盈利最高的上市公司之一，因此我们认为我们的估值是合理的。我们的 Source: Bloomberg, Guotai Junan International. 件 估值比香港同业高，但与全球同业平均市盈率相当。 行 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 (US$ m) (US$ m) (US$) (△ %) (x) (US$) (x) (US$) (%) (%) 2015A 3,361 205 0.082 26.2 27.4 0.331 6.8 0.016 0.7 27.1 nfo2 2016A 3,842 295 0.118 43.9 19.1 0.424 5.3 0.024 1.1 31.3 中] 2017F 4,108 353 0.141 19.5 15.8 0.537 4.2 0.028 1.2 29.4 4,446 416 0.166 17.7 13.4 0.671 3.3 0.032 1.5 27.5 外 2018F 耐 2019F 4,814 483 0.193 16.3 11.5 0.827 2.7 0.038 1.7 25.8 运 世 [Table_BaseData]Shares in issue (m) 总股数 (m) 2,505.1 Major shareholder 大股东 PCM Holding 67.2% 特输 Market cap. (HK$ m) 市值 (HK$ m) 43,689.8 Free float (%) 自由流通比率 (%) 32.8
3 month average vol. 3 个月平均成交股数 (‘000) 6,189.3 FY18 Net gearing (%) FY18 净负债/股东资金 (%) Net cash
52 Weeks high/low (HK$) 52 周高/低 (HK$) 20.400 / 9.800 FY18 Est. NAV (HK$) FY18 每股估值（港元） 23.2 NexteerHK) (01316 Source: the Company, Guotai Junan International.
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[Table_PageHeader] Nexteer (01316 HK)
] 1 r a M t h g i R _ e l b a T [
Table of Contents
Automobile Industry Overview ...... 3
2018
China Automobile Market ...... 3
US Automobile Market ...... 4 1 March
Steering Market Overivew ...... 5
Market dynamic ...... 5
Analysis of Nexteer Under Porter’s Five Forces ...... 6
The Next Technological Upgrade ...... 7
Peers Comparison ...... 10
] 2 r a M t h g i R _ e l b a T [
Company Analysis ...... 10
Backlog Analysis ...... 12
Financial Analysis ...... 13
Investment Thesis, Valuation and Risk ...... 18
Financial Statements and Ratios ...... 20
(01316 HK)
耐世特 Nexteer
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See the last page for disclaimer Page 2 of 21 [Table_PageHeader] Nexteer (01316 HK)
Automobile Industry Overview
] 1 r a M t h g i R _ e l b a T [
A stable global automobile industry is expected. According to PricewaterhouseCoopers (“PWC”), global production volume in
the automobile industry grew from 56 million units in 2003 to 93 million units in 2016. PWC expects global production volume to 2018 rise to 112 million units in 2023, representing a CAGR of 2.8% during 2017 to 2023. The primary driver of future growth is largely derived from the Asia Pacific region with China being one of the largest contributors. We believe that the strong growth has
stemmed from a stronger economic outlook of the Asia Pacific region, which has remained robust and the strongest region 1 March globally in 2017, according to the IMF. In most Southeast Asian economies, growth is expected to accelerate somewhat, supported by robust domestic demand which is an important driver of growth in these countries. Moreover, automobile manufacturers have continued to shift their production facilities from high-cost regions, such as North America and Europe, to lower-cost regions, such as China and Southeast Asia.
Figure-1: Global Vehicle Sales by Country Figure-2: Global Production Volume and Forecast
Units (million) 2014 2015 2016 2017 Units (million) 2017-2023 CAGR: 2.8% 30 120
25 100
] 2 r a M t h g i R _ e l b a T [ 20 80
15 60 10 40 5 20 0
0
USA
Italy
Brazil
China
Korea
Japan
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Canada
Australia
2017F 2018F 2019F 2020F 2021F 2022F 2023F Germany Source: CAAM, WIND, Guotai Junan International. Source: PWC, Guotai Junan International.
China Automobile Market
A transition year in 2017. According to China Association of Automobile Manufacturers (“CAAM”), China vehicle sales grew
3.0% yoy in 2017, and was significantly lower than the three year high of 13.7% in 2016. In particular, sales growth of passenger (01316 HK)
vehicles (“PV”) showed a larger reduction due to the scale down of purchase tax cut in 2017. In 2017, PV sales was up 1.4% yoy, 耐世特 but was 13.7 ppts lower than in 2016. In terms of vehicle type, SUVs continued to be the driver of the overall PV market, recording 13.3% yoy growth in 2017, while sedans stayed rather flat at -2.5% yoy growth; both MPVs and crossovers were down by a larger magnitude of 17.5% yoy and 20.0% yoy, respectively. In contrast, commercial vehicles (“CV”) sales was far better Nexteer than PV sales, up 14.0% in 2017, mainly driven by better heavy-duty truck (“HDT”) sales.
Figure-3: China Vehicle Sales and Sales Growth Figure-4: Sales Growth of Different Types of PVs
Overall vehicle yoy Units Sedan MPV SUV Crossover 80% 35,000,000 45.5% 50% 45% 30,000,000 60% 40% 32.5% 25,000,000 35% 40% 24.8% 30% 20,000,000 22.3% 25% 20% 15,000,000 13.9% 13.7% 20% 0%
10,000,000 15%
15 16 17
15 15 16 16 17 17
15 15 16 17 17 14 16
15 17 16
- -
6.8% -
------
------
- - 6.6% - 4.2% 4.6% 10%
5,000,000 2.7% 3.0% -20%
Apr Apr Apr
Oct Oct Oct
Jun Jun Jun
Feb Feb Feb
Aug Aug Aug
Dec Dec Dec 5% Dec
- 0% -40%
Report
2006 2007 2008 2009 2012 2013 2014 2015 2016 2017 2011 2010 -60%
Source: CAAM, Guotai Junan International. Source: CAAM, Guotai Junan International.
Company
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We forecast single-digit growth in 2017 onwards. We forecast overall automobile market growth to further decrease in the
next few years. Without any stimulus policy, the vehicle market will maintain single-digit growth.] 1 r a ThisM ist becauseh g i R 1)_ sincee l 2011,b a T [
the vehicle market has already been growing at a much slower pace due to a saturating market. Japan’s and South Korea’s
vehicle market became saturated upon surpassing 84 units and 63 units of vehicle ownership per one thousand inhabitants,
respectively. China reached that level in 2011 and data from previous years has proven that China’s vehicle market will grow in a 2018 more steady manner; 2) vehicle sales growth is highly correlated with economy growth. We think that vehicle sales growth will follow the overall trend in China’s economy in the next few years, which will exhibit a stable and moderate growth trend; and 3) this year, as history revealed in 2010, the scaling down of purchase tax subsidy would result in slower sales growth which is 1 March consistent to the current trend.
Figure-5: China Vehicle Sales and Forecast
Units Vehicle sales yoy 35,000,000 50.0% CAGR:25.4% 45.5% CAGR:5.4% 45.0% 30,000,000 37.5% 40.0% 33.5% 32.5% 25,000,000 35.0%
20,000,000 24.8% 30.0% 22.3% 25.0% 15,000,000 16.9% ] 2 r 20.0%a M t h g i R _ e l b a T [ 13.1% 13.8% 13.9% 13.7% 10,000,000 15.0% 6.6% 6.8% 10.0% 4.2% 4.6% 5,000,000 2.7% 3.0% 1.5%0.6%0.8% 5.0%
- 0.0%
2002 2004 2006 2007 2009 2011 2013 2014 2016 2001 2003 2005 2008 2010 2012 2015 2017
2018F 2020F 2019F Source: CAAM, Guotai Junan International.
US Automobile Market
A tough year for the US market. Vehicle sales dropped in 2017 after growing for 8 consecutive years since 2009. Retail demand was weak in 2017 and US auto sales fell for most of the year, ranging from 1.4% to 3.2%. Similar to China, the SUV / crossover market has been the better segment in recent years. Classified as light-duty trucks in the US, the SUV / crossover
market was up 4.2% in 2017, while pick-up trucks have also shown improved growth, up 5.8% yoy in 2017. On the contrary, (01316 HK) sedans were down 11.6% yoy in 2017. Traditional US automakers, Ford, General Motors (“GM”) and Fiat Chrysler Automobile
(“FCA”), displayed similar trends to the industry, with sales mostly experiencing yoy decline in 2017. The expectation is that the 耐世特 current year should experience marginal full-year decline with the outlook remaining challenging as market replacement
demand has largely been filled and cyclical downward trend is more than likely after 8 years of yoy increase. Nexteer
Figure-6: US Auto Sales Growth Figure-7: Traditional Automakers - Auto Sales in the US
Light vehicle Light truck Light car FCA Ford GM 30.0% 50.0% 25.0% 40.0% 20.0% 15.0% 30.0% 10.0% 20.0% 5.0% 10.0% 0.0%
0.0%
03 06 03 06 09 12 03 06 09 12 03 06 09 09 12 12
------
-5.0% -
03 09 03 09 03 09 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 06 12 06 12 06 12
------
-10.0% -10.0%
2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2014 2014 2017
2011 2011 2012 2012 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2011 2012 2012 2013 2013
-15.0% -20.0% 2011
-20.0% -30.0%
Report
Source: WardsAuto, Guotai Junan International. Source: WardsAuto, Guotai Junan International.
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See the last page for disclaimer Page 4 of 21 [Table_PageHeader] Nexteer (01316 HK)
Steering Market Overview
] 1 r a M t h g i R _ e l b a T [
Growing demand for electric power steering systems (“EPSS”). Historically, vehicles have operated using manual steering
systems through a rack and pinion system. Next came hydraulically-assisted steering systems (“HPSS”), which dominated the 2018 automotive world since 1951. Although EPSS had long existed, the system never quite matched the low cost and performance of hydraulic power assisted steering systems in the early days. In the past decade, the adoption of EPSS has increased as
manufacturing costs have become relatively cheaper. Coupled with other advantages such as efficiency, convenience and 1 March packaging, the penetration rate of EPSS was around 54.7% globally in 2016.
Figure-8: Steering Systems Segment
Steering
Manual Power
Hydraulic Electric
] 2 r a M t h g i R _ e l b a T [
Column driven Pinion driven Rack driven EPS EPS EPS
Source: Guotai Junan International.
Market dynamic
Steady growth in the EPS market is expected. By consolidating market research data, we estimate that the global EPSS market will post CAGR of about 7% in 2017 to 2021. Currently, North America occupies a majority of the global EPSS market and we expect the US to continue to dominate the market over the next few years thanks to major contributions from the US,
which is the second largest auto market in the world, albeit slower growth due to saturation of the market. On the other hand, Asia Pacific (“APAC”) is expected to be the fastest growing regional segment, attributable to the swift increase in conversion of EPS in light commercial vehicles (“LCV”) and PVs, especially coming from China and India. Within these high-growth regions, the underlying driver is the increasing demand in sales of PVs and SUVs, and the convenience in vehicle purchase such as (01316 HK) lower cost of finance, comfortable repayment options and increasing sales incentives have been supportive to the auto market. 耐世特 EPSS are structurally better than HPSS in light of the current market trend of fuel efficiency. EPSS is a comparatively newer technology with less complicated build and mechanism; it takes up less space and is more durable. Therefore, vehicles Nexteer that apply EPSS are generally lighter in weight and more fuel efficient. The elimination of extra accessories also simplifies the manufacturing and maintenance process. Moreover, in engineering terms, hydraulic steering systems pull energy from the engine whenever the car is running, whether the steering system is engaged or not. This is why hydraulic steering systems cause the engine to consume higher amounts of fuel than EPSS. As such, with fuel economy and electric power to be the future trend in the automotive world, we expect EPSS will be a more preferable option for OEMs.
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See the last page for disclaimer Page 5 of 21 [Table_PageHeader] Nexteer (01316 HK)
Analysis of Nexteer Automotive under Porter’s Five Forces
] 1 r a M t h g i R _ e l b a T [
Bargaining power of suppliers: Medium pressure
The primary types of materials purchased are 1.) electrical parts, particularly controllers, motors and sensors; 2.) machined
parts, including castings and forgings, bearings, and stampings; and 3.) commodity purchases. We believe that suppliers of 2018 these raw materials are not concentrated or differentiated, implying lower bargaining power for them. Also, despite that the cost
of commodity purchases is significantly impacted by market price, such as steel and rare earth materials, and could 1 March significantly affect purchase decisions, the impact can be mitigated by a full or partial pass-through clause within customer contracts, therefore this does not present significant pressure to Nexteer.
Bargaining power of customers: Medium pressure Auto parts customers are mainly auto OEMs, which generally have the most bargaining power along the supply chain. However, when the auto parts include more technologically driven content such as EPSS, the bargaining power of customers should reduce. In the current market, cooperation between suppliers and OEMs are more suitable ways when steering becomes a core component of vehicles. Moreover, development costs are generally less for the next model generation than the first one, making the OEMs more likely to keep original suppliers. The above factors should balance out the bargaining power between suppliers and auto OEMs.
] 2 r a M t h g i R _ e l b a T [
Threat of new entrants: Low pressure Capital and technical capability requirements are high in this segment. The global steering systems market is capital intensive; high investment is required for continuous testing of new products and development. New entrants with lesser capital structures have limited resources for sustainable development in this industry. Another main barrier to entry is the limited access of relevant technology, which has been developed through long-term relationship with global OEMs. New business opportunities arise only when OEMs engage in development of new models or redesigns of existing models, and we believe long-term business partners are more favorable than new entrants as switching cost will be high for OEMs, as well as that components suppliers usually have installed components integrated with OEMs, giving them competitive advantages over new entrants.
Threat of substitute products or services: Medium pressure Steering systems have grown to become a technological part of the vehicle, especially with the rise in EPSS, which has fended
off competition to some extent. When HPSS was still the major steering solution of vehicles, there were more competitors and (01316 HK) substitute options in the industry. Moreover, during the life cycle of a model or platform, there tends to be several suppliers sharing the same source for steering systems. However, when EPSS emerged as the next technological upgrade, less players 耐世特 had this manufacturing capability and this reduced competition.
Nexteer Competitive rivalry: Medium pressure The steering systems industry is rather concentrated, which is primarily dominated by multinational companies including JTEKT Corporation, Bosch, TRW, NSK, Mando and Nexteer. In 2012, approximately 73% of global steering system sales were contributed by the top seven manufacturers, and we believe that this figure should continue to rise in 2017 along with increasing EPSS adoption rates. In 2016, JTEKT and Bosch together seized more than one-third of the share of the market. Moreover, as EPSS overtook HPSS as the mainstream automotive steering system (capturing 54.7% market share globally and 53% in China), products became more differentiated than during the days when HPSS were the main steering solution.
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See the last page for disclaimer Page 6 of 21 [Table_PageHeader] Nexteer (01316 HK)
The Next Technological Upgrade
] 1 r a M t h g i R _ e l b a T [
One trend in the market is the penetration of steering-by-wire (“SBW”) technology. SBW technology helps to remove the
physical connection between the steering wheel and the steering system with the help of electrically connected motors, helping 2018 to change the direction of the front wheels. With SBW, the vehicle's computer gets the command from the connected device, and the computer sends the command to the wheels. While gaining market share might be a difficult task in this industry and
due to the late stage of EPSS conversion, the next market reshuffle could start with the next technology shift to advanced driver 1 March assistance systems (“ADAS”) featuring EPSS or SBW. We believe Nexteer is well-positioned in the next technology upgrade stage due to its strong R&D investment, existing ADAS / SBW technology capabilities and the formation of key partnerships.
Strong R&D Investment: Nexteer has strong research capabilities to help keep them ahead in the market. Nexteer R&D expenditure started to pick up again in 2016, recording 6.4% as percentage of sales. We also noticed that Nexteer has devoted a significant amount of resources into R&D comparatively, one of the most among its peers, just below German company Bosch. We believe its R&D focus strategy has helped them during the last EPSS conversion cycle, helping them to continue to move up in the steering systems market. Nexteer has an R&D centre located in China to serve as a technical centre to support product development in China on brush motor-based column EPSS. Recently the Suzhou centre expanded its operational scope to product design, development and release of customer programs for more
] 2 r a M t h g i R _ e l b a T [ regional focus.
Figure-9: Nexteer R&D Expenditure Figure-10: R&D Expenditure Comparison
10.0% 9.5% 8.8% 10.0% 9.0% 9.0% 8.0% 7.4% 8.0% 7.0% 6.4% 6.1% 6.1% 7.0% 6.4% 6.0% 6.0% 5.5% 4.8% 5.0% 5.0% 3.7% 4.0% 4.0%
3.0% 3.0% 2.0% 2.0% 1.5% 1.0% 1.0%
0.0% 0.0% (01316 HK) 2012A 2013A 2014A 2015A 2016A JTEKT Bosch NSK Ltd ZF Group Mando Nexteer
耐世特 Source: the Company, Guotai Junan International. Source: the Companies, Guotai Junan International.
ADAS Technology: EPS is a key ADAS enabler and a major ingredient to the gateway to a semi-automated and fully Nexteer automated driving experience. Nexteer initiated the development of ADAS modules ten years ago and began system integration with global OEMs two years ago. Currently, there are many Nexteer EPSS-enabled ADAS features on the road. Park assist, lane keeping and lane departure warnings are a few common functions on today’s road. In Jan. 2017, Nexteer unveiled commercially viable by-wire technology at the US auto show, namely Nexteer Steering on Demand™ System and Nexteer Quiet Wheel™ Steering. The technology enables vehicles to perform Society of Automotive Engineers (“SAE”) level 3, 4 and 5 automated driving. We believe that this is important for any components supplier to launch next generation technology, as it will allow them to engage in development programs with OEMs during the early stages.
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See the last page for disclaimer Page 7 of 21 [Table_PageHeader] Nexteer (01316 HK)
Table-1: SAE Level of Driving Automation Execution of Fallback System Monitoring of steering and ] 1 r a M performancet h g i R _ capabilitye l b a T [ Level Name Narrative Definition driving acceleration of dynamic (driving environment /deceleration driving task models)
Human driver monitors the driving environment
the full-time performance by the human driver of all 2018
0 No Automation aspects of the dynamic driving task, even when Human driver Human driver Human driver n/a enhanced by warning or intervention systems
the driving mode-specific execution by a driver 1 March assistance system of either steering or acceleration/deceleration using information about Human driver Some driving Driver Assistance Human driver Human driver 1 the driving environment and with the expectation and system modes that the human driver perform all remaining aspects of the dynamic driving task the driving mode-specific execution by one or more driver assistance systems of both steering and acceleration/deceleration using information about Some driving Partial Automation System Human driver Human driver 2 the driving environment and with the expectation modes that the human driver perform all remaining aspects of the dynamic driving task
Automated driving system("system") monitors the driving environment
the driving mode-specific performance by an automated driving system of all aspects of the Some driving
3 Conditional Automation dynamic driving task with the expectation that the System System ] 2 r Humana M t driverh g i R _ e l b a T [ modes human driver will respond appropriately to a request to intervene
the driving mode-specific performance by an automated driving system of all aspects of the Some driving High Automation System System System 4 dynamic driving task, even if a human driver does modes not respond appropriately to a request to intervene
the full-time performance by an automated driving system of all aspects of the dynamic driving task All driving Full Automation System System System 5 under all roadway and environmental conditions modes that can be managed by a human driver Source: SAE, Guotai Junan International.
Strong partnership with industry leaders: The automotive industry is changing fast nowadays and continuously
redefines the future automobility. In automated driving, vehicles largely operate by wires, including the steering system, braking and throttle systems. In particular, steering and braking may be more integrated to enhance overall control motions. In Jan. 2017, Nexteer announced the formation of the joint venture with Continental AG (“Continental”), targeting to combine advanced steering and driver assistance technologies with Continental’s advanced braking technologies to (01316 HK)
accelerate advancements in vehicle motion control systems. We believe this will enhance Nexteer’s technical capabilities 耐世特 to bring further business opportunities. In addition, Nexteer is also working with Waymo, Google’s self-driving division. Despite that the collaboration may not be relevant to earnings in the short term, it is strategically meaningful to Nexteer to become a leading steering systems supplier in the future. Nexteer
The industry is changing fast with consolidation taking place in recent years. Driven by new digital technologies demand, players along the supply chain and new entrants are striving to gain a foothold in the market. Gaining relevant technologies in autonomous driving has become critical for suppliers and OEMs. As normally companies do not have enough resources (talent, organizational skill, culture) to build all the required technologies in-house, we should see more partnerships / acquisitions / takeovers in the industry. Therefore, we think that Nexteer working with Continental AG and Waymo is strategically beneficial for the Company to be the best supplier in steering solutions. According to PWC, M&A deal value of components suppliers in 1H17 reached USD 20.6 billion, the highest disclosed deal value in the last five years. Further, transactions were mainly focused on an auto-tech combination, with fifteen auto-tech deals completed in the first half of 2017, compared to just three in 2016. Technology deals include, but are not limited to, sensors, electronics, cameras, LiDAR, software, Bluetooth, and alternative powertrains, which are all key components of new technologies (See table 2, 3 & 4 for some major deals / investments).
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Figure-11: Global Automotive M&A Deal Volume and Figure-12: Components Suppliers M&A Activity
Value ] 1 r a M t h g i R _ e l b a T [
USD bn Disclosed Deal Value Deal Volume (RHS) Non-megadeal USD bn 40.0 300 Megadeal Deal Volume (RHS) 276 276 25.0 160 35.0 264 257 2018 250 250 140 30.0 222 20.0 120 200 25.0 100 15.0 1 March 20.0 150 15.0 80 17.2 34.1 10.0 15.0 60 27.5 100 3.9 24.4 7.0 10.0 21.3 40 5.0 - 6.3 13.1 50 6.4 20 10.6 4.7 5.6 5.0 2.3 3.2 2.8 - - - 0 1H12 1H13 1H14 1H15 1H16 1H17 1H12 1H13 1H14 1H15 1H16 1H17 Source: PWC, Guotai Junan International. Source: PWC, Guotai Junan International.
Table-2: Automobile Industry Related Acquisition on ADAS Technology Date Acquirer Acquiree Nature of acquirer Nature of acquiree 2015 Continental Elektrobit Traditional supplier A specialist in highly innovative software solutions
] 2 r a M t h g i R _ e l b a T [ A Carnegie Mellon University spinoff company that provides 2015 Delphi Ottomatika Traditional supplier software and systems development for self-driving vehicles 2015 ZF TRW Traditional supplier Safety systems supplier Advanced Scientific Concepts Supplier of 3D Flash LIDAR Vision Systems for terrestrial, 2016 Continental Traditional supplier (Auto Lidar Division) aerial and space applications 2016 GM Cruise Automotive OEM A San Francisco-based self-driving car kit startup 2017 Delphi NuTonomy Traditional supplier Self-driving car company 2017 Continental AG Quantum Inventions Traditional supplier Mobility intelligence provider Semiconductor, as new 2017 Intel Mobileye A leader in computer vision for autonomous driving technology entrant Source: PWC, the Companies, Guotai Junan International.
Table-3: Automobile Industry Related Investment on ADAS Technology Date Investor Investee Nature of investor Nature of investee A developer of vehicle technologies that delivers safety and fuel 2015 Volvo Peloton OEM savings to fleets in the trucking industry
2015 Delphi Quanergy Traditional supplier A leader in 3D sensing (01316 HK)
Bosch(2018),
Intel(2017), BMW, OEMs/Traditional 耐世特 2015-2018 HERE Mapping and location services Audi, and suppliers/New entrants Mercedes(2015)
Source: PWC, the Companies, Guotai Junan International. Nexteer
Table-4: Automobile Industry Related Partnerships with ADAS Technology Date Partnership Nature/Scope of partnership 2015 GM Mobileye A leader in computer vision for autonomous driving technology
2015 Volkswagen Mobileye A leader in computer vision for autonomous driving technology The creation of an HD map with integrated Radar Road Signature layer for the 2015 Bosch TomTom localisation of vehicles in autonomous driving 2016 BMW Intel and Mobileye Developing self-driving platform
Builds LG’s telematics tech together with HERE’s location services and high-resolution maps to offer something automakers can use as a 2017 LG HERE communications hub for both semi-autonomous and fully autonomous vehicle platforms
A five-year joint R&D project that SenseTime's AI and deep learning smarts 2017 Honda SenseTime combine with Honda's automotive focused-AI tech to develop solutions 2016: developed a vehicle with a new approach to communication; 2018: the
2016-2018 Hyundai Cisco production of a next-generation, hyperconnected car.
2018 Baidu Blackberry Blackberry's QNX used as the basis for Baidu’s Apollo self-driving platform Report
2018 Volkswagen and Hyundai Aurora (founded by Google) To incorporate Aurora self-driving technology in production cars by 2021
Source: PWC, the Companies, Guotai Junan International. Company
See the last page for disclaimer Page 9 of 21 [Table_PageHeader] Nexteer (01316 HK)
Peers Comparison
] 1 r a M t h g i R _ e l b a T [
Nexteer as a steering pure play among its peers. When comparing with other close peers operating globally, Nexteer
generates the most revenue from steering systems, comprising over 80% of their business activity. Meanwhile, other peers 2018 have a much lower revenue mix from steering units; our figures should be overstated to a certain extent as the steering division is only part of a segment only. It has been noticed that these global auto components companies are all well positioned in their
respective local markets with the majority of revenue generated from where the company is based. For example, Bosch and ZF 1 March Group, which are based in Germany, have the majority of revenue coming from Europe; NSK and JTEKT generate revenue mostly from Japan. On the other hand, it has also been noticed that these companies have also expanded into China and most of them have more than 20% revenue generated from China.
A global downward trend, but Nexteer to remain stable. Looking at the steering division sales trend, most experienced a slowdown in sales, consistent with the saturating EPSS market and more noticeable with Japanese peers, seeing a yoy decline in 2016. Meanwhile, Nexteer has been able to keep low double-digit growth in 2016 thanks to its exposure in China. Moreover, as Nexteer has a more focused business segment than other peers, we believe this allows the company to work more efficiently, in our view, and therefore yielding a higher EBIT margin (see figure 13).
Table-5: Peers Overview ] 2 r a M t h g i R _ e l b a T [ % of US or Steering-related Total sales Steering division % of Largest revenue % of largest North % of Company division sales (US$ m) group sales contribution revenue region America China (US$ m) revenue JTEKT 11,865 5,744 48% Japan 42% 22% 10% Bosch 80,442 48,330 60% Europe 53% 19% 28% NSK Ltd 8,543 3,315 39% Japan 35% 17% 21% ZF Group 38,683 15,891 41% Europe 48% 28% 22% Nexteer 3,842 3,206 83% North America 65% 65% 22% Source: the Companies, Guotai Junan International. Note: Bosch steering division is included in Mobile Solution Segments; NSK steering division is included in Automotive Component Business; ZF Group steering division is included in Active and Passive Safety Technology unit.
Figure-13: EBIT Margin Figure-14: Steering Division Sales Growth
12.0% 10.8% JTEKT Bosch NSK Ltd Nexteer
10.0% 30%
25% (01316 HK) 8.0% 6.9% 20% 5.9% 6.0% 5.2% 耐世特 4.7% 4.8% 15%
4.0% 10%
5% Nexteer 2.0% 0% 2014 2015 2016 0.0% -5% JTEKT Bosch NSK Ltd ZF Group Korea's Nexteer Mando -10%
Source: the Companies, Guotai Junan International. Source: the Companies, Guotai Junan International. Note: We did not include ZF Group as not comparable in 2016, after acquired TRW in 2015.
Company Analysis
Nexteer is a global leader in advanced steering systems, driveline systems, ADAS and autonomous vehicle technology. The Company designs, develops, manufactures and distributes steering and driveline systems and components,
primarily for OEMs. The Company has 25 manufacturing plants, 5 regional engineering centers and 11 customer service centers strategically located in North and South America, Europe and Asia. With more than 13,000 employees, the Company
has established a global customer network that serves over 50 customers including BMW Group (“BMW”), Fiat Chrysler
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Automobiles N.V. (“FCA”), Ford Motor Company (“Ford”), General Motors Company and Subsidiaries (“GM”), SAIC General
Motors Co., Ltd. (“SGM”), SAIC-GM-Wuling Automobile Co. Ltd. (“SGMW”), PSA Groupe (“PSA”), Toyota Motor Corporation
(“Toyota”) and Volkswagen Group (“Volkswagen”), as well as domestic automakers in India, China and South America. Company
See the last page for disclaimer Page 10 of 21 [Table_PageHeader] Nexteer (01316 HK)
Table-6: Key milestones in the development of Nexteer Date Development milestones
] 1 r a M t h g i R _ e l b a T [
1906 Founded as Jackson, Church & Wilcox Co. in the U.S. 1909 Acquired by Buick, which was owned by GM 1917 Separated from Buick and became Jackson, Church, Wilcox Division, the first automotive parts manufacturing division of GM
1995 Expanded into China market by establishing Nexteer Zhuozhou, a joint venture, in China to produce halfshafts 2018
1998 Organized as a division of Delphi Corporation which was created by GM 1999 Became a division of an independent publicly held corporation after Delphi Corporation was spun-off from GM
2009 Acquired by GM and renamed Nexteer Automotive 1 March 2010 Acquired by Pacific Century Motors China (“PCM China”) from GM. 2011 AVIC Auto acquired a 51% interest in PCM China from Beijing E-Town 2013 Listed on HKEX Registered a new indirect wholly-owned subsidiary, Nexteer Automotive Systems (Liuzhou) Co., Ltd., in China to expand 2015 manufacturing capacities for Entry level brush motor column-assist EPS (BEPS)
Opened a record 3 new manufacturing facilities to meet the demands of a growing customer base including a wholly-owned 2016 facility located in Brazil, a joint venture in Chongqing, China both focused and a new facility in India. Unveiled steering by wire technology. As well as, forming a joint venture with Continental on autonomous driving technology 2017 collaboration. Source: the Company.
Nexteer has a history which traced back to 1906. The Company was founded by Jackson, Church & Wilcox Co in 1906,
] 2 r a M t h g i R _ e l b a T [ which was then acquired by GM. In 1917, the Company became the first automotive parts manufacturing division of GM engaged in steering systems research, design and manufacture. In 1998, the Company’s steering operations became a major business division under Delphi Corporation, an automotive components business under GM that was subsequently spun-off and became an independent publicly-held corporation in 1999. In 2009, GM acquired, among other things, the steering operations from Delphi Corporation and renamed it Nexteer Automotive. In November 2010, the Company was acquired by Pacific Century Motors China (“PCM China”) and in March 2011, AVIC Auto acquired a 51% interest in PCM China.
Figure-15: Nexteer Shareholders’ Structure
Beijing E-Town AVIC Automobile International Automotive Systems Holding Co., Ltd. Investment & (“AVIC”) Management Co. Ltd. 49% 51%
PCM China (01316 HK)
100% 耐世特 Nexteer Automotive (Hong Kong) Other Shareholders
Holdings Limited Nexteer
67% 33%
The Company
Source: the Company, Guotai Junan International.
A steering systems consist of components required to provide lateral directional control of the vehicle. The Company’s steering system product lines include EPSS, HPSS as well as steering columns and intermediate shafts. A driveline system consists of the components required to transfer power from the transmission to the drive wheels. The Company’s driveline system products include front wheel drive halfshafts, intermediate drive shafts and rear wheel drive halfshafts as well as propeller shaft joints.
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Company
See the last page for disclaimer Page 11 of 21 [Table_PageHeader] Nexteer (01316 HK)
Figure-16: Nexteer Products
] 1 r a M t h g i R _ e l b a T [
2018
1 March
Source: the Company, Guotai Junan International.
] 2 r a M t h g i R _ e l b a T [
Table-7: Major Products and Customers Key Product Line OEM Customers ELECTRIC POWER STEERING (EPS)
Column-assist EPS (CEPS) GM, Shanghai GM, FCA Entry level brush motor column-assist EPS (BEPS) SGMW Rack-assist EPS (REPS) Ford, FCA, GM Single pinion-assist EPS (SPEPS) PSA, Dongfeng Peugeot Citroen, BMW HYDRAULIC POWER STEERING (HPS)
Magnasteer with Torque Overlay (MTO) GM, FCA, PSA Smart Flow STEERING COLUMNS AND INTERMEDIATE SHAFTS (CIS) GM, Chevrolet Impala, Cadillac ATS, Ford DRIVELINE SYSTEMS (DL)
Halfshafts FCA, GM, PSA, Volkswagen, some China and India domestic OEMs Intermediate drive shafts GM Propeller shaft joints Ford ADAS AND AUTOMATED DRIVING (AD)
Nexteer Steering on Demand™ System
Nexteer Quiet Wheel™ Steering
Source: the Company.
(01316 HK) Backlog Analysis
耐世特 Nexteer possess a rich backlog of orders. Nexteer’s earnings can be sustainability analyzed through its backlog. As at 3Q17, the Company had a large backlog of orders worth USD 23.7 billion, with 70% of its backlog comprising of EPSS orders. The Nexteer backlog in orders has slightly decreased from 2016, mainly affected by order cancellation of USD 1.4 billion associated with the sale of Opel-Vauxhall from GM to PSA group. Despite that, it is promising that Nexteer can win back orders from PSA, as the Company has a good working relationship with PSA group, and has just won CMP platform orders with PSA. Of the backlog, North America will continue to be the key segment for Nexteer, comprising 60%; while Asia and other regions comprise 22% and 18%, respectively. Moreover, customer base is diversifying with GM motors comprised of only about 38% of the backlog, compared to 44% contribution in 1H17.
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Company
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Figure-17: Nexteer’s Backlog by Product Figure-18: Nexteer’s Backlog by Region (1H17)
] 1 r a M t h g i R _ e l b a T [
USD bn EPS HPS CIS DL 30.0
25.6 24.0 23.7 18%
25.0 2018 North America 20.0 Asia 15.0 1 March
22% 60% 10.0 Europe & South America 5.0 0.0 End of 2016 1H17 3Q17
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Customer base is widening with help from the Asia Pacific region. By analyzing the new production project launches during 2016 and 1H17, it is been noticed that Asia Pacific is truly the new growth engine for Nexteer, adding 33 new production
] 2 r a M t h g i R _ e l b a T [
projects for the period 2016 and 1H17. Customers include state-owned enterprises such as BAIC, Changan, Dongeng, FAW, etc., which we believe partly benefits from AVIC’s shareholding, the controlling stakeholder of Nexteer. We believe that AVIC will help Nexteer to continue to penetrate the China market, allowing a sustainable source of growth as the majority of China OEMs are state-owned enterprises. Moreover, earnings quality is also supported by the growing customer base from JV in China. For example, Nexteer has started supplying BMW China’s UKL platform (JV of BMW and Huachen) in 1H17, for models of 1-series and X1. On the other hand, new productions for both North America and Europe and South America are all from long-term customers (FCA, GM and Fiat), suggesting a mature market which is hard to penetrate and growth should be very limited in the current market landscape.
Table-8: New Production Launches in 2016 and 1H17
Asia Pacific Europe & South America North America Total
BAIC Motor 1 1 BMW 2 2
Changan 4 4
Chery 1 1
Dongfeng Liuzhou 6 6 (01316 HK)
FAW-VW 1 1
FCA 3 2 5
Ford 2 2 耐世特
GM 6 1 9 16 Haitec 1 1
Mahindra & Mahindra 1 1
Nexteer PSA 1 1
Renault Nissan 2 2
SGM 2 2
SGMW 1 1
Tata Motors 5 5
33 5 13 51 Source: the Company, Guotai Junan International.
Financial Analysis
Nexteer’s revenue to grow at a CAGR of 7.8% during 2016 to 2019. We expect slower growth in our forecasted period as compared to 2013 to 2016, because of slower EPSS conversion rate and a slowdown of US and China’s vehicle market growth. We expect moderate EPSS demand in the next few years as driven by the global trend of fuel efficiency emphasis which puts EPSS as the first steering option. As a result, we expect sales mix will continue to focus on EPSS, and we forecast that EPSS
composition will constantly increase from 62.0% in 2016 to 65.1% in 2019. Accordingly, increased EPSS will drive overall
steering revenue (EPSS + HPSS + CIS) up to 84.3% in 2019 from 83.4% in 2016, but may be slightly offset by slowing demand Report
from HPSS and CIS. Moreover, as Nexteer has more exposure to SUVs and light commercial vehicles, that should make the Company growth faster than the industry average, as these sub-segments (SUVs in particular) are the driving forces in global
vehicle markets.
Company
See the last page for disclaimer Page 13 of 21 [Table_PageHeader] Nexteer (01316 HK)
Figure-19: Nexteer’s Revenue Mix by Product Figure-20: Nexteer’s Revenue by Product
] 1 r a M t h g i R _ e l b a T [
EPS HPS CIS Driveline EPS HPS CIS Driveline yoy USD mn
100%
90% 19.7% 18.3% 17.4% 16.6% 16.3% 16.1% 15.8% 6,000 30.0% 24.8%
80% 2018 15.0% 5,000 25.0% 18.1% 16.5% 16.1% 15.6% 70% 21.5% 19.6% 4.4% 4.2% 4.9% 4.6% 4,000 20.0% 60% 6.1% 5.0% 14.3% 13.4% 1 March 50% 3,000 12.8% 15.0% 40% 10.1% 8.2% 8.3% 62.0% 63.0% 63.9% 65.1% 2,000 6.9% 10.0% 30% 56.0% 59.5% 20% 45.4% 1,000 5.0% 10% 0% - 0.0% 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2013A2014A2015A2016A2017F2018F2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
China will remain as the fastest growing market. The US is Nexteer’s major market, comprising 65.4% of total sales in 2016. However, market growth in the US is not too optimistic after recording its first decline in 2017 since 2009. We believe sales to
] 2 r a M t h g i R _ e l b a T [
North America will stay flat as sales should not experience large fluctuations in the already mature US market. Supportive factors to Nexteer is their focus on light trucks (SUV /CUV), which should keep them ahead of the market. The relatively flat growth in North America should result in the fast growing Asia market, especially China, contribute more sales than before in terms of sales mix. The faster growth in China is backed by continuous EPSS conversion from HPSS, as well as expected expansion of client base in China. In terms of growth, we forecast North America / Asia Pacific / Europe and South America to grow at a CAGR of 6.9% / 13.7% / -0.6%, respectively. Consistent with the overall market trend, we expect China to be the fastest growing market, but to slowdown as purchase tax subsidies are no longer applicable in 2018 onwards. As a result, we expect sales mix from Asia Pacific to increase from 23.4% in 2016 to 27.5% in 2019.
Figure-21: Nexteer’s Revenue Mix by Region Figure-22: Nexteer’s Revenue by Region
North America Asia Pacific Europe and South America North America Asia Pacific Europe and South America
USD mn (01316 HK) 100% 6,000 11.0% 11.2% 10.4% 9.6% 8.8% 90%
5,000 耐世特 80% 23.1% 23.4% 24.8% 26.1% 27.5% 70% 4,000 60%
50% 3,000 Nexteer 40% 2,000 30% 66.0% 65.4% 64.9% 64.3% 63.8% 20% 1,000 10% 0% 0 2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Increasing ADAS content in China supports Nexteer to expand market share. The Chinese Government is very supportive of making the community into a highly connected society. Recently, MIIT published a three-year action plan for the development of artificial intelligence (2018 to 2020) [促进新一代人工智能产业发展三年行动计划（2018-2020 年）], with the development of connected cars as the top priority. The measure calls for the development of a reliable, secure and responsive
connected platform to support HA level (equivalent to Level 4 SAE standard) autonomous driving by 2020. With strong support from the government, we expect that the next few years will be a strong product cycle for EPSS equipped with ADAS content.
Report
Smart content is still lagging in China, but this provides opportunity. The current market landscape does not only
compete with engine and appearance, soft content in cars is becoming the leading factor for consumers. As we have compared
Company some of the most popular SUVs in China, there are a number of findings which suggest that there is still room for improvement for self-owned brands. 1) Popular models from self-owned brands are equipped to a certain degree with ADAS content, despite See the last page for disclaimer Page 14 of 21 [Table_PageHeader] Nexteer (01316 HK)
some divergence, with cruise control being the most common feature. On the other hand, we saw that adaptive cruise control
(“ACC”) was rare, seeing it only in the Geely’s Boyue elite version. We believe this also explains] 1 r a whyM Geelyt h g ’s i BoyueR _ ise onel b of a T [
the most sought after SUVs in 2017. 2) Low-end SUVs (Baojun 510 and SX6) are the least appealing in terms of soft content,
which also justifies their lower selling price. We believe that these smart features are becoming commodities in China, making
room for Nexteer to grow alongside Chinese OEMs. 2018
Table-9: Self-owned Brands Comparison of Smart Content
Dongfeng 1 March OEM Geely GAC SGMW Dongfeng GWM Beijing Benz Honda
Model Boyue Trumpchi GS4 Baojun 510 SX6 Haval H6 CR-V GLA Model Type Compact SUV Compact SUV Mini SUV Compact SUV Compact SUV Compact SUV Compact SUV Price ('000 RMB) 157.8 161.8 76.8 88.9 146.8 259.8 399.0 2017 Sales Volume (Unit) 286,885 337,330 363,949 26,377 506,418 71,909 71,214 Cruise Control √ √ √ √ √ √ √ Adaptive Cruise Control √ - - - - √ - Park Assist Vision - - - - - √ √ Stop-and-start Engine - √ - √ √ √ √ Piloted Driving ------Hill-start Assist Control √ √ √ √ √ √ √ Auto Hold √ √ - - √ √ √
] 2 r a M t h g i R _ e l b a T [
Hill Descent Control √ √ - - √ √ √ Source: the Company, Guotai Junan International.
Raw material costs are a major component in cost of sales, comprising 70.8% in 2016. For Nexteer, raw materials were comprised of 1.) electrical parts, particularly controllers, motors and sensors; 2.) machined parts, including castings and forgings, bearings, and stampings; and 3.) commodity purchases. The cost of commodity purchases is significantly impacted by global economic conditions. The key commodities that impact material costs are steel and rare earth materials, and are subject to uncontrollable economic factors which would affect prices. However, this price risk is mitigated by having a pass-through clause in the contract to partially or fully pass on the unfavourable price movement. We believe that this practice allows the Company to maintain effective cost-control measures, and as a result, better manage margins.
Gross margin to gradually increase on more ADAS enabled products. Going forward, sales mix continues to shift towards EPS, especially on more technologically advanced EPSS, which would support more integrated ADAS capability. Due to the
importance of such features in the consumer end, we expect this process will speed up in the next few years especially in (01316 HK) China, which is not commoditized in most self-owned brands yet. Moreover, more sales are expected to be generated in China, which is generally higher margin due to cheaper labour costs and better economies of scale. We expect margin to gradually 耐世特 increase from 17.2% in 2016 to 20.4% in 2019.
Nexteer
Figure-23: Nexteer’s Cost of Sales Composition Figure-24: Nexteer’s Gross Profit Margin
25.0% 20.4% 19.6% 26.4% 18.8% 20.0% 17.2% 16.2% 27.9% 14.2% 14.1% Raw material used 15.0% 12.4% 12.5%
2.8% 3.0% Depreciation 69.1% 10.0% Others 70.8% 5.0%
0.0%
2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F
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Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Note: outer ring: 2016; inner ring: 2015
Company
See the last page for disclaimer Page 15 of 21 [Table_PageHeader] Nexteer (01316 HK)
Deleveraging is expected to continue. The Company’s gearing ratio has gradually decreased in recent years (2015 and
2016) mainly due to improved profits and repayment of borrowings, and should turn to net] cash1 r positiona M t inh 2018g i onwards.R _ e l Theb a T [
deleveraged is one of the main channels for the Company to strengthen its balance sheet. Borrowings are mainly from bank
borrowings and a bank note with principal amount of USD250 million which matures in 2021. As a result, net finance costs were
also reduced due to the lower debt level. Finance costs are mainly from the above items less any amount capitalized in 2018 qualifying asset, netting USD30.2 million in 2016. We expect further reductions to USD27.2 million in 2019. Moreover, borrowings are mainly denominated in USD (96.9%), therefore, should have less foreign exchange risk. 1 March Figure-25: Nexteer’s Net Finance Cost Figure-26: Nexteer’s Borrowings and Gearing Ratio
USD mn Total borrowings USD mn 34 Gearing Ratio(%) - Net Debt/Equity 700 30% 33 600 32 20% 500 31 10%
30 400 0% 29 300 -10% 28 200
] 2 r a M t h g i R _ e l b a T [ -20% 27 100
26 0 -30% 2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Note: negative gearing represents net cash position.
Nexteer has a fast cash conversion cycle. We have seen that the Company’s cash conversion cycle has continued to improve since 2012, and dropped to 2.7 days in 2016. We expect the cash conversion cycle to maintain at this relatively efficient level in our forecasted period, staying below 10 days. This is mainly due to the effect of the Company being able to slightly delay payments to suppliers in recent years, increasing from an average of 81 days in 2012 to 2014, to about 91 days in
2015 and 2016. We expect that the Company will be able to maintain similar credit terms with suppliers. Meanwhile, we assume inventory turnover days of about 1 month to 1.5 months and trade receivables turnover days of about 1.5 months to 2 months, which is similar to historical levels.
(01316 HK)
Figure-27: Nexteer’s Cash Conversion Cycle 耐世特
Trade receivables Inventory Trade payable Cash Conversion Cycle - CCC Nexteer 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 21.88 16.72 18.16 20.0 13.39 8.03 6.69 10.0 2.68 5.36 - 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International.
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See the last page for disclaimer Page 16 of 21 [Table_PageHeader] Nexteer (01316 HK)
Nexteer to maintain a free cash flow position during our forecasted period. Nexteer turned to positive free cash flow in
2015 and we expect strong operating cash flow to be maintained as supported by solid new] orders1 r a andM t orderh g backlogsi R _ e throughl b a T [
its business expansion in China. We also expect capital investment to be largely over as the current EPSS replacement cycle
has already passed its peak, and future investment would mainly be regular upgrades of machinery and equipment. In terms of
dividend payout, it was very stable at about 20% in previous periods, and we continue to assume that the Company will 2018 maintain its payout record in which an increase is not likely in our view. Given increasing technology requirements in the field of ADAS / autonomous driving, we believe stronger free cash flow would be beneficial for the Company to stay competitive for timely investment decisions or other M&A opportunities. As a result, free cash flow should be on a stable upward trend in 2017 1 March to 2019.
Figure-28: Nexteer’s Free Cash flow Figure-29: Nexteer’s Shareholders’ Equity
USD mn USD mn 350 2,500 300
250 2,000 200 150 1,500 100
] 2 r a M t h g i R _ e l b a T [
50 1,000 0 (50) 500 (100) - (150) 2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
We forecast 17.9% three-year shareholders’ profit CAGR for 2016 to 2019. We also expect better margins along with stable ROE. Both EBIT margin and net margin will increase on more advanced EPSS, and an effective cost control environment. In
fact, the Company has only experienced a drop in margin in 2012 due to one-off events such as employee restructuring initiatives and the Company’s IPO. On the other hand, we expect ROE to remain at a relatively high level of 25% to 28% in 2017 to 2019, however, continue to decrease from 2016 on deleveraging effect.
(01316 HK)
耐世特 Nexteer
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Company
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Figure-30: Nexteer’s Margins Figure-31: Nexteer’s ROE
] 1 r a M t h g i R _ e l b a T [
Net margin EBIT margin 45.0% 40.5% 40.0% 16.0% 13.8% 13.0% 35.0% 31.3% 14.0% 29.6% 29.4% 12.1% 2018 27.1% 27.5% 10.8% 30.0% 25.8% 25.8% 12.0% 10.3% 9.6% 9.3% 25.0% 10.0% 8.8% 8.0% 7.9% 7.2% 20.0% 1 March 8.0% 6.3% 5.5% 6.0% 4.6% 15.0% 4.0% 3.9% 3.0% 4.0% 2.7% 10.0% 2.0% 5.0% 0.0% 0.0% 2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Investment Thesis, Valuation and Risk
] 2 r a M t h g i R _ e l b a T [
Positive fundamental outlook: With a strong presence in the US market, Nexteer continues to expand in China, the largest vehicle market, mainly thanks to AVIC’s major shareholding. Moreover, the investment in its Suzhou plants and research center enables a fast and responsive product team to target local customers. All of the above can maintain stable top-line growth. On the other hand, margin expansion is to continue as higher-end products are getting popular and are supporting more advanced functions in vehicles, as well as effective cost control management to keep costs constant to help support margin expansion.
Strong balance sheet: Nexteer’s balance sheet has been improving through growing profits, lowering debts and improving cash conversion cycles. In tandem with stable and rational capital investment, free cash flows enjoyed steady increments since 2012, and turned positive since 2015. We expect the healthy balance sheet and cash flow position will enable the Company to seize any business opportunities in the future, supportive for growth outlook.
Ample technological reserve: We believe Nexteer as a steering pure play, is well-positioned for the next technological upgrade. Nexteer has been at the forefront of connectivity technology, producing ADAS enabling EPSS since 2007. Its technology for autonomous driving is also at the top of the agenda after unveiling its steer-by-wire technology in early 2017 and
also its joint venture investment with Continental AG for technology collaboration on further vehicle control integration. (01316 HK)
We initiate investment rating at “Accumulate” for Nexteer, TP is set at HK$19.33, representing 17.5x 2017 PER, 14.9x 耐世特 2018 PER, 4.6x 2017 PBR and 3.7x 2018 PBR. Globally, auto parts suppliers are trading in disperse valuation, probably due
to the wide spectrum in the auto parts industry. Nexteer focuses on the steering market and is one of the most profitable listed Nexteer companies globally; therefore we think our valuation is reasonable. Our valuation is above HK market peers, but closer to the average of global peers.
Risk Factor: Sales concentration with GM, worse-than-expected vehicle sales, foreign exchange risk.
Figure-32: PER Band of Nexteer Figure-33: PBR Band of Nexteer
Aug 15 Aug 16 Aug 17 Aug
Feb 15 Feb 16 Feb 17 Feb 18 Feb
May16 May17 May15
Nov15 Nov16 Nov17
Aug 15 Aug 16 Aug Aug 17 Aug
Feb15 Feb16 Feb17 Feb18
May15 May17 May16
Nov16 Nov15 Nov17 19 6 17 (X) (X) 5 15 13 4 11 3 9 2 7
5 1
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3 0 PE band PE (historical mean) PB band PB (historical mean) PE (2018F) PE (2017F) PB(2018F) PB (2017F) PB(historical high) PB(historical low) PE (historical high) PE (historical low) Company
Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.
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Table-10: Peers comparison PE PB ROE(%) D/Y(%) EV/EBITDA
Company Stock Code Currency Last price 16A 17F 18F 19F 16A ] 17F1 r 18Fa M 19Ft h 17Fg i R 17F_ e l b 17F a T [
Wuling Motors Ho 305 HK HKD 0.56 6.2 n.a. n.a. n.a. 0.8 n.a. n.a. n.a. n.a. n.a. n.a.
Minth Group Ltd 425 HK HKD 46.30 25.8 19.8 16.1 13.3 4.4 3.5 3.1 2.7 18.4 1.9 14.3
Fdg Evehicles 729 HK HKD 0.32 n.a. n.a. n.a. n.a. 2.1 2.4 n.a. n.a. (24.7) n.a. n.a.
Xinyi Glass 868 HK HKD 12.18 14.7 12.0 11.0 9.6 3.6 2.7 2.5 2.2 25.5 3.8 11.6
Fuyao Glass In-H 3606 HK HKD 31.40 21.5 19.8 15.9 14.3 3.9 3.2 2.9 2.7 17.1 3.0 12.2
2018 Zhejiang Shiba-H 1057 HK HKD 2.35 25.1 n.a. n.a. n.a. 1.1 n.a. n.a. n.a. n.a. n.a. n.a.
Xinchen China Po 1148 HK HKD 0.96 5.7 7.1 4.8 3.9 0.4 0.3 0.3 0.3 4.7 n.a. 4.8
Shuanghua Hldgs 1241 HK HKD 0.36 n.a. n.a. n.a. n.a. 0.5 n.a. n.a. n.a. n.a. n.a. n.a.
Nexteer 1316 HK HKD 17.44 18.7 16.3 13.9 11.9 5.3 4.1 3.4 2.8 28.2 1.2 8.3 1 March Xin Point Holdin 1571 HK HKD 6.07 n.a. 13.3 10.6 8.6 n.a. 2.5 2.2 1.9 24.6 2.2 8.3
Xingda Intl 1899 HK HKD 2.96 13.5 9.5 7.0 6.4 0.7 0.7 0.6 0.6 7.4 7.4 n.a.
Xiezhong Interna 3663 HK HKD 1.56 24.7 n.a. 43.3 21.7 1.4 1.3 1.3 1.2 (2.9) 0.0 n.a.
Huazhong In-V 6830 HK HKD 1.42 20.4 n.a. n.a. n.a. 3.3 n.a. n.a. n.a. n.a. n.a. n.a.
Simple Average 17.6 14.0 15.3 11.2 2.3 2.3 2.0 1.8 10.9 2.8 9.9
Weighted Average 19.3 15.9 13.4 11.6 3.9 3.1 2.7 2.4 18.9 2.5 10.7
Anhui Zhongdi-A 000887 CH CNY 16.69 22.0 17.6 14.5 12.8 3.1 2.7 2.3 2.0 14.9 0.6 n.a.
Jiangnan Mould-A 000700 CH CNY 4.90 18.8 14.4 11.4 8.9 1.1 n.a. n.a. n.a. n.a. n.a. n.a.
Songz Automobi-A 002454 CH CNY 11.98 20.7 15.9 13.7 11.4 1.8 1.6 1.4 1.3 10.0 1.5 n.a.
Wanxiang Qian-A 000559 CH CNY 8.90 29.4 n.a. n.a. n.a. 5.6 n.a. n.a. n.a. n.a. n.a. n.a.
Avic Electrome-A 002013 CH CNY 9.70 39.3 35.4 28.0 24.5 3.1 2.8 2.6 2.4 7.7 0.6 18.1
Lingyun Indust-A 600480 CH CNY 13.69 29.1 19.6 16.5 n.a. 1.8 n.a. n.a. n.a. n.a. n.a. n.a.
Ningbo Huaxian-A 002048 CH CNY 20.35 15.1 13.0 10.2 8.2 2.1 1.7 1.5 1.2 14.4 0.6 n.a.
Wanfeng Auto -A 002085 CH CNY 13.79 31.2 23.0 19.4 18.0 5.7 4.4 3.7 3.1 16.4 0.0 n.a.
Zhejiang Yinlu-A 002126 CH CNY 9.10 25.3 21.5 16.5 12.8 2.9 2.5 2.2 1.9 11.9 0.6 n.a.
Tianrun Crank -A 002283 CH CNY 5.28 31.1 19.6 18.2 n.a. 1.7 n.a. n.a. n.a. n.a. n.a. n.a.
] 2 r a M t h g i R _ e l b a T [ Zhejiang Asia -A 002284 CH CNY 7.75 38.8 33.7 26.3 n.a. 2.2 2.1 2.0 n.a. 4.6 1.2 n.a.
Changchun Fawa-A 600742 CH CNY 17.23 17.1 11.9 9.8 8.2 1.7 1.6 1.4 1.3 12.8 2.5 n.a.
Huayu Autom-A 600741 CH CNY 26.27 13.6 12.7 11.4 10.4 2.2 2.0 1.8 1.6 16.4 4.2 6.5
Dongfeng Elect-A 600081 CH CNY 11.95 32.1 26.9 23.7 n.a. 3.3 3.0 2.7 n.a. 12.5 1.6 n.a.
Zhejiang Wanli-A 002434 CH CNY 8.89 29.6 15.5 11.9 9.2 2.1 1.9 1.7 1.5 12.3 2.5 n.a.
Xuchang Yuando-A 002406 CH CNY 6.73 32.3 37.4 35.4 n.a. 1.7 n.a. n.a. n.a. n.a. n.a. n.a.
Ningbo Shuangl-A 300100 CH CNY 13.55 16.5 13.6 10.6 8.6 2.1 n.a. n.a. n.a. n.a. n.a. n.a.
Simple Average 26.7 26.8 23.0 12.5 3.0 2.8 2.4 2.1 12.2 1.4 12.3
Weighted Average 22.7 20.6 17.7 10.2 3.1 1.9 1.7 1.4 11.0 1.7 3.5
Denso Corp 6902 JP JPY 6,231.00 20.3 19.1 15.6 14.5 1.6 1.5 1.4 1.3 7.3 1.9 8.4
Keihin Corp 7251 JP JPY 2,248.00 29.3 15.0 11.3 10.7 1.0 1.0 0.9 0.9 7.8 1.8 3.5
Aisin Seiki Co 7259 JP JPY 6,160.00 18.0 13.9 12.8 11.6 1.6 1.4 1.3 1.2 9.7 1.7 5.7
Toyota Industrie 6201 JP JPY 6,650.00 10.8 15.8 13.5 14.0 1.0 0.9 0.8 0.8 5.8 1.8 11.8
Koito Mfg Co 7276 JP JPY 7,310.00 25.4 20.7 15.6 16.0 4.1 3.5 3.0 2.6 17.8 0.6 8.6
Nhk Spring Co 5991 JP JPY 1,107.00 12.5 10.7 10.5 9.6 1.0 0.9 0.9 0.8 9.0 2.0 3.9
Nok 7240 JP JPY 2,262.00 13.0 14.3 10.9 10.1 1.0 0.9 0.9 0.8 6.4 2.2 4.9
Stanley Elec Co 6923 JP JPY 4,115.00 26.9 23.8 18.7 16.2 2.3 2.1 2.0 1.8 9.4 0.9 8.8
Toyoda Gosei 7282 JP JPY 2,583.00 16.5 20.6 12.8 11.0 1.1 1.1 1.0 0.9 7.2 2.0 4.1
Bridgestone Corp 5108 JP JPY 4,714.00 13.9 12.5 11.3 10.7 1.7 1.5 1.4 1.3 12.7 3.0 5.6
Sumitomo Rubber 5110 JP JPY 2,012.00 12.8 11.1 10.4 9.9 1.2 1.1 1.1 1.0 9.4 2.7 6.0
Toyota Boshoku 3116 JP JPY 2,230.00 106.1 9.1 10.1 9.6 2.1 1.8 1.6 1.4 19.0 2.0 3.7 (01316 HK) Nsk Ltd 6471 JP JPY 1,585.00 13.1 18.4 12.8 11.3 1.9 1.8 1.6 1.5 9.4 2.4 9.3
Hanon Systems 018880 KS KRW 12,500.00 22.9 22.3 19.1 17.2 3.7 3.4 3.1 2.9 15.7 2.3 10.4
Hankook Tire Wor 000240 KS KRW 19,900.00 7.0 9.3 8.1 7.6 0.7 0.6 0.6 0.5 6.9 1.5 6.9 耐世特
Kumho Tire Co In 073240 KS KRW 5,600.00 n.a. n.a. n.a. n.a. 0.8 0.8 0.9 0.9 (5.0) n.a. 16.9
Hyundai Mobis 012330 KS KRW 228,000.00 7.1 13.8 8.1 7.3 0.8 0.7 0.7 0.6 8.2 1.6 5.3
Mando Corp 204320 KS KRW 257,500.00 12.1 58.8 12.6 10.8 1.6 1.7 1.5 1.4 2.7 1.8 9.9
Cheng Shin 2105 TT TWD 50.20 12.3 22.5 16.2 14.2 1.9 1.8 1.9 1.8 8.5 4.4 9.4 Nexteer
Amtek Auto Ltd AMTK IN INR 25.15 n.a. n.a. n.a. n.a. n.a. 0.3 n.a. n.a. n.a. n.a. n.a.
Amer Axle & Mfg AXL US USD 14.76 4.8 4.6 4.2 4.3 2.2 1.1 0.9 0.7 42.8 0.0 4.8
Meritor Inc MTOR US USD 24.50 3.9 6.7 9.0 8.2 n.a. 8.0 5.7 3.6 (128.6) 0.0 8.9
Borgwarner Inc BWA US USD 49.08 89.2 23.5 11.3 10.3 3.2 2.8 2.4 2.1 22.2 1.2 7.4
Johnson Controls JCI US USD 36.87 n.a. 21.4 13.2 12.1 1.4 1.7 1.7 1.6 7.8 2.7 9.8
Superior Inds SUP US USD 14.45 8.9 36.1 13.1 n.a. 0.9 0.7 0.7 n.a. 9.0 n.a. n.a.
Tenneco Inc TEN US USD 52.55 8.1 13.4 6.9 6.2 4.8 4.0 3.6 2.8 55.9 1.9 4.7
Gentex Corp GNTX US USD 22.71 18.8 16.0 14.0 12.7 3.4 3.1 2.9 2.5 18.9 1.7 9.0
General Motors C GM US USD 39.35 6.4 n.a. 6.2 6.3 1.3 1.6 1.3 1.1 18.9 3.9 2.9
Valeo Sa FR FP EUR 53.46 13.7 14.4 11.8 10.5 3.1 2.9 2.4 2.1 22.0 2.5 6.2
Brembo Spa BRE IM EUR 11.50 15.5 13.7 14.0 13.0 4.4 3.7 3.1 2.6 26.4 1.9 8.5
Faurecia EO FP EUR 69.28 14.9 15.6 12.9 12.1 3.3 3.0 2.4 2.1 18.6 1.5 5.5
Autoliv Inc ALV US USD 143.44 22.3 29.4 19.2 16.1 3.4 3.1 2.9 2.6 13.9 1.7 10.2
Continental Ag CON GY EUR 225.70 16.1 14.4 12.9 11.9 3.2 2.8 2.4 2.1 20.1 2.1 7.0
Michelin ML FP EUR 126.70 13.8 13.5 12.1 11.1 2.2 2.0 1.8 1.7 15.1 2.7 5.6
Gkn Plc GKN LN GBp 437.80 31.0 14.9 13.7 12.3 3.6 3.0 3.0 2.6 21.1 2.1 8.2
Nokian Renkaat NRE1V FH EUR 37.77 20.2 23.2 16.6 15.3 3.5 3.5 3.3 3.0 16.7 4.2 11.0
Simple Average 19.9 17.8 12.4 11.3 2.2 2.1 1.9 1.7 10.5 2.0 7.4
Weighted Average 16.3 14.9 12.3 11.4 2.1 2.0 1.8 1.6 13.6 2.3 7.0 Global Simple Average 21.4 19.5 16.9 11.7 2.5 2.4 2.1 1.8 11.2 2.1 9.9
Global Weighted Average 22.1 20.1 16.6 14.7 3.0 2.7 2.4 2.1 17.9 3.0 9.0
Source: the Company, Guotai Junan International. Report
Company
See the last page for disclaimer Page 19 of 21 [Table_PageHeader] Nexteer (01316 HK)
Financial Statements and Ratios
[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [
Income Statement Balance Sheet
Year end 31 Dec (USD m) 2015A 2016A 2017F 2018F 2019F Year end 31 Dec (USD m) 2015A 2016A 2017F 2018F 2019F
Total revenue 3,361 3,842 4,108 4,446 4,814 Property, plant and equipment 685 779 873 979 1,105
Land use rights 2018 Cost of sales (2,816) (3,181) (3,337) (3,576) (3,832) 1 1 1 1 0 Gross profit 545 662 772 870 981 Intangible assets 408 450 511 572 633 Deferred income tax assets 11 10 13 17 19 Engineering and product Other receivables and
(97) (123) (132) (143) (154) 1 March development costs prepayments 6 16 12 16 16 Selling and distribution expenses (12) (15) (17) (18) (19) Investment in a joint venture 10 11 12 12 13 Administrative expenses (105) (114) (122) (132) (143) Total non-current assets 1,121 1,266 1,422 1,596 1,787 Other gains (losses), net (17) 7 (5) 1 (2) Operating profit 313 415 496 578 662 Inventories 254 262 284 301 329 Trade receivables 570 590 645 684 748 Share of results of joint ventures 1 1 1 1 1 Other receivables and Finance costs, net (31) (30) (29) (28) (27) prepayments 95 91 106 108 120 Profit before tax 283 386 468 550 636 Restricted bank deposits 0 1 1 0 1 Cash & cash equivalents 417 484 487 609 733 Income tax (73) (84) (106) (124) (140) Total current assets 1,336 1,428 1,521 1,704 1,932 Profit after tax 210 302 361 426 495 Total assets 2,457 2,693 2,943 3,300 3,718 Non-controlling interest (5) (7) (9) (10) (12) Shareholders' profit 205 295 353 416 483 Trade payables 559 604 614 666 720 Other payables and accruals 98 107 106 114 122 Basic EPS 0.082 0.118 0.141 0.166 0.193 Borrowings 81 75 75 75 75
Dividend per share (USD) 0.016 0.024 0.028 0.032 0.038 Current income tax liabilities ] 132 r a M 15 t h g 36 i R _ 50e l b 69a T [
Others 57 58 52 28 13 Total current liabilities 807 860 884 933 1,000
[Table_CashFlowStatement] Borrowings 561 489 412 334 257 Cash Flow Statement Deferred income tax liabilities 52 57 57 83 95 Provisions 66 76 86 96 107 Year end 31 Dec (USD m) 2015A 2016A 2017F 2018F 2019F Deferred revenue 92 93 95 98 103 EBT 283 386 468 550 636 Other payables and accruals 25 27 26 27 27 Depreciation and amortization 119 140 154 176 202 Total non-current liabilities 795 742 676 638 589 Finance cost, net 33 32 30 30 29 Changes in working capital 69 19 (65) 16 (20) Total liabilities 1,602 1,602 1,560 1,572 1,589 Share of results of JV and associates (1) (1) (1) (1) (1) Total shareholders' equity 827 1,059 1,343 1,677 2,066 Change of other operating Items 14 2 3 3 3 Minority Interest 27 32 41 51 63 Income taxes paid (49) (68) (73) (94) (108) Total equity 854 1,091 1,384 1,729 2,129 Cash from operating activities 468 509 516 681 741 BPS (USD) 0.331 0.424 0.537 0.671 0.827
Net investments in PPE (162) (165) (221) (243) (279) Financial Ratios Net change of intangible assets (112) (118) (130) (141) (152) Net change of restricted cash 1 (1) 0 0 (0) 2015A 2016A 2017F 2018F 2019F Net investments in Asso. and JV (3) 0 0 0 0 Profitability Cash from investing activities (276) (283) (351) (384) (432) (01316 HK) Gross profit margin (%) 16.2 17.2 18.8 19.6 20.4 Net change of LT bank loan (91) (80) (76) (78) (77) EBITDAR (%) 13.6 15.0 16.4 17.5 18.5
Issuance of shares 0 0 0 0 0 EBIT Margin (%) 9.3 10.8 12.1 13.0 13.8 耐世特 Dividend paid (32) (40) (59) (69) (81) Net profit margin (%) 6.3 7.9 8.8 9.6 10.3 Others (38) (35) (28) (28) (27) ROE (%) 27.1 31.3 29.4 27.5 25.8 Cash from financing activities (162) (155) (163) (175) (185) ROA (%) 13.4 16.1 17.6 18.5 18.9 Growth Nexteer Net changes in cash 30 71 2 123 124 Sales volume growth (%) Other adjustment 6 (3) 0 0 0 Revenue growth (%) 12.8 14.3 6.9 8.2 8.3 Cash at beg of year 380 417 484 487 609 EPS (%) 27.3 43.4 19.7 17.9 16.2 Cash at end of year 417 484 487 609 733 BPS (%) 21.0 27.9 26.8 24.9 23.2 Liquidity and solvency Gearing ratio (%) 27.2 7.5 0.1 Net cash Net cash Interest cover ratio (x) 10.1 13.8 17.1 20.3 24.4 Cash ratio 0.5 0.6 0.6 0.7 0.7 Quick ratio 1.2 1.2 1.3 1.4 1.5 Current ratio 1.7 1.7 1.7 1.8 1.9 Efficiency Inventory turnover 45 42 43 43 43 Days receivable 59 55 57 56 57 Days payable 91 94 93 93 93
Source: the Company, Guotai Junan International.
Report
Company
See the last page for disclaimer Page 20 of 21 [Table_PageHeader] Nexteer (01316 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%; 2018 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. 1 March Neutral 中性 Relative Performance is -5% to 5%; 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 GREENLAND BROAD (01253 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886 HK),GFI MSCI A I (03156 HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),LINK HOLDINGS (08237 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies 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. (01316 HK) (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.
耐世特
Nexteer 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
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Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.
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Company
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