Dongfeng (489.HK)
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EQUITY RESEARCH Dongfeng (489.HK) Annual sales volumes review: downgrade to accumulate rating 12 March 2015 Hong Kong | Automobile | Update Report ·The annual passenger vehicle sales volume increases by 10% Accumulate (Downgrade) The overall sales volume of Dongfeng Motor Group was 2.7335 million in 2014, stably CMP HKD11.82 increasing by 6.46% compared with that in the same period of the previous years. Among TARGET HKD14 (+18.4%) that, the sales volume of passenger vehicle was up 10.4% yoy and reached 2.339 million, while that of commercial vehicle was down 12.2% yoy and reached 394 thousand. The COMPANY DATA overall sales volume of passenger vehicle of the group slightly exceeded the average level of O/S SHARES (MN) : 8616 the market which was 9.9%. However, that of its commercial vehicle was greatly impacted MARKET CAP (HKD MN) : 33755 by the cold market, losing to the average level of the market which was -6.5%. 52 - WK HI/LO (HKD): 15.2 / 9.6 ··· Japanese cars: "one tie and one failure" for Dongfeng Nissan and Dongfeng Honda Among three JV passenger vehicle enterprises, Japanese cars had a poor performance. The sales volume of Dongfeng Nissan was about 950 thousand, basically holding the line yoy and SHARE HOLDING PATTERN, % slightly up 3%. The new vehicle models that Dongfeng Nissan plans to release in 2015 Dongfeng Motor Corporation 66.86 include a seven-seat large SUV, the new generation Qashqai and a compact sedan as well as the Venucia T70 that came into the market in January. We predict that the sales power of 2015 will still come from the SUV vehicle models. PRICE PERFORMANCE, % 1M 3M 1Y The sales volume that Dongfeng Honda completed in 2014 was 308 thousand, down 4.1% Dongfeng 3.99 7.73 14.97 yoy. In 2015, Dongfeng Honda will release face-lifted CRV equipped with brand-new engine HIS index 5.71 5.23 7.66 and CVT gear box; in addition, the first small-sized SUV vehicle model XRV that came into the PRICE VS. HSI market at the end of 2014 will also be released with the 1.5 L model with smaller engine in the first half of this year, which is expected to relieve the condition of Dongfeng Honda SUV vehicle models being insufficient and chase market share in the current Chinese SUV spending spree. ···French cars: a suddenly rising new force; JVs` profits 50% more DFPSA performed fairly well in making progress in 2014, whose annual sales volume reached around 700, 000 and was up 28% yoy. In accordance with our judgments, DFPSA`s whole- year powerful product sales brought a positive scale effect, which made its expense ratio Source: Phillip Securities (HK) Research greatly diluted and profitability rise accordingly. According to the latest announcement, the KEY FINANCIALS turnover in 2014 of the two joint ventures DFPSA and DFPC Motor Sales Company geared to CNY mn FY13 FY14E FY15E FY16E the company and PSA was up 21% to 699, 000 million Yuan yoy ; the net profit was 45, 900 Net Sales 161253 171037 187221 212589 million Yuan after taxes, up 50% yoy, and the cash in hand surged 84.8% to 128, 000 million Net Profit 10528 13867 14162 16025 yoy.In 2015, DFPSA plans to release at least four new vehicle models (including the new 508, EPS, CNY 1.22 1.61 1.64 1.86 308S and C4 Picasso). The target sales volume is 800000 with a rate of increase of 15%. P/E, x 7.6 5.8 5.7 5.0 BVPS, CNY 7.33 8.24 8.94 10.09 P/BV, x 1.3 1.1 1.0 0.9 Investment Thesis DPS (CNY) 0.18 0.22 0.23 0.28 In conclusion, in order to reflect the worse-than-expected Japanese cars` sales volume in Div. Yield (%) 1.9% 2.4% 2.5% 3.0% Source: Company reports, Phillip Securities Est. 14H2, we revised the company`s EPS in 2014/2015/2016 to RMB 1.61, 1.64 and 1.86 and accordingly regulate the target price to 14 HKD, corresponding to 6.9/6.7/5.9 times of the Research Analyst expected price earnings ratio in 2014/2015/2016 and 1.3/1.2/1.1 x P/E for 2014/2015/2016, ZhangJing (+ 86 51699400-103) gowngrade to the "accumulate" rating. [email protected] Page | 1 | PHILLIPCAPITAL HONGKONG RESEARCH The annual passenger vehicle sales volume increases by 10% According to the public data, the overall motor sales vol Group was 2.7335 million in 2014, stably increasing by 6.46% compa the same period of the previous years. Among that, the sale vehicle was up 10.4% yoy and reached 2.339 million, while th was down 12.2% yoy and reached 394 thousand. The overall sal passenger vehicle of the group slightly exceeded the average which was 9.9%. However, that of its commercial vehicle cold market, losing to the average level of the market wh Dongfeng`s monthly sales 300000 250000 200000 150000 100000 Total yod-Total ume of Dongfeng Motor 50000 Dongfeng s volume of passenger 0 PV at of commercial vehicle yod-PV red with that in Source: Company,Jan- Phillip11 Securities Hong Kong Research was greatly impacted by the ich was -6.5%. Mar-11 level of the market UPDATE REPORT Japanese cars: "one tie and one failure" for Dongfeng Nissan and Dongfeng Honda May-11 es volume of Among three JV passenger Jvehicleul-11 enterprises, Japanese cars had CV yod-CV The sales volume of Dongfeng SNissanep-1 1was about 950 thousand, line yoy and slightly up 3%. Due to theNo vhot-1 1SUV market “X-TRAIL+SYLPHY" had replaced the formerJan -"TIIDA+TEANA+12 Mar-12 became the main contributing vehicle models. TheM montay-12 was over 10 thousand and that of SYLPHY was over 25 thousand.Jul-12 keep a tepid monthly sales volume of over 9 thousand aft Sep-12 level. The sales volume of SUNNY and TIIDA dropped to Nov-12 monthly. The new vehicle models that Dongfeng Nissan pl Jan-13 Mar-13 include a seven-seat large SUV, the new generation Qashq 50% well as the Venucia T70 that came into the market in Jan May-13 u 40% sales power of 2015 will still come from the SUV vehicle mod J l-13 Sep-13 30% Nov-13 20% Dongfeng`s JV monthly sales Jan-14 10% Mar-14 0% 120000 May-14 -10% Jul-14 -20% 100000 Sep-14 -30% Nov-14 -40% 80000 -50% of China, Dongfeng Nissan`s 60000 a poor performance. basically holding the 40000 hly sales volume of X-TRAIL 20000 SYLPHY+SUNNY" and DFNissan the level of 6 to 8 thousand er dropping TEANA from continued a high to 0 Source: Company, Phillip Securities Hong Kong Research J ans to release in 2015 an-13 ai and a compact sedan as uary. We predict that the M ar-13 els. DFHonda Page | 2 | PHILLIPCAPITAL HONGKONG RESEARCHMay-13 Jul-13 Se p-13 DFPSA Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 N ov-14 Dongfeng UPDATE REPORT The sales volume that Dongfeng Honda completed in 2014 was 308 thousand, down 4.1% yoy. The main reason was that the competitiveness of its main force vehicle model CRV was weakened due to the emergence of more competitive products, while the performance of the newly released vehicle models was not good enough. The sales volume of CRV in 2014 was down 11.5% yoy, and the monthly sales volume of Civic and Jade stayed at about 4 to 5 thousand, respectively. In 2015, Dongfeng Honda will release face-lifted CRV equipped with brand-new engine and CVT gear box; in addition, the first small-sized SUV vehicle model XRV that came into the market at the end of 2014 will also be released with the 1.5 L model with smaller engine in the first half of this year, which is expected to relieve the condition of Dongfeng Honda SUV vehicle models being insufficient and chase market share in the current Chinese SUV spending spree. French cars: a suddenly rising new force; JVs` profits 50% more DFPSA performed fairly well in making progress in 2014, whose annual sales volume reached around 700, 000 and was up 28% yoy. In accordance with our judgments, DFPSA`s whole-year powerful product sales brought a positive scale effect, which made its expense ratio greatly diluted and profitability rise accordingly. According to the latest announcement, the turnover in 2014 of the two joint ventures DFPSA and DFPC Motor Sales Company geared to the company and PSA was up 21% to 699, 000 million Yuan yoy ; the net profit was 45, 900 million Yuan after taxes, up 50% yoy, and the cash in hand surged 84.8% to 128, 000 million yoy. In 2015, DFPSA plans to release at least four new vehicle models (including the new 508, 308S and C4 Picasso). The target sales volume is 800000 with a rate of increase of 15%. Among them, there are 350000 Citroen vehicles and 450000 Peugeot vehicles. Restrained by productivity, before the DFPSA fourth plant goes into operation, part of the vehicle models` production will be contracted to Dong Feng Aeolus. Investment Thesis In conclusion, in order to reflect the worse-than-expected Japanese cars` sales volume in 14H2, we revised the company`s EPS in 2014/2015/2016 to RMB 1.61, 1.64 and 1.86 and accordingly regulate the target price to 14 HKD, corresponding to 6.9/6.7/5.9 times of the expected price earnings ratio in 2014/2015/2016 and 1.3/1.2/1.1 x P/E for 2014/2015/2016, downgrade to the "accumulate" rating.