Dear all,
Attached please find the November tracker for the automotive sector entitled "Sales Volume Rises While Medium Term Pressure Remains Huge" by Li Chunbo.
Investment Highlights
The sales volume for the auto sector slightly increased YoY in October, 2008. The total sales volume for the whole auto sector was 720,000, with a 3% YoY growth and a -5% MoM growth. This is a fairly good sales situation after two months of negative growth. Holiday adjustment made more working days in Oct. together with the new optional vanity plates pushed sales in October
Pressure will increase in the future. Although the auto market had positive growth in October, the main reasons that restrain auto market demand still exist, including: slowdown of macro economy, diminishing of wealth effects, slowdown of export market in emerging markets. Pressure of auto market in 1H09 is still great. The minus growth rate in single month could be normal
The demand for heavy duty trucks (HDT) dropped. The total sales volume of HDT sector was 25,000, with a -30% MoM growth and -34% YoY growth. Coming into October, domestic investment in manufacturing industry decreased. Price of staple commodity dropped sharply. Increasing speed of highway tonnage declined. All the factors caused HDT demand to drop. We expected a 560,000 sales volume in 2008. The drawing effects of positive financial policies investment should be observed in the future.
Profit for auto companies dropped greatly in 3Q, and will not improve notably in 4Q. The net profit for auto companies fell 57% YoY growth in 3Q08. Sales volume decreasing caused revenues' declining. High raw material prices caused gross profit margins to drop. Investment profit in stock market reduced the impact on earnings. Although raw material prices declined, auto demand will probably be low and 4Q profit will not improve.
Risk factors: Wealth effect reduces middle and high-end car markets. A sliding macro-economy results in the slowdown of truck market growth. Slowdown of international economy puts increased pressure of exports.
Short term pressure remains. However, from a mid-term point of view, the sector is fairly priced. We reiterate our "Outperform" rating on commercial vehicles and a "Neutral" rating on passenger vehicles. We recommend Zhengzhou Yutong Bus, FAW Car, Weichai Power, CNHTC Jinan Truck, Jiangling Motors.
Should you have any query, please feel free to contact your account managers. [attach]9315[/attach]
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发表于 2008-11-17 16:12
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