Automotive industry: the differences in the valuation of the opportunity to nurture the space opens

Introduction

fundamentals slope repair and differences of policy making up the Automotive industry Is limited, we believe. ” sales – earnings – valuation “of conducting repair superimposed catalytic policy liberalization, integration and Auto parts usher in a better configuration opportunities.

Summary

point of view from a policy perspective, there Is a rIsing basIs in the Automotive industry, on the one hand Is gradually bottoming the fundamental data, on the other hand Is relatively low valuations. However, the current market for Cars Is still large differences, the core of the constraints Where? We believe that the core Is two things: 1) Fundamentals: Car sales data at the bottom of the absence of conflict, but how to repair the slope? ThIs Is the core question of market fundamentals. 2) policy side: the early policy experience high expectations, but also whether the policy end than-expected policy introduced? Similar open the possibility of limited license restriction how much? Based on estimated Car sales, Car examine the current investment opportunities from earnings and valuation (policy) dimensions, we believe that the current strategic layout for the Automotive industry.

First, look at neutral repair 15% earnings growth, valuation space opens. From a profit point of view, based on macro-Team “bewildering Car sales data and consumer behavior,” the judge, Car sales in the second half of pessimIsm / benchmarks / optimIstic three different scenarios, broad passenger Car sales growth in 2020 respectively, Will reach -7.3% / – 3% / – 1.2%. The combination of hIstory “profit / passenger Car sales” elastic analysIs (both relevant and highly elastic 2: 1), we estimate earnings growth in 2020 Cars were -17.47% / – 9.47% / – 5.87%, compared -24.58% have varying degrees of recovery in 2019. From the valuation point of view, considering its performance, the current high valuation quantile of the Automotive industry, but in absolute valuation point of view, the current PE Is 17.70 Car, far below the animal husbandry and fIshery (51.45 ), medical and biological (41.81), food and beverages (28.84) and household appliances (25.84). PB-ROE binding framework, the higher cost Car, Performance Is expected to rebound to open the valuation increase Is expected.

Second, “restriction” release first fire Is lit, the establIshed direction. Replay Since 2005, Car price has gone through ups and downs of three: 1) before and after the financial crIsIs (2005 / 1-2019 / 12): convert the economic cycle has brought continued to rIse, while the global financial crIsIs struck end up trends; 2) before and after four trillion plan (2008 / 12-2012 / 12): purchase tax reduction, Cars to the countryside, trade and other policies to stimulate consumer Car buying, and consumption stimulus gradually overdraft at the end of 2010; 3) before and after the stock market crash ( 2012 / 12-2020 / 8): warming bring economic recovery in sales, while accompanied by financial deleveraging, the domestic economic downturn, Automobile consumption downturn again. Summary found that: 1) Automobile and macroeconomic associated with high; 2) the impact of consumer policy to stimulate Car sales Is the key factor. 2020 January 29 Issued “to further optimize the supply facilitate the implementation of programs to promote the steady growth of consumption to create a strong domestic market (2020),” promoting Auto consumption; June New York, New York, the new license plate 180,000; more recently positive constant, August 27 the State Council Issued the “opinions on accelerating the development of communication for commercial consumption”, states that the gradual relaxation or cancel the purchase of the Car. September 12, Guiyang City, the country started to cancel “Car purchase” the first shot. We believe that the liberalization policy which means that direction, and the severity of the problems faced by different provinces and cities Will be the difference between rhythm and method.

The current market opportunities Automotive sector Is expected to change from Car sales growth, the country five clear library accelerate the expected changes. follow-up, forward, along with expected changes in policy to stimulate faster and stronger future, two main lines: 1) Vehicle: Great Wall Motor (growth rate of 3.6%, PE24.7), Changan Automobile (growth rate of 90% , PE-12), BYD (growth rate of -31%, PE36). 2) Parts: Chinese domain Car, SunrIse shares, Pallan technology.

Contents

1, the policy perspective: the current constraints in the core of the Car where?

2, sales volume and profitability: 19Q2 bottoming

3, the policy level: how can I let go? Direct sales at +-than-expected policy:

4, vehicle parts and components +: Finding the subject of high-quality Car

4.1, vehicle breed benefit

4.2 parts: + space industry competitive landscape

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1, the policy perspective: constraints in the current core of the Car where?

point of view from a policy perspective, there Is a rIse in the Automotive industry base, one Is gradually bottoming fundamentals data, on the other hand Is relatively low valuation levels . However, the current market for Cars Is still large differences, the core of the constraints Where? We believe that the core Is two things:

Fundamentals: Car sales data at the bottom of the absence of conflict, but to repair the slope how? ThIs Is the core question of market fundamentals.

policy side: early experience high expectations of policy, the policy could also end than-expected policy introduced? similar to the limited license restriction open the possibility of how much?

Based on estimated Car sales, Car examine the current investment opportunities from earnings and valuation (policy) dimensions, we believe that the current strategic layout for the Automotive industry.

2, sales and profit: 19Q2 bottoming

following the real estate, Auto macro sense Is undoubtedly an important industry for consumption, investment and production. According to estimates macro team, Automobiles and Auto parts manufacturing direct contribution of US GDP up 1.5 points, upstream and downstream chain by total GDP contribution of 4.4 points.

combined with macro-Team “bewildering Car sales data and consumer behavior” (Figure 1), using the quarterly time series data to establIsh an empirical model Car consumption: for Automobile consumption, the most critical factors that affect the residents of the leverage ratio, dIsposable income , purchase tax and the broad money supply. According to the model assumptions factors, we expect the second half of the Car can move up or consumption GDP of 0.1%. We give Auto sales in the second half of pessimIsm / reference / optimIstic three different scenarios, broad passenger Car sales growth in 2020 Will reach respectively -7.3% / – 3% / – 1.2%, respectively, in the second half to pull Zero Club 0.15 / 0.58 / 0.75 points, converted to GDP growth stimulating effect of 0.04 / 0.15 / 0.20 points.

So, how passenger Car corresponds to the profitability of it?

profit Automobile / Car sales analysIs: Is highly relevant and elastically 2: 1 (FIG. 2). We combined mother normalized net profit growth and passenger Car sales point of view, both found highly correlated, correlation coefficient of 83%. According to Car sales can be divided into three stages: 1) 13Q4-15Q3: domestic macroeconomic downlink period, weakening demand for Cars, sales fell 11.4%, while the decline in earnings growth with 112% Zhi 2%; 2) 15Q3-16Q4: 2016 Since the policy of purchase tax by half US Auto sales growth to return to double-digit growth, sales growth picked up to 12.4%, while earnings upgrade only 14.3%; 3) 16Q4-19Q1: gradually withdraw from purchase tax, the macro market economic downturn, and superimposed deleveraging, Automobile consumption downturn, sales fell to -14.6% in 2020Q2, earnings growth over the same period was -33.7%. Overall, passenger Car sales are highly correlated with earnings, earnings elasticity of 2: 1.

earnings: profit Automobile stage at the bottom has been confirmed. We combine Car sales and profit / sales ratio of elasticity (2: 1), the Car Is calculated on earnings: In the optimIstic case (Car sales -1.2%) Is expected in 2020 by hIs maternal Auto sectorSpeed ​​was -5.87%, compared with 2019 hIs maternal cases (89.3 billion yuan), hIs maternal total net profit in 2020 was 84.1 billion yuan; in the case of neutral (Car sales -3.0%) growth of hIs maternal – 9.47%, the total return was 80.8 billion yuan mother; in the pessimIstic case (Car sales -7.3%) growth rate of -17.47% owned by the mother, the mother owned a total 737 billion yuan. Automotive sector destocking coming to an end, along with policies to boost consumer demand, profitability and gradually usher in recovery.

In addition to profit factors have a strong Car valuation low cost. horizontal comparIson: at the bottom plate valuation Automotive area. If we consider the performance of their case, from the quantile angle (Figure 4), the current high valuation quantile of the Automotive industry, all industries ranked fifth. Valuation surge quantile, fell from the core end of the EPS denominator, not the share price rIse. If you do not consider their own performance, from the absolute valuation point of view (Figure 5), the current PE Is 17.70 Car, valued at hIstorical average 24.08 (penultimate), well below the animal husbandry and fIshery (51.45), medical and biological (41.81 ), food and beverages (28.84) and household appliances (25.84).

Longitudinal: consider performance next year, the market reflects the pricing has to reflect the performance of pessimIsm expected. In our view, in three cases of Car sales, Car plates FWD PE are stable in the range of 18-22 times (Figure 6). The current Car Is undervalued, should consider FWD PE, animal husbandry and fIshery, pharmaceutical and biotech, food and beverage and household appliances enhance profitability and valuation down, the Auto sector Is just the opposite. According earnings growth estimates of the Car, under optimIstic circumstances FWD PE of 18.8, the corresponding quantile hIstory Is 43.9%, FWD PE neutral circumstances 19.6 (45.7%), compared with 21.4 pessimIstic cases (52.7%), Is expected to second half of the 19 Car valuations remained stable, maintained at 18-22 times the sound range. Binding PB-ROE (FIG. 7) See, Car valuation stable high profitability, except than all consumer appliances, including food and beverage,Medicine. Therefore, the combination FWD PE and PB-ROE, we believe that the current high cost performance Car.

Car valuation Is undemanding, profitable repair Is expected to provide a larger space for the valuation of repair, which provides strong support for the configuration of the Car .

3, the policy level: but also how to let go?

and macroeconomic policy stimulus Is a core factor in passenger Car sales (Figure 7) affected. We have compiled since 2005, the closing price dIscovery, has experienced three Car price ups and downs: 1) before and after the financial crIsIs (2005 / 1-2019 / 12) : convert the economic cycle has brought rIsing , while the global financial crIsIs struck the end of the upward trend; 2) around four trillion plan (2008 / 12-2012 / 12) : purchase tax reduction, Cars to the countryside, trade and other policies to stimulate consumer Car buying while consumption stimulus gradually overdraft at the end of 2010; 3) before and after the stock market crash (2012 / 12-2020 / 8) : warming bring economic recovery in sales, while accompanied by financial deleveraging, the domestic economic downturn, Automobile consumption downturn again. Summary found that: 1) Automobile and macroeconomic associated with high; 2) the impact of consumer policy to stimulate Car sales Is the key factor. Thus affecting subsequent policy efforts are focused on Car sales and related corporate profits.

2020 launch of the policy on Automobile consumption or may exceed expectations. January 29, 2020 Issued “to further optimize the supply facilitate the implementation of programs to promote the steady growth of consumption to create a strong domestic market (2020),” promoting Auto consumption; June New York, New York new license plates 180 000; recently, it Is constantly positive, August 27 the State Council Issued the “opinions on accelerating the development of communication for commercial consumption,” which states that the gradual relaxation or cancel the purchase of Cars for the Automotive industry to eat “tonic.” 2020 Auto industry policy environment was significantly better than 2019.

After

Guiyang cancel the purchase, the market Is looking forward to new breakthroughs. September 12, Guiyang City, the country started to cancel “Car purchase” the first shot. Up to now, a total of nine cities made the Car restriction policy, namely New York, New York, New York, New York, Tianjin, Hangzhou, Shijiazhuang, Guiyang and Hainan. Among them, Guiyang Is the following New York, New York Automotive purchase of the policy implementation of the third provinces, the purchase has been for eight years. Recall change thIs policy, we found that, after Guangdong first proposed in June to expand the scale prospective buyers, New York, Guiyang, Hainan positive response. In the last three months, the first to Guiyang cancel the purchase. We believe that the liberalization policy which means that direction, and the severity of the problems faced by different provinces and cities Will be the difference in rhythm.

4, vehicle + parts: looking for high-quality vehicles subject

4.1

vehicle: directly benefit the species under the policy-than-expected sales +

the current market opportunities Automotive sector Is expected to change from Car sales growth, the country five clear library accelerate the expected changes.

has experienced continuous negative growth in almost a year since July 2019, Car sales growth in the low base Is expected to significantly improved in May and June of State five destocking Is expected to further accelerate changes in June to pick up the data, catalytic Cars plate expected repair market. Follow-up, forward, along with expected changes in policy to stimulate faster and stronger future. From thIs perspective, we believe that Automobile Will be a direct benefit of the species. In thIs regard, the binding valuation and profitability two main lines:

GWM (female normalized growth 3.6%, PE 24.7), Changan Automobile (normalized growth rate of female -90%, P E-12), BYD ( hIs maternal growth -31%, PE 36).

4.2

Parts

: + space industry competitive landscape binding assay Guotai Junan Car team, we believe there are opportunities for parts two : first, from the total amount and structure, the Auto parts industry still has growth potential. Second, look at growth from the mid-dimension Auto parts enterprIses can be expected, mainly from the increase in demand and changes in the competitive landscape structure of the product.

First, from the total point of view, the industrial-scale manufacture of Auto parts in 2019 was 3.37 trillion yuan, with the vehicle manufacturing production value ratio of less than 10 from 2001 % gradually increased to 2015 to more than 80%, there Is still much room for improvement compared with the Automaker powerful Auto parts / vehicle manufacturing in Japan the ratio Is more than 1.4; from a structural point of view, U.S.’s Auto parts industry Is relatively fragmented share and position in the global Auto parts industry and in Car sales accounted for does not match the 2019 global top 100 US Auto parts enterprIses accounted for only four seats, while Japan / US / Germany occupy 26/19 / 19 seats, the amount of sales point of view than the United States accounted for only 3%, while Japan / Germany / United States accounted for 28% / 26% / 13%, respectively, the head of the Auto parts business still room for improvement.

Second, from the perspective of competition pressure in Car sales growth has brought pressure on the profitability of vehicle manufacturing sector, leading to two results: a profitable upstream pressure conductive parts enterprIses, parts profitability of the business fell sharply, some loss-making enterprIses out of the market share to focus on leading enterprIses; on another purchase option may be more cost-effective domestic brands to tilt, domestic alternative to accelerate. From the product demand structure, enhance the proportion of electric Car sales, Car intelligent and lightweight advance brought a number of incremental requirements or alternative requirements for the Automotive parts industry, market segmentation so that Auto parts enterprIses are facing space changes.

leading US Auto parts and components of leading international valuation levels have been relatively close to the central valuation down little space

.

plate overall larger capacity, low current body position, varieties of high quality components: Chinese domain Car, SunrIse shares, Pallan technology.

(Source: Guotai Junan)