Auto Dealers/ China Meidong Auto (1268 HK) Auto... · Mon, 13 Jul 2015 Equity Research Meidong Auto...
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Mon, 13 Jul 2015 Equity Research Meidong Auto (1268 HK) Auto Dealers/ China Swimming against the current Resume BUY with TP of HK$ 2.31, based on 10x FY16 PE, 57% upside Accelerated growth through M&As Undemanding valuation and excellent growth prospect Resume BUY rating with TP of HK$ 2.31. We resume our coverage on Meidong Auto (1268 HK) (“MD”) with a BUY rating, and derived a TP of 2.31, based on 10x FY16 PE, representing an upside of 57%. The current valuation is undemanding due to its excellent growth profile, where we anticipate its sales/ EPS to have 21/32% CAGR over the course of FY15-17, plus a 3.5% FY16 yield. Accelerated growth through M&As. In our recent update following their HK$183m share placement (at HK$1.83/share for a 3.7% discount to market) in early June, management disclosed that they are close to acquiring a portfolio comprising of 5 4S car dealer stores: 2 of them being Honda stores located in Jiangxi, opened in 2008 and 2010 respectively, and both reporting losses in 2014 while the remaining 3 are Jaguar Land Rover (“JLR”) Stores in Hunan, Hebei, and Guangdong, all three are yet to commence operations (likely to begin in 2016-17). Management has stressed that the cost of acquisitions will be attractive as the stores are non-preforming or yet to be built, they believe this addition will contribute positively to the group. MD, in our view, should be able to fix the problem and turn it around. MD has proven to be efficient manager as well as quality after-sales services provider, being one of the few with higher than peers margins. Their NP margins in FY14 (2.9%), outperformed listed peers (2.5%), let alone the non-listed ones (1.5% for top 100 domestic dealers). Undemanding valuation, with excellent growth prospects. We project MD to comfortably achieve 21/ 32% CAGR in sales/ EPS over the FY15-17 period. Driven mainly by 1) 24.8% CAGR in store counts and 2) sustainable margins expansion due to higher mix of luxury products (from 39% to 49% of sales over the FY14-17 period). We forecast GP/NP margins to jump from 10.2/2.9% in FY14 to around 10.9/3.7% in FY17. Our valuation is based on 10x FY16 PE, with a forecast yield of 3.5%. BUY. Walter Woo +852 2135 0248 [email protected] Initial Coverage BUY Close price: HK$1.47 Target Price: HK$2.31 (+57%) Key Data HKEx code 1268 12 Months High (HK$) 2.34 12 Month Low (HK$) 0.90 3M Avg Dail Vol. (mn) 7.69 Issue Share (mn) 1,100.00 Market Cap (HK$mn) 1,617.00 Fiscal Year 12/2014 Major shareholder (s) Ye Family (68.41%) Source: Company data, Bloomberg, OP Research Closing price are as of 10/7/2015 Price Chart 1mth 3mth 6mth Absolute % -27.6 -3.2 -15.7 Rel. MSCI CHINA % -14.1 14.5 -13.3 Exhibit 1: Forecast and Valuation Year to Dec (HK$ mn) FY13A FY14A FY15E FY16E FY17E Revenue 3,479.7 3,854.8 4,707.4 5,887.4 6,931.2 Growth (%) 18.0 10.8 22.1 25.1 17.7 Net Profit 105.9 110.6 149.3 203.5 252.0 Growth (%) 121.7 4.5 34.9 36.3 23.9 Diluted EPS (HK$) 0.172 0.138 0.170 0.231 0.286 EPS growth (%) 115.7 (19.5) 22.7 36.3 23.9 Change to previous EPS (%) 0.00 0.00 0.00 Consensus EPS (HK$) 0.00 0.00 0.00 ROE (%) 23.3 22.0 24.7 27.3 27.3 P/E (x) 8.6 10.6 8.7 6.4 5.1 P/B (x) 2.0 2.2 1.9 1.6 1.3 Yield (%) 2.0 2.0 2.6 3.5 4.4 DPS (HK$) 0.030 0.030 0.038 0.052 0.064 Source: Bloomberg, OP Research 0.0 0.5 1.0 1.5 2.0 2.5 Jul/14 Oct/14 Jan/15 Apr/15 Jul/15 HK$ 1268 HK MSCI CHINA
Transcript of Auto Dealers/ China Meidong Auto (1268 HK) Auto... · Mon, 13 Jul 2015 Equity Research Meidong Auto...
Mon, 13 Jul 2015
Equi ty Research Meidong Auto (1268 HK) Auto Dealers / China
Swimming against the current
Resume BUY with TP of HK$ 2.31, based on 10x FY16 PE, 57% upside
Accelerated growth through M&As
Undemanding valuation and excellent growth prospect
Resume BUY rating with TP of HK$ 2.31. We resume our coverage on Meidong
Auto (1268 HK) (“MD”) with a BUY rating, and derived a TP of 2.31, based on 10x
FY16 PE, representing an upside of 57%. The current valuation is undemanding
due to its excellent growth profile, where we anticipate its sales/ EPS to have
21/32% CAGR over the course of FY15-17, plus a 3.5% FY16 yield.
Accelerated growth through M&As. In our recent update following their
HK$183m share placement (at HK$1.83/share for a 3.7% discount to market) in
early June, management disclosed that they are close to acquiring a portfolio
comprising of 5 4S car dealer stores: 2 of them being Honda stores located in
Jiangxi, opened in 2008 and 2010 respectively, and both reporting losses in 2014
while the remaining 3 are Jaguar Land Rover (“JLR”) Stores in Hunan, Hebei, and
Guangdong, all three are yet to commence operations (likely to begin in 2016-17).
Management has stressed that the cost of acquisitions will be attractive as the
stores are non-preforming or yet to be built, they believe this addition will
contribute positively to the group. MD, in our view, should be able to fix the
problem and turn it around. MD has proven to be efficient manager as well as
quality after-sales services provider, being one of the few with higher than peers
margins. Their NP margins in FY14 (2.9%), outperformed listed peers (2.5%), let
alone the non-listed ones (1.5% for top 100 domestic dealers).
Undemanding valuation, with excellent growth prospects. We project MD to
comfortably achieve 21/ 32% CAGR in sales/ EPS over the FY15-17 period.
Driven mainly by 1) 24.8% CAGR in store counts and 2) sustainable margins
expansion due to higher mix of luxury products (from 39% to 49% of sales over
the FY14-17 period). We forecast GP/NP margins to jump from 10.2/2.9% in
FY14 to around 10.9/3.7% in FY17. Our valuation is based on 10x FY16 PE, with
a forecast yield of 3.5%. BUY.
Walter Woo
+852 2135 0248
Initial Coverage
BUY
Close price: HK$1.47
Target Price: HK$2.31 (+57%)
Key Data
HKEx code 1268
12 Months High (HK$) 2.34
12 Month Low (HK$) 0.90
3M Avg Dail Vol. (mn) 7.69
Issue Share (mn) 1,100.00
Market Cap (HK$mn) 1,617.00
Fiscal Year 12/2014
Major shareholder (s) Ye Family (68.41%)
Source: Company data, Bloomberg, OP Research
Closing price are as of 10/7/2015
Price Chart
1mth 3mth 6mth
Absolute % -27.6 -3.2 -15.7
Rel. MSCI CHINA % -14.1 14.5 -13.3
Exhibit 1: Forecast and Valuation Year to Dec (HK$ mn) FY13A FY14A FY15E FY16E FY17E
Revenue 3,479.7 3,854.8 4,707.4 5,887.4 6,931.2
Growth (%) 18.0 10.8 22.1 25.1 17.7
Net Profit 105.9 110.6 149.3 203.5 252.0
Growth (%) 121.7 4.5 34.9 36.3 23.9
Diluted EPS (HK$) 0.172 0.138 0.170 0.231 0.286
EPS growth (%) 115.7 (19.5) 22.7 36.3 23.9
Change to previous EPS (%) 0.00 0.00 0.00
Consensus EPS (HK$) 0.00 0.00 0.00
ROE (%) 23.3 22.0 24.7 27.3 27.3
P/E (x) 8.6 10.6 8.7 6.4 5.1
P/B (x) 2.0 2.2 1.9 1.6 1.3
Yield (%) 2.0 2.0 2.6 3.5 4.4
DPS (HK$) 0.030 0.030 0.038 0.052 0.064
Source: Bloomberg, OP Research
0.0
0.5
1.0
1.5
2.0
2.5
Jul/14 Oct/14 Jan/15 Apr/15 Jul/15
HK$1268 HK MSCI CHINA
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 2 of 25
Table of Contents
Table of Contents ......................................................................................................................................... 2
Good time for M&A as market consolidates .................................................................................................. 3
Industry dynamics ........................................................................................................................................ 5
Strong pipeline of store & brand expansions ................................................................................................ 7
“Single City Single Brand” has a high win rate ............................................................................................. 9
Tier 2-4 cities focus generate inelastic demand ...........................................................................................10
Performance by Brands .............................................................................................................................. 11
Robust margins expansion from more luxury ..............................................................................................15
Power shifts from OEMs to dealers .............................................................................................................16
Effect of Price War on dealers is slight positive ...........................................................................................18
Favourable age distribution of China’s cars .................................................................................................19
Car sales to follow reversal in property sales ..............................................................................................20
Valuation and Recommendations ................................................................................................................21
Financial Summary .....................................................................................................................................22
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 3 of 25
Good time for M&A as market consolidates
According to China Automobile Dealers Association (“CADA”), only 30% of car
dealers in China were profitable in 2014, whereas the ratio was as high as 70%
back in 2010. Over 87.5% of the dealers believe that they will encounter the
problems of capital shortage in the coming year, of which the rising inventory level
is the main trigger of the capital shortage, as quoted in the Deloitte China
Dealership Performance Survey in late 2014.
Exacerbating this situation has been the general low new car sales margins as
well as the tight credit environment due to push from OEMs for their aggressive
sales targets, which have driven a long line of players to leave this business. So
this is a perfect time for listed players to acquire others at a reasonably low price.
It is precisely in this atmosphere of market consolidation that MD feels that it can
make acquisitions at prices low enough to make economic sense particularly in
relation to the alternative of building their own stores.
Thus MD recently disclosed its interest in buying 5 4S stores, 2 currently
operating Honda stores and 3 Jaguar Land Rover dealership licenses.
Management had indicated the purchase price is at cost (i.e. the asset values) as
the targets are loss-making or yet to be built up in 2014, they will enhance the
overall sales/earnings upon completion of turning-around the operations.
We believe MD has a fair chance of success given their strong track record in the
past where they consistently delivered industry leading operating and financial
metrics.
Prior to their Beijing Zhongye Toyota store takeover by MD in 2009, it was the
worst performing among all stores in Beijing. However, within 9 months following
the acquisition, MD, through a series of measures, was able to raise its
productivity and efficiency level high enough for it to be ranked # 2 out of all 22
FAW Toyota stores.
Exhibit 2: Meidong has a better than peers’ GP margins
Source: Company data, Wind, OP Research
10.2
7.7
10.7
9.3
8.7
8.1
8.8 9.1
6.1
5.0
6.0
7.0
8.0
9.0
10.0
11.0
Meidong(1268 HK)
Sunfonda(1771 HK)
Harmony(3836 HK)
Rundong(1365 HK)
Zhongsheng(881 HK)
Yongda(3669 HK)
Zhengtong(1728 HK)
Baoxin(1293 HK)
Top 100 avg.
70% dealers in China were loss
makers in 2014, over 80% think
they need more financing
A lot of quality 4S stores are up
for sales at a bargain, MD is in a
good position with access to
capital market
MD will buy 2 new Honda stores
and 3 Jaguar stores
Given MD’s track record, we are
confident on the turn-around
Beijing Toyota stores was a good
example
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 4 of 25
Exhibit 3: Meidong has a better than peers’ NP margins
Source: Company data, Wind, OP Research
MD has an exceptionally high absorption ratio, attributable to its use of
information technology in all aspects of their operations. Ranging from its IT
based customer relationship management systerm (CRM), which stores not only
the transaction details but also takes note of various interests, needs and
preference of every individual customers, to its supply demand tracking systerm
for each model and part, as well as the corresponding sales incentive strategy in
dealing with unpopular models.
Exhibit 4: Meidong has a high absorption ratio
Source: Company data, Wind, OP Research
2.9
2.2
5.3
2.0
1.41.5
2.6
2.3
1.5
1.0
2.0
3.0
4.0
5.0
6.0
Meidong(1268 HK)
Sunfonda(1771 HK)
Harmony(3836 HK)
Rundong(1365 HK)
Zhongsheng(881 HK)
Yongda(3669 HK)
Zhengtong(1728 HK)
Baoxin(1293 HK)
Top 100 avg.
95.3
76.4
89.4
84.1
95.4
83.7
94.9
91.0
60.0
65.0
70.0
75.0
80.0
85.0
90.0
95.0
100.0
Meidong(1268 HK)
Sunfonda(1771 HK)
Harmony(3836 HK)
Rundong(1365 HK)
Zhongsheng(881 HK)
Yongda (3669HK)
Zhengtong(1728 HK)
Baoxin (1293HK)
MD’s extensive use of IT systerm
has been industry leader
𝑨𝒃𝒔𝒓𝒐𝒑𝒕𝒊𝒐𝒏 𝒓𝒂𝒕𝒊𝒐 =𝑨𝒇𝒕𝒆𝒓 𝒔𝒂𝒍𝒆𝒔 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕
𝑫𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 + 𝑨𝒅𝒎𝒊𝒏𝒊𝒔𝒕𝒓𝒂𝒕𝒊𝒗𝒆 𝒆𝒙𝒑𝒆𝒏𝒔𝒆𝒔 (𝑺𝑮&𝑨)
Absorption ratio of a 100% indicates that a dealership’s operating costs
can esstentially be supported by after-sales
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
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Industry dynamics
China car sales growth is prone to be slow, but some brands and segments
can still outperform
China’s PV sales in 2015 have been disappointing, with May sales falling by 0.4%,
and Jan-May sales slowing to 2.1%. We expect sales volume to further reduce to
around 0% in 2015, from 6-7% in 2014. Factors attributed to the slowdown are: 1)
weakening GDP growth, 2) more limitations arise from various concerns on
pollutions/ traffics / energy perspective, 3) price war between brands, 4) capital
dilution from the stock markets, and etc.
However, we are reasonably optimistic that the sales trend should recover, when
the wealth effect kicks in, triggered by a rising property and stock prices.
Exhibit 5: China Car sales continue to slow in May
Source: Bloomberg, Wind, OP Research
Exhibit 6: We expect PV sales volume growth to be around 0% in 2015
Source: CAAM, Wind, OP Research
3.3%
-0.5%
-0.4%
-5%
0%
5%
10%
15%
20%
25%
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Jun
-13
Jul-1
3
Au
g-1
3
Se
p-1
3
Oct-
13
Nov-1
3
Dec-1
3
Jan
-14
Fe
b-1
4
Mar-
14
Ap
r-14
Ma
y-1
4
Jun
-14
Jul-1
4
Au
g-1
4
Se
p-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan
-15
Fe
b-1
5
Mar-
15
Ap
r-15
Ma
y-1
5
Sales Volume Growth (%)
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2015 2014 2013 2012 2011 2010
PV sales growth has been
trending downwards in Jan-May
2015
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
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Exhibit 7: China Vehicle Inventory Alert Index (VIA) and the dealer
inventory index
Source: CADA, Wind, OP Research
Exhibit 8: Car dealer view on the future demand (mom changes)
Source: CAAM, Wind, OP Research
44.0%
50.5%
58.2%
44.5%
46.3%
49.3%
58.9%
51.1%
51.8%
45.8%
55.0%
65.7%
55.5%56.3%
50.9%
67.5%
60.5%
57.3%
0.97
2.33
1.38 1.52 1.53
1.69 1.62 1.56
1.42 1.48
1.83 1.53
1.20
1.89 1.77
1.67
-0.2
0.3
0.8
1.3
1.8
2.3
2.8
40%
50%
60%
70%
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15
Inventory Alert Index (LHS) Inventory index (RHS)
0%
20%
40%
60%
80%
100%
Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Increase Unchange Decrease
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 7 of 25
Strong pipeline of store & brand expansions
MD recently reiterated its plan to add 6 new stores each year, but there could be
more if further acquisitions were made. We expect its sales network to increase
by 25% CAGR in FY15-17, from 19 in 2014 to 36 in 2017. This expansion will be
fuelled by organic growth, namely the luxury brands (9 BMW, 4 Lexus and 1
Toyota) in the pipe line, as well as by acquisition (e.g. 2 Honda and 3 JLR’s
operation licenses). Expansion in brands can increase stability in sales/ earnings,
by a welcomed diversification of business risks as highlighted by their experience
in 2015 when weak performance of BMW stores in general were offset by the
better sales out of their Toyota, Honda and Porsche stores, aided by the launch of
several new models. We have yet to take account of those 3 potential Jaguar
stores in our model for the sake of caution.
Exhibit 9: Store opening schedule
Provinces
Stores in
operation in 2014
Stores to be
opened in 2015
Store to be
opened in 2016
Store to be
opened in 2017
Gansu 1 Lexus
Beijing & Hebei 1 Toyota
1 BMW
1 BMW
Hubei
1 BMW 1 BMW 1 BMW
Hunan 1 Toyota 1 BMW 2 BMW
1 Lexus
3 BMW
Guangdong 1 Lexus 1 Lexus 1 Toyota
5 Toyota 1 Porsche
2 Hyundai
1 Porsche
Guangxi
1 Lexus
Fujian 1 Lexus 1 Lexus
1 Lexus
1 Toyota
Jiangxi
1 BMW
2 Honda (M&A)
Sichuan
1 BMW
Source: Company data, OP Research
Exhibit 10: Store counts growth
2013 2014 2015E 2016E 2017E
Sales network in operation
Luxury brands
BMW 2 4 8 11 13
Lexus 4 4 6 7 8
Porche
1 2 2 2
Total 6 9 16 20 23
Mid-high end brands
Toyota 7 8 8 9 9
Hyundai 2 2 2 2 2
Honda
2 2 2
Total 9 10 12 13 13
Overall Total 15 19 28 33 36
Overall Total ( by company *) 15 22 33 39 45
* including projects under construction or for planning for construction)
Source: Company data, OP Research
Meidong’s store counts GAGR is
25% in FY15-17, more luxury
brands like BMW, Lexus, and
Porsche will be added
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 8 of 25
Exhibit 11: Portfolio by brands in 2015 and 2017
Source: Company data, OP Research
BMW, 8
Lexus, 6
Porche, 2
Toyota, 8
Hyundai, 2
Honda, 2
Portfolio by brands in 2015
BMW, 13
Lexus, 8
Porche, 2
Toyota, 9
Hyundai, 2 Honda, 2
Portfolio by brands in 2017
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 9 of 25
“Single City Single Brand” has a high win rate
By tapping into cities that originally have no existence of such brands to provide
new car sales and after-sales services, MD is able to capture most of the
potential customers springing up in those areas. The lack of trustable and quality
services in china is a long-standing issue that has in turned created inelastic
demand for such services in licensed 4S stores. In cities with “SCSB” feature, the
effect will be amplified. Level of stickiness and customer’s loyalty enhanced by
both factors, will translate into greater sales and higher margins. Currently 47% of
stores are classified as “SCSB”, but given the ratio that 10 out of 14 are
considered “SCSB” in the pipeline, we expect it to go up to 56% by the end of
2017.
Exhibit 12: Store lists and with the “Single City Single Store”
Number Brands Location Opened in “SCSB”
1 BMW Zhuzhou (湖南株洲美寶行) 2010 Yes
2
Hengyang (湖南衡陽美寶行) 2013 Yes
3
Changde (湖南常德) 2014 Yes
4
Chengde (河北承德) (70%) 2014 Yes
5
Xiaogan (湖北孝感) 2015 Yes
6
Zhangjiajie (湖南张家界) 2015 Yes
7
Jiangxi Jingdezhen (江西景德镇) 2015 Yes
8
Chengdu Sichuan (四川成都) 2015 Yes
9
Hunan Yongzhou (湖南永州) 2016 Yes
10
Hunan Yueyang (湖南岳阳) 2016 Yes
11
Hubei Huanggang (湖北黄冈) 2016 Yes
12
Hubei Xianning (湖北咸宁) 2017 Yes
13
Beijing & Hebei (北京) (75%) 2017
14 Lexus Xiamen (福建廈門) 2008
15
Changsha (湖南長沙) 2011
16
Gansu Lanzhou (甘肃籣州) 2013 Yes
17
Fujian Longyan (福建龙岩) 2015 Yes
18
Guangdong Foshan (广东佛山) 2015
19
Guangxi Liuzhou (广西柳州) 2016 Yes
20
Fujian Zhangzhou (福建漳州) 2017 Yes
21
Dongguan Meidong (廣東東莞) (49%), a JV 2008
22 Porsche Guangdong Foshan (广东佛山) 2014 Yes
23
Guangdong Shantou (广东汕头) 2015 Yes
24 FAW Toyota Dongguan Dongbu (廣東東莞東部) 2004
25
Dongguan Meidong (東莞美東) 2008
26
Beijing Zhongye (北京中業) 2009
27
Quanzhou Meidong (福建泉州) 2010 Yes
28 GAC Toyota Dongguan Dongxin (東莞東鑫) 2007
29
Yiyang Dongxin (湖南益陽東鑫) 2011 Yes
30
Dongguan Fenggang (东莞市凤岗) 2014
31
Guangdong Dongguan Zongtang (广东东莞左宗棠) 2016
32 FAW Toyota Dongguan Anxin (东莞安信) (49%), an Associate 2010
33 Hyundai Dongguan Guangfeng (東莞冠豐) 2004
34
Heyuan Guangfeng (廣東河源冠豐) (70%) 2011 Yes
35 Honda Jiangxi Fuzhou (江西撫州) 2008
36
Jiang Yichuan (江西宜春) 2010
Source: Company data, OP Research
Meidong enjoy superb monopoly
power over many cities because
they hold sole dealership of
brands
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 10 of 25
Tier 2-4 cities focus generate inelastic demand
MD has the highest ratio of stores located in T2-T4 cities among listed peers.
Spending power of T2-T4 cities are in general lower, but careful analyses are
made before MD enters any of them. Certain level of GDP, population, income
must be reached before they are being considered. The rough profile is 10K car
registered for around 1 mil in population, generating GDP of over Rmb 50 bils.
There will usually be less competition as the penetration of brands is still low.
Combined with the group’s preferred strategy of “SCSB”, the room to grow shall
be guaranteed. The risk of these cities encountering limitations on car licenses is
lower as well.
Exhibit 13: % of stores in T2-T4 cities among listed dealers
Source: Company data, OP Research
9.0%
36.0%
15.0%
39.0%
51.0%44.0%
36.0%
47.0%
36.0%21.0%
47.0%
28.0%38.0%
25.0% 28.0%
0%
20%
40%
60%
80%
100%
Meidong Baoxin Zhongsheng Zhengtong Yongda
Tier 1 Tier 2 Tier 3-4
Meidong prefers opening stores
in selected tier 2-4 cities with
health demands and supply
dynamics
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 11 of 25
Performance by Brands
BMW’s slowdown is expected and is neutral to dealers
In terms of new car sales, we have seen the BMW ’s sales in China slow down
dramatically in 2015, its sales volume growth turning to negative in May, falling by
4.2%, implying its Jan-May growth is only 3%, way below its 10% growth
guidance. However, we do not find it surprising, for a few reasons, 1) they have
no new model this year, 2) pressure to reduce dealers’ inventories, and 3)
broad-based slowdown in demand from weakening economic growth, continuing
anti-corruption drive, etc. The slowdown, however, is not necessarily a bad thing
to dealers. On one hand, fall in sales volume could affect its sales growth, but on
the other hand, it could imply the de- stocking of dealers. Going forward, once
dealers are de-stocked financing pressures from both new car sales and
financing are reduced, thus improving margins and costs.
Meidong’s BMW stores are still young, BMWs’ new model to come in
FY16-17.
For Meidong, the impact will be less, in our view, because 1) stores were only
recently opened, 2) they are all being considered “SCSB”. Due to their young
stores profiles (only 1 out of 8 were opened before 2013), we expect their sales
will still be at fast growing stage. Additionally, these 8 stores (4 to be opened in
2015) are all enjoying the bonus of being the “Single City Single Brand”. More
importantly, we believe BMW’s outlook will improve, as the new 2 series/ X1 will
come on stream in 2016 with the new 5 series to follow in 2017.
Exhibit 14: New BMW 5 series
Source: Company data, OP Research
BMW sales slow down in China
due to softer OEMs policy and
lack of new models
But Meidong’s BMW sales should
still grow at a fast pace due to its
stores are still young
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 12 of 25
Japanese brands to fight back
Japanese brands hope to outperform after 3 years in doldrums, they are planning
numerous new model to win back market shares this year. They have set more
conservative targets in 2015, and we are optimistic that they will over achieve
their goals even though the price war has been kick started by the US, German
and Korean brands. So far, during Jan-May, Japanese brand’s sales have grown
by 3.2%, compared to about 1.6% drop for the US, German and Korean brands.
Toyota kept the target volume, making it easier to achieve
Toyota has kept their sales volume target of 1.1 mils unit in China in 2015,
therefore we think this is conservative and should be achievable. Its sales in
Jan-May grew by 16.1%, thanks to the New Corrolla and Levin introduced in 2014.
Highlander and the new Crown, as well as two Hybrid model Levin Hev and
Corolla will also be launched in 2015.
Exhibit 15: Highlander
Source: Company data, OP Research
Porsche and Honda sparkling in the competition
For other brands, both Porsche and Honda are having a strong year in China.
Their May sales grew by 70.3% and 32.3%, while it Jan-May sales grew by
43.8% and 31.3%. Strong sales behind Honda are backed by the increasing
popularity of new models introduced last year (e.g. Odyssey and Fit). For
Porsche, sales have accelerated from the 25.4% growth in 2014: still they have
cut their target down to only 7% growth for 2015 to some 50K units in China after
negotiations with dealers. We believe the newly introduced Macan is the driver, a
cheaper entry model with a lower price tag, this is the first time Porsche sell its
car at a price lower than 600K Rmb in China. Many of the buyers are upgraders
from BMW X3 and Benz GLK.
Japanese brands have lined up
many new models in 2015, aiming
to win back market shares
Toyota sales rebounded in 2015
and should overshoot its
guidance
Porsche and Honda experienced
stellar sales, growing by 43.8%
and 31.3% YTD in China
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 13 of 25
Exhibit 16: Porsche Macan
Source: Company data, OP Research
Lexus and Hyundai are just floating around
Lexus and Hyundai are underperforming with Jan-May sales growth in China to
be -3.6 and -3.5%. Lexus will launch the new RX in 2015.
Exhibit 17: PV wholesales volume growth by brand origin
Source: Company data, OP Research
18.8%
15.9%
-30%
10%
50%
90%
130%
170%
210%
Se
p-1
3
Oct-
13
Nov-1
3
Dec-1
3
Jan
-14
Fe
b-1
4
Ma
r-14
Ap
r-14
Ma
y-1
4
Jun
-14
Jul-1
4
Au
g-1
4
Se
p-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan
-15
Fe
b-1
5
Ma
r-15
Ap
r-15
Ma
y-1
5
Domestic German US Japanese Korean French
Lexus and Hyundai sales were
not exciting
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 14 of 25
Exhibit 18: PV retail volume growth by brand origin
Source: Company data, OP Research
Exhibit 19: Meidong’s sales growth by brands
2013 2014 2015E 2016E 2017E
Sales by brands
Luxury brands
BMW 524 850 1,116 1,677 2,224
Lexus 597 574 574 713 817
Porsche 0 83 167 233 318
Mid-high end brands
Hyundai 298 346 317 363 374
Toyota 1,697 1,582 1,626 1,861 1,991
Honda 0 0 387 386 403
After-sales services 364 421 521 655 804
Total 3,480 3,855 4,707 5,887 6,931
Growth (%)
Luxury brands
BMW 24.1% 62.2% 31.4% 50.2% 32.7%
Lexus 12.2% -3.9% 0.0% 24.1% 14.6%
Porsche 102.5% 39.4% 36.5%
Mid-high end brands
Hyundai 43.8% 16.0% -8.4% 14.6% 3.1%
Toyota 13.0% -6.8% 2.8% 14.5% 7.0%
Honda -0.2% 4.4%
After-sales services 26.9% 15.7% 23.6% 25.8% 22.7%
Total 18.0% 10.8% 22.1% 25.1% 17.7%
% of total
Luxury brands
BMW 15.1% 22.0% 23.7% 28.5% 32.1%
Lexus 17.2% 14.9% 12.2% 12.1% 11.8%
Porsche 2.1% 3.6% 4.0% 4.6%
Mid-high end brands 0.0% 0.0% 0.0%
Hyundai 8.6% 9.0% 6.7% 6.2% 5.4%
Toyota 48.8% 41.0% 34.5% 31.6% 28.7%
Honda 8.2% 6.6% 5.8%
After-sales services 10.5% 10.9% 11.1% 11.1% 11.6%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Company data, OP Research
20.1%
12.0%
-30%
-10%
10%
30%
50%
70%
90%
Se
p-1
3
Oct-
13
Nov-1
3
Dec-1
3
Jan
-14
Fe
b-1
4
Ma
r-14
Ap
r-14
Ma
y-1
4
Jun
-14
Jul-1
4
Au
g-1
4
Se
p-1
4
Oct-
14
Nov-1
4
Dec-1
4
Jan
-15
Fe
b-1
5
Ma
r-15
Ap
r-15
Ma
y-1
5
Domestic German US Japanese Korean French
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 15 of 25
Robust margins expansion from more luxury
According to management, inventory levels have been brought down in 1H15
compared to 2H14, party a result of scaling back of sales targets imposed by the
OEMs. This development, in our view, has a positive pull in dealers’ margins.
Another pull in the overall margins for new car sales is the first full year
contribution of its new Porsche stores. The first one was opened in Guangdong
Foshan (广东佛山) in late 2014, and the other one in Guangdong Shantou (广东
汕头) will be rolled out in 2H15. Comparing to its current portfolio, the new car
sales margins from Porsche (12%) is way higher than its current margins (5.3%).
MD’s after sales services should be able to charge a higher margin for their luxury
brands in cities where they enjoy significant monopoly power, and this trend will
continue in our view.
Exhibit 20: Meidong’s sales by segments
Source: Company data, OP Research
15.1%22.0% 23.7%
28.5% 32.1%
17.2%
14.9% 12.2%12.1%
11.8%2.1% 3.6%4.0%
4.6%
8.6%
9.0% 6.7%6.2%
5.4%
48.8%41.0%
34.5%31.6% 28.7%
8.2% 6.6% 5.8%
10.5% 10.9% 11.1% 11.1% 11.6%
0%
20%
40%
60%
80%
100%
2013 2014 2015E 2016E 2017E
BMW Lexus Porsche Hyundai Toyota Honda After-sales services
New car sales margin for Porsche
(12%) is way above others (5%)
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 16 of 25
Power shifts from OEMs to dealers
Dealers gain bargaining power over OEMs, driving less inventory pressures
and better margins outlook
After years of outsized growth that turned China into the world’s largest auto
market, slowdown in 2014 has exacerbated tensions between the auto OEMs
and dealers, smaller margins lead to tougher negotiation over sharing profits.
China Automobile Dealers Association (“CADA”) initiated non-cooperative actions
in late 2014 (e.g. stop buying cars from BMW, stop attending all BMW trade fairs
and events unless they agree to return a reasonable rebates and terms to
dealers). Almost all battles started by dealers against OEMs ended in victory. This
indicated a huge change in bargaining power from OEMs to dealers, and we
expect it to go further in this direction.
Incident 1: BMW had been forced to settle the dispute with dealers by paying 5.1
bils rmb in Jan 2015. Soon after this, Toyota announced their compensation of
over 1.2 bils rmb to its dealers in Feb 2015. Many others, like Audi, Benz, Honda
and Nissan encountered same issues, and they have also pledged hundreds of
millions in subsidies to square things up with the dealers before the dispute went
public.
Incident 2: In 1Q15, major BMW dealers in China began to press BMW to set
more realistic sales targets, lower wholesale prices and extend grace periods for
payment to tide over dealers grappling with high inventories amid weakening
demand. BMW responded afterward and saying they would reduce prices and cut
its sales target for 2Q in China.
Incident 3: Jaguar / Ferrari / Porsche admitted they have misbehaved previously
when they deal with the sales target and the rebate for their dealerships. They
have all replaced their China chiefs in Jun 2015, and implemented a change in
policies, (e.g. lower sales targets were given with hopes of repairing the
relationship with the dealers).
Amid the new paradigm where OEMs are getting more difficult to push sales via
channel stuffing, we expect auto OEMs to cut their supply to cope with slowing
demand, which will favour dealers’ new car sales profitability.
For Meidong, we expect their new car sales margins in 2015 to pick up slightly
thanks to the production cuts and lower targets set by the OEMs. Combining with
better product mix (greater sales from Porsche and after-sales), we anticipate
their GP/NP to improve from 10.2/2.9% in FY14 to 11/4.4% in FY17.
Dealers have won the dispute
over car sales’ subsidies and we
expect the bargaining power to
shift from OEMs to dealers in the
future
Productions were cut and lower
sales targets set for dealers by
the OEMs and this should help
ease the inventory and margin
pressures for distributors
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 17 of 25
Exhibit 21: Meidong’s GP margin trend
Source: Company data, OP Research
Exhibit 22: Meidong’s sales growth by segment
Source: Company data, OP Research
9.4%
10.2% 10.4%10.7%
11.0%
5.0% 5.0% 5.0%5.4%
5.8%
3.0% 2.9%3.2%
3.5% 3.6%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2013 2014 2015E 2016E 2017E
GP margins OP margins NP att. margins
17.5%
34.4%
23.3%
41.2%
28.1%
16.8%
-3.4%
20.9%
12.0%
6.1%
26.9%
15.7%
23.6%
25.8%
22.7%
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
2013 2014 2015E 2016E 2017E
Luxury Mid to high-end After-sale services
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 18 of 25
Effect of Price War on dealers is slight positive
Volkswagen stated to cut prices in April, followed by Hyundai, Ford, General
Motor, BMW and many others, price cut is on average around 10%. This is an
advertisement to catch consumer’s attention, and to boost their sales volume.
Ironically, in our view, the impact on dealers is in fact, slightly positive. Because
the price cut this time is on the ex-factory prices, retail tag prices has not moved
much and discount is always there, so the direct improvement is in the dealers’
liquidity, as less capital is needed for new cars.
So far, around 2 months after the price war started, we have not seen significant
pick up in volume, as well as any meaningful reduction in dealers’ inventory.
Japanese brands, are not so responsive to the price war, but still they have
maintain a good sales trend in May. So we think the effect from price cut could
come with a time lag, still we prefer to think the sales trend of brands are more
related to its reception of new models, rather than just the absolute prices.
Price cut is more like a gimmick,
and in fact it benefits dealer’s
liquidity
But it seems not so effective… in
terms of boosting sales
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 19 of 25
Favourable age distribution of China’s cars
Demand for after-sales services is set to grow exponentially
During the 2009- 2014 car bloom, Chinese purchased an enormous amount of
cars with total volume reached 155 mils in 2014. With over 40% of the vehicles
aged around 1-3 years old, they are expected to demand more frequent
after-sales services in the coming 1-2 years. Our longer term bullish view on the
auto dealers remains unchanged as we foresee the significance of after sales
services to increase along with the fast growing demand.
Exhibit 23: Ages mix for domestic cars in china
Source: Company data, Bloomberg, OP Research
1-3 yrs old41.7%
4-5 yrs old23.5%
6-7 yrs old14.8%
8+ yrs old20.0%
Over 40% of cars in China are
relatively young and will require
more after-sales services soon
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 20 of 25
Car sales to follow reversal in property sales
Auto sales are often related to the properties’ sales, as those home purchasers
tend to buy their cars afterwards, especially for those first time buyers. The
domestic monetary easing cycle in China is underway and this has helped to
stabilize the property market, with both sales and prices trending up, which in turn
should have a positive pull in auto sales. Further RRR and interest rate cuts will
no doubt help to improve access to credit and its cost of financing for both the
dealers and consumers and should be supportive of greater demand.
Exhibit 24: Property sales often lead the car sales by 3 months
Source: Bloomberg, Wind, OP Research
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
-40%
-20%
0%
20%
40%
60%
80%
100%
Feb-0
7
Jun
-07
Oct-
07
Feb-0
8
Jun
-08
Oct-
08
Feb-0
9
Jun
-09
Oct-
09
Feb-1
0
Jun
-10
Oct-
10
Feb-1
1
Jun
-11
Oct-
11
Feb-1
2
Jun
-12
Oct-
12
Feb-1
3
Jun
-13
Oct-
13
Feb-1
4
Jun
-14
Oct-
14
Feb-1
5
Area GFA sold yoy growth (%) - L.H.S.
PV sales yoy growth (%) 3 months lag - R.H.S.
Property sales picked-up recently
and it usually brings in new car
sales
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 21 of 25
Valuation and Recommendations
1H15 result may decline YoY but we think the worst has already passed.
Due to the exceptional result in 1H last year, we expect the 1H15 net profits to
decline YoY by roughly 20-30%, but thanks to the lower coms formed by the
sector slow-down in 2H14, MD could still achieve a reasonable improvement on
the HoH basis. Furthermore, we have seen the pressure on new car sales margin
eased in 1H15, as well as the ramp up of those newly opened Porsche and BMW
stores in 2014, we are confident of a much better 2H in FY15.
Undemanding valuation, with excellent growth prospects.
We project MD to comfortably achieve 21/ 32% CAGR in sales/ EPS over the
FY15-17 period. Driven mainly by 1) 24.8% CAGR in store counts and 2)
sustainable margins expansion due to higher mix of luxury products (from 39% to
49% of sales over the FY14-17 period). We forecast GP/NP margins to jump from
10.2/2.9% in FY14 to around 11.0/3.6% in FY17. Our valuation is based on 10x
FY16 PE, where it also hold a forecast yield of 3.5%. BUY.
Exhibit 25: Major assumptions (volume/ GP margins growth)
2013 2014 2015E 2016E 2017E
New car sales volume (units)
Luxury 2,657 3,776 4,917 6,752 8,497
Min to high-end 14,310 13,970 17,550 19,350 20,568
Total 16,967 17,746 22,467 26,102 29,065
Sales volume growth (%)
Luxury 24.0% 42.1% 30.2% 37.3% 25.8%
Min to high-end 25.2% -2.4% 25.6% 10.3% 6.3%
Total 25.0% 4.6% 26.6% 16.2% 11.4%
Revenue (RMB mn)
New car sales 3,116 3,434 4,187 5,232 6,127
After-sale services 364 421 521 655 804
Total revenue 3,480 3,855 4,707 5,887 6,931
Revenue growth (%)
New car sales 17.0% 10.2% 21.9% 25.0% 17.1%
After-sale services 26.9% 15.7% 23.6% 25.8% 22.7%
Total revenue 18.0% 10.8% 22.1% 25.1% 17.7%
Gross margin (%)
New car sales 4.2% 5.3% 5.4% 5.7% 5.7%
After-sale services 54.0% 49.7% 50.0% 51.1% 51.6%
Overall gross margin 9.4% 10.2% 10.4% 10.7% 11.0%
Source: Company data, OP Research
Net profit in 1H15 should decline
due to a high base, but we should
see a decent 2H15
Cheap valuation of 6x FY16 PE
and good growth profile, 32%
CAGR in EPS from FY14-17
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 22 of 25
Financial Summary
Year to Dec FY13A FY14A FY15E FY16E FY17E
Year to Dec FY13A FY14A FY15E FY16E FY17E
Income Statement (RMB mn)
Ratios
Sales 3,116 3,434 4,187 5,232 6,127
Gross margin (%) 9.4 10.2 10.4 10.7 11.0
After sales revenue 364 421 521 655 804
Operating margin (%) 5.0 5.0 5.0 5.4 5.8
Turnover 3,480 3,855 4,707 5,887 6,931
Net margin (%) 3.0 2.9 3.2 3.5 3.6
YoY% 18 11 22 25 18
Selling & dist'n exp/Sales (%) 2.8 3.1 3.1 3.0 3.0
COGS (3,152) (3,462) (4,220) (5,257) (6,169)
Admin exp/Sales (%) 2.3 2.6 2.7 2.6 2.7
Gross profit 328 393 487 630 763
Payout ratio (%) 21.8 27.1 28.0 28.0 28.0
Gross margin 9.4% 10.2% 10.4% 10.7% 11.0%
Effective tax (%) 28.1 29.7 26.0 26.0 26.0
Other income 23 20 20 25 30
Total debt/equity (%) 174.8 134.0 125.0 112.6 100.9
Selling & distribution (96) (121) (146) (180) (205)
Net debt/equity (%) 28.7 31.9 42.9 60.1 55.0
Admin (81) (99) (126) (156) (188)
Current ratio (x) 1.0 1.1 1.0 1.0 1.0
Other opex 0 0 0 0 0
Quick ratio (x) 0.7 0.6 0.6 0.6 0.6
Total opex (177) (220) (272) (335) (393)
Inventory T/O (days) 53 68 60 60 60
Operating profit (EBIT) 174 193 236 320 399
AR T/O (days) 25 29 35 40 40
Operating margin 5.0% 5.0% 5.0% 5.4% 5.8%
AP T/O (days) 60 85 75 70 70
Provisions 0 0 0 0 0
Cash conversion cycle (days) 19 12 20 30 30
Interest Income 11 9 8 7 7
Asset turnover (x) 2.2 2.0 2.1 2.2 2.2
Finance costs (45) (63) (62) (75) (88)
Financial leverage (x) 3.5 3.9 3.8 3.6 3.4
Profit after financing costs 139 139 182 253 318
EBIT margin (%) 5.0 5.0 5.0 5.4 5.8
Associated companies & JVs 10 17 18 21 23
Interest burden (x) 0.9 0.8 0.8 0.9 0.9
Pre-tax profit 149 156 200 274 341
Tax burden (x) 0.7 0.7 0.7 0.7 0.7
Tax (39) (41) (47) (66) (83)
Return on equity (%) 23.3 22.0 24.7 27.3 27.3
Minority interests (4) (4) (4) (5) (6)
ROIC (%) 17.7 19.7 20.1 20.2 19.8
Net profit 106 111 149 203 252
YoY% 122 4 35 36 24
Year to Dec FY13A FY14A FY15E FY16E FY17E
Net margin 3.0% 2.9% 3.2% 3.5% 3.6%
Balance Sheet (RMB mn)
EBITDA 193 221 286 389 490
Fixed assets 288 437 560 711 881
EBITDA margin 5.6% 5.7% 6.1% 6.6% 7.1%
Intangible assets & goodwill 11 11 11 12 13
EPS (RMB) 0.137 0.111 0.136 0.185 0.229
Associated companies & JVs 28 44 63 84 107
YoY% 116 (19) 23 36 24
Long-term investments 105 103 103 103 103
DPS (RMB) 0.030 0.030 0.038 0.052 0.064
Other non-current assets 10 9 9 9 9
Non-current assets 443 603 746 919 1,112
Year to Dec FY13A FY14A FY15E FY16E FY17E
Cash Flow (RMB mn)
Inventories 458 642 694 864 1,014
EBITDA 193 221 286 389 490
AR 242 309 451 645 760
Chg in working cap (94) (58) (130) (223) (89)
Pledged deposits 182 429 429 429 429
Others 2 6 0 0 0
Cash 491 127 116 5 40
Operating cash 102 169 156 166 401
Current assets 1,373 1,506 1,690 1,943 2,242
Tax (34) (47) (9) (47) (66)
Net cash from operations 68 122 147 119 335
AP 515 802 867 1,008 1,183
Tax 16 9 47 66 83
Capex (125) (181) (188) (235) (277)
Bank loans 805 609 709 809 909
Dividends received 0 0 0 0 0
Current liabilities 1,336 1,420 1,624 1,883 2,175
Sales of assets 12 13 14 15 16
Payment for lease
prepayment (2) 0 0 0 0
Bank loans & leases 0 120 120 120 120
Advances and repayment of
advances 170 (5) 0 0 0
Deferred tax & others 3 4 4 4 4
Interests received 11 4 8 7 7
MI 17 21 25 29 36
Others 0 (145) 0 0 0
Non-current liabilities 20 145 149 153 160
Investing cash 67 (314) (166) (213) (254)
FCF 135 (193) (19) (95) 80
Total net assets 460 544 664 825 1,020
Issue of shares 334 0 0 0 0
Buy-back 0 0 0 0 0
Shareholder's equity 460 544 664 825 1,020
Minority interests 0 0 0 0 0
Share capital 79 79 79 79 79
Net change in bank loans 236 (75) 100 100 100
Reserves 382 466 585 747 942
Net change in other liabilities (46) (1) 0 0 0
Dividends paid (44) (30) (30) (42) (57)
BVPS (HK$) 0.75 0.68 0.75 0.94 1.16
Interests paid (50) (65) (62) (75) (88)
Others (233) 0 0 0 0
Total debts 805 730 830 930 1,030
Financing cash 198 (171) 8 (17) (45)
Net cash/(debts) (132) (174) (285) (496) (561)
Net change in cash 333 (364) (11) (111) 35
Exchange rate or other Adj 0 0 0 0 0
Opening cash 159 491 127 116 5
Closing cash 491 127 116 5 40
CFPS (HK$) 0.110 0.152 0.167 0.135 0.380
Source: Company, OP Research
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 23 of 25
Exhibit 26: Peer Group Comparison
Company Ticker Price
Mkt cap
(US$m)
3-mth
avg t/o
(US$m)
PER Hist
(x) PER FY1 (x)
PER
FY2
(x)
EPS
FY1
YoY%
EPS
FY2
YoY%
3-Yr EPS
Cagr (%) PEG (x)
Div
yld
Hist
(%)
Div
yld
FY1
(%)
P/B
Hist
(x)
P/B
FY1
(x)
EV/
Ebitda
Hist
EV/
Ebitda
Cur Yr
Net
gearing
Hist
(%)
Gross
margin
Hist
(%)
Net
margin
Hist
(%)
ROE
Hist
(%)
ROE
FY1 (%)
Sh px
1-mth
%
Sh px
3-mth
%
China Meidong Au 1268 HK 1.47 209 1.9 10.6 8.7 6.4 22.7 36.3 27.6 0.31 2.0 2.6 2.16 1.95 7.4 6.6 31.9 10.2 2.9 22.0 24.7 (26.9) (5.2)
HSI 24,901.28 10.3 11.9 10.9 (13.4) 9.9 1.5 7.91 3.3 3.3 1.33 1.29 12.9 10.8 (8.7) (11.1)
HSCEI 11,858.55 8.7 8.5 7.7 2.1 10.3 7.2 1.19 3.4 3.6 1.20 1.11 13.9 13.1 (15.2) (18.7)
CSI300 4,106.56 17.7 15.4 13.5 15.0 14.1 15.0 1.0 1.5 1.8 2.4 2.2 13.8 14.2 (23.0) (7.1)
Adjusted sector avg* 11.2 8.0 6.3 43.4 25.2 26.4 0.3 1.9 2.6 1.3 1.1 10.3 7.6 134.2 8.5 2.0 13.6 15.7 (14.6) (6.4)
Baoxin Auto Grou 1293 HK 4.20 1,386 6.5 12.0 7.9 6.5 51.4 22.2 31.8 0.25 1.2 2.6 1.69 1.38 9.6 8.4 207.3 9.1 2.3 14.5 18.6 (23.6) (12.5)
China Zhengtong 1728 HK 4.86 1,386 4.0 10.7 8.5 6.9 26.6 21.9 21.1 0.40 2.1 2.3 1.05 0.94 9.3 7.6 111.6 8.8 2.6 10.2 11.9 (3.6) (5.6)
Zhongsheng Group 881 HK 4.64 1,285 4.4 10.6 7.1 5.5 50.6 28.8 29.7 0.24 1.9 2.9 0.72 0.64 9.2 7.7 147.8 8.7 1.4 7.7 9.5 (23.2) (25.6)
China Harmony Au 3836 HK 6.85 1,392 15.5 10.8 10.4 7.7 3.9 34.5 17.4 0.60 1.5 1.3 2.20 1.05 11.7 9.4 71.7 10.7 5.3 22.0 14.8 (27.3) (4.6)
China Yongda Aut 3669 HK 5.10 974 1.0 12.0 8.2 6.2 47.1 31.0 32.1 0.25 2.4 2.4 1.57 1.35 10.1 7.3 181.6 8.1 1.5 13.8 17.5 (1.5) 9.9
Rundong Auto 1365 HK 3.50 485 1.4 8.2 5.8 5.2 41.2 12.5 N/A N/A N/A N/A N/A 1.08 12.0 7.3 580.9 8.6 2.0 31.2 21.6 (21.9) 6.1
Sunfonda Group 1771 HK 2.75 213 0.0 6.9 N/A N/A N/A N/A N/A N/A 2.3 N/A 0.84 N/A 6.5 N/A 84.9 7.7 2.2 13.2 N/A (1.1) (12.4)
* Outliners and "N/A" entries are excl. from the calculation of averages
Source: Bloomberg, OP Research
Mon, 13 Jul 2015
Meidong Auto (1268 HK)
Page 24 of 25
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