Investment Highlights: The development prospects of the Chinese automobile market are broad and it is expected to continue to grow rapidly for over 10 years. With the rapid and stable development of China's economy and the increase in income levels, the automobile penetration rate will gradually increase to comparable levels with developed countries in the next 15 years. It is conservatively expected that the number of domestic private passenger vehicles will increase by 7 times to 120 million by 2020. .
The improvement of international competitiveness drives the rapid development of independent brands. The gap between the technological level of developed countries and that of the developed countries is continuously narrowing, and the international competitiveness of China’s automobile industry is continuously improving. The rise of self-owned brand automobiles is changing the competitive landscape of the Chinese market and will profoundly change the international automobile market in the next 5-10 years. Surpassing Korea has become the fourth pole of competition with Japan, Europe and the United States.
The market position of self-owned brands has grown rapidly and the market position of dominant companies has remained relatively stable. Competition among automotive companies has shifted from production capacity to R&D, spare parts supply, manufacturing, sales and brand competition, and the value chain control capability has become the core of competitiveness.
There is a good combination of opportunities between the well-developed trends, the emergence of value-discovery functions, and the technology and capital-intensive automotive industries. In the past two years, SAIC, Dongfeng Group, Weichai Power, Haima Group, etc. have been listed through different channels. The future FAW Group, Southern Auto, CNHTC Group, Guangzhou Automobile Group and others have capital operation plans.
From the perspective of PEG, Chinese auto companies have valuation advantages. The reason for the relatively low valuation of international auto companies is that the global auto industry has become a cyclical industry, and the growth rate of performance has been quite slow. We believe that the target price in the next six months can already be used to shift the valuation base to the profit in 2008. For companies with a market position that is expected to continue to improve and the growth of the performance to be good, we can use the PE valuation of 25-30 times in 2008.
Haima Motors, Changan Automobile, Weichai Power, China National Heavy Duty Truck, Foton Motors, Yutong Bus and other companies are highly recommended to maintain the investment rating of “Outperform†of the auto industry.
The rise of independent brands changes the market structure
Rapidly improve the international competitiveness of China's auto industry
From the performance of China's auto product import and export, we can see a significant increase in the international competitiveness of the industry. From 1991 to 2006, the average annual growth rate of imports was 18%, while the average growth rate of exports reached 42%, and the growth rate of vehicle exports exceeded 50%. Since 2005, the export volume of automobiles and the export value of automotive products have surpassed imports. The Chinese auto industry has exhibited a net export trend. In 2006, the trade surplus of the auto industry expanded rapidly, and the international competitiveness of the Chinese auto industry improved significantly.
There are two driving forces behind the rapid growth of exports. Multinational companies continue to expand their investment and purchase volume in China under pressure from competition. “Going to China†has become a new trend in the global automotive industry. The labor cost advantage and the accumulation of industrial technology have made China's vehicle export a new growth point, while the independent brand is the absolute main force for vehicle exports. The international competitiveness of China's auto manufacturing industry will follow the footsteps of industries such as textiles and home appliances. The “Made in China†automotive products will change the pattern of the future international market.
It is a key issue for Chinese domestic companies to have stronger market competitiveness relative to the multinational companies’ sole proprietorship or joint venture companies in China. We believe that although domestic companies in China are still significantly lower in terms of automotive technology and market influence than multinational companies, in the past more than two decades, the strategy of changing the technology of the market for the industry, almost all multinational automobile companies have established joint ventures or imported directly. In other ways to enter China, and occupy the mainstream of China's passenger car market and profits. However, China's domestic auto industry, or domestic listed auto companies, still have market competitiveness and long-term development prospects.
The advantage of the big country market is the basis for the development of the Chinese auto industry. With the expansion of domestic auto demand in China, the Chinese auto industry has formed a relatively complete R&D, manufacturing, marketing, and after-sales system. The supporting capability of parts and components has become very strong. Automobile auto parts and components exports have become an important driver of industry growth. . Compared with the International Automobile Group, the gap between the technology level and financial strength of China's auto industry has been significantly reduced.
Local companies can create competitive advantages through in-depth understanding of the local market and innovations in production and management methods and product selection. In the special report of "China's Auto Industry: Competitiveness of Local Auto Companies" at the beginning of the year, we specifically discussed the local competitiveness due to the different factor endowments structure of China and the developed countries.
In general, we believe that in the next five to ten years, China’s own brands will participate in the domestic market and global competition, which is expected to profoundly change the global auto industry’s competitive landscape.
The development of self-owned brands has become a fundamental factor in changing the market structure of the car industry. The Chinese auto industry has already established a foothold in the commercial vehicle sector. Chery, Geely and other companies have created a world in the field of self-owned brand passenger cars, including hippocampus, BYD, Great Wall, and Brilliance. Such companies have a very good momentum of development. SAIC and Nanjing Auto have entered the market from high-end through the purchase of technology. Companies such as JAC and Dongfeng are also steadily advancing their plans for autonomous cars.
From the perspective of market sales, the release of the wealth effect has promoted the prosperity of the automotive market, especially the passenger vehicle market, and integrated the new and used car markets. The growth rate in 2006 exceeded 30%, due to the impact of used car competition on low-end economical cars. The rapid growth in the new car is mainly the high-grade cars with a price of more than RMB 150,000 and the cars with a rating of RMB 80,000-10,000. From the perspective of displacement structure, 1-1.6 liters have already accounted for more than half of the total sales, and the growth rate of economic cars below 1 litre has slowed down. The hot selling of 8-10 million A-class vehicles is behind the rise of independent brand power, while joint ventures need to continue to put into production and improve mid- to high-end cars in order to increase their market position and profitability.
In fact, the main driving factor behind the current decline in the market concentration of the car industry is the rise of independent brands. Chery has entered the first group, and Geely, Haima, BYD, Brilliance and other growth rates far exceed the industry average. As a result of market competition, the market positions of Beijing Hyundai and Shenlong, which were originally in the second group, have continued to decline.
Chinese automakers are on the rise
In the past, we discussed the impact of factors such as government policies on the rise of the Japanese and South Korean automobile industry. Actually, the reason why the late-developing countries have advantages is that we are fundamentally the combination of the laws of industrial development and domestic factor endowments. The company has stronger insight and ability to grasp.
China has established international competitiveness in the fields of textiles and home appliances, and a number of local companies have begun to take shape. In the field of machinery manufacturing, the rise of CIMC and Zhenhua Port Machinery has demonstrated the strength of China's manufacturing. The international competitiveness of China's industries and mainstream companies in the fields of shipbuilding and construction machinery is also being significantly enhanced.
In the field of commercial vehicles and general auto parts, the international competitiveness of Chinese companies is also significantly enhanced. In the future, we are also expected to demonstrate strength in the field of passenger vehicles. We believe that the rise of Chinese domestic auto companies is a fact that is happening and will also significantly change the order of the global auto industry in the next five to ten years. The main winners in the future of China's auto market competition will not be those with the strongest capital and technical strength, but will be able to adapt to the Chinese market (including product markets and factor markets), be able to make full use of China’s comparative advantages, optimize product selection and Quality control, transformation of R&D and manufacturing processes, a company that has completely transformed its management style.
In the past few years, self-owned brands have dominated the mid- and low-end sedan segment. The Chinese auto industry is undergoing a period of strategic value transition from the stage of investment and resource-driven to the stage of technological innovation. The key period and the opportunity period are the transition, consumer demand orientation and policy orientation. It also tends to develop its own brand. After more than 20 years of joint ventures and the test of the domestic market, the gap between Chinese companies (whether joint ventures or domestic-funded enterprises) in manufacturing has become smaller and smaller.
Chinese companies improve the competitiveness of the industrial chain in the independent manufacturing of core components such as engines. Chery, Haima, Brilliance, Geely, and Great Wall have independently manufactured higher-quality engines, and their domestic independent engine displacement has increased from 0.8-1.3 litres of the current year. As the mainstream gradually moved up to 1.6-2.0 liters, and some of the engines with more than 2.0 liters also entered the batch production stage, reflecting that the self-owned brand will rapidly expand to the high end in the next two to three years. We will continue to expand the industry chain with independent brands in the future, gradually expand to higher grades, continue to expand domestic market share, and have confidence in the impact of global low-end car market.
China's auto market has a bright future
China has entered a period of rapid growth in car consumption
The popularity of Chinese automobiles, especially cars, is at a very low level. With the continued growth of the economy and the rapid increase in income, the popularity of cars will have a good performance.
The history of the development of the international car market shows that the mid- and long-term development trend of the passenger vehicle market in a country is mainly determined by the R value.
The development experience of automobile pilot countries shows that when the R value reaches 2-3, the car begins to enter the family on a large scale, the automobile penetration rate rapidly increases, and the automobile market begins to enter the growth period.
The R-values ​​in Shenzhen, Guangzhou, Shanghai, etc. have already fallen below 3, while in Beijing, the automobile has entered the family on a large scale around 5 times. As the price of cars decreases and per capita income increases, the R-value will decrease rapidly, and more and more families have the ability to purchase cars. According to China's macroeconomic forecast and analysis, around 2009, a large number of cars enter the family (mid-income families have the ability to buy cars).
From a regional point of view, due to the significant regional economic development level and per capita income level in China, car consumption will gradually move from developed regions such as Beijing and Shanghai to middle and less developed regions. The current population of thousands of passenger cars in the more developed coastal areas is still very low compared to Beijing. However, the per capita GDP of these provinces has reached or exceeded US$2,000 and will enter the period of rapid automobile development. The total population of these provinces is close to 300 million, far higher than Beijing, and its rapid development period should be longer than the first category.
The three types of regions will also be the follow-up force for the sustainable development of the passenger vehicle market. With the development of the economy, its contribution to the development of the passenger vehicle market will gradually emerge.
The stability of the macroeconomic environment is favorable. The upgrade of the consumption structure with the improvement of travel conditions will continue until 2020. The formation of the national highway network, the new rural construction to improve the status of rural roads, the vigorous development of the logistics industry, to provide conditions for the development of the automotive industry. In 2006, the penetration rate of urban household family cars was only 3%, and it is still in its infancy. China's current car ownership rate is far below the international average and far below the level of developed countries in the same period of development.
At the end of 2006, the number of private passenger cars in China was 15 million, which is conservatively expected to increase to 120 million by 2020. With the rapid growth of the domestic market and the expansion of exports, it is estimated that around 2015, China's auto production and sales volume is expected to reach more than 18 million, and the market share of self-owned brands is expected to exceed half.
The development of the passenger car market will at least have a rapid growth of about 20 years, and it is expected to maintain an annual growth rate of around 15-20% in the next 10 years.
Commercial Vehicles Advantageous Company Performance Stable and Rapid Growth Independent brand commercial vehicles have formed strong advantages in the low-end and mid-end commercial vehicle market. Experienced fierce competition in the domestic market. Most domestic mainstream commercial vehicle companies have strong independent research and development capabilities and significant low cost. Advantages: China's own-brand commercial vehicles have greater advantages in terms of price when their technical performance is not much different from that of the international market, and their cost performance is much higher than that of foreign brands. The advantages in medium and heavy-duty trucks, large and medium-sized buses, and light trucks are very obvious.
From the development of the past decade or so, it can be seen that in the commercial vehicle market, especially in large and medium-sized buses and trucks, the market share of domestic companies has been continuously increasing, which has occupied more than 90% of the market share. Joint ventures and imported vehicles are only Some mid-to-high-end market segments are competitive.
Exports have become an important growth point for commercial vehicles in China. On the whole, as China's industrialization process is significantly faster than urbanization, commercial vehicle development maturity is higher than that of passenger vehicles. The future development of the domestic market is not as wide as passenger vehicles. Reflected in the industry growth rate is lower than passenger cars led by cars. With China's economic development, industrialization, and urbanization, the general trend of growth in the domestic market for commercial vehicles is close to the level of GDP growth.
The export of commercial vehicles has become an important driving force for the growth of the industry: Although there are still gaps in the manufacturing of some high-end products, commercial vehicles and engineering machinery made in China have already reached or come close to the products of multinational companies in terms of basic performance. The trend of Chinese equipment to meet the global low-end market has been basically established. Based on a large domestic market, the prices of China's light trucks, large and medium-sized passenger vehicles, medium and heavy-duty trucks are much lower than those of developed countries. With the improvement of technology level and the improvement of vehicle development and manufacturing quality, exports have grown significantly, and there is a clear cost-performance advantage in meeting the needs of developing countries in the world.
The export of Yutong Bus, Jinlong Automobile, China National Heavy Duty Truck and other companies has gradually accounted for more than 10% of the company's production and sales, and it is becoming one of the key factors for future company development and investment value evaluation. According to the company's export planning and the expansion of overseas marketing of products, we believe that in the period of 3-4, sales in the international market may account for about 30% of sales of related companies.
Structural changes in the commercial vehicle market lead to rapid growth of some products. From a consumer perspective, commercial vehicles and passenger car-based passenger vehicle industries are very different, due to customers' understanding of product performance and understanding of cost-effectiveness. Thoroughly, it belongs to expert consumption.
Reflected in the market, brand loyalty is relatively higher, resulting in a relatively stable market structure. As can be seen from the major commercial vehicle market segments, the market share of companies with stronger product competitiveness has rapidly expanded to gain a leading position in the industry, and the corresponding profitability is also stronger. Overall, there is an increasing trend in concentration, and it is in a dominant position in the market. The leading company’s market position has been continuously strengthened and long-term stable returns can be obtained.
The growth of the performance of leading companies in the commercial vehicle market is relatively stable. With the development of the international market, the production, sales volume and profitability will grow steadily and rapidly, and the combined growth of major companies' performance is expected to reach around 30%.
The high-end heavy truck market has become a highlight of the market performance. The main driver of heavy truck domestic demand lies in the contradiction between transport capacity and traffic volume. It is expected that the economic growth will drive the domestic traffic demand to increase by about 10% annually, and the export demand will increase rapidly, driving the demand to increase by 3-5% annually. The upgrading of the power segment and the evolution of the structure to the high-end are inevitable trends in the industry. Changes in the market structure have resulted in medium-sized (4-8 tons load) and heavy low-end (8-15 tons load) growth rate lower than the industry, and the total volume has remained flat or slightly increased. In the next three years, heavy-duty high-end sales are expected to increase from 150,000 in 2006 to 300,000, and heavy-duty high-end growth will remain at around 25%. The rapid growth of 26 tons to 32 tons of products and high-end tractors reflects the development trend of the industry. The market position of manufacturers with high product structure or high-end extension capability will continue to increase, and companies that can provide related core components will benefit significantly. We expect that Sinotruk and Shaanxi Heavy Duty Truck will continue to consolidate their positions in the vehicle sector, while the revenue levels of CNHTC, Shaanxi Heavy Duty Truck, Fast, Weichai and other related core components will also be treated with cola and heavy trucks. The rapid growth in the sales volume of construction vehicles will also promote the significant improvement in the performance of Foton Motor.
From the monthly auto industry profitability level, it can be seen that the auto industry's profit margin is currently maintained at around 5%, a significant improvement from the level of around 3% in the second half of 2004 and close to the full-year profit level in 2005. We expect that the year-on-year growth rate of production and sales will be significantly lower than the first half of the year, and the price cuts for medium-to-high-end cars will increase. With the impact of consumption tax, the overall profitability level for 2006 will remain at 5%. It is expected that future industry profitability will be achieved. Will remain at about 5% level.
With the deepening of the global division of labor in the automotive industry and the increasingly fierce competition in the market, the value-added structure of the industrial chain has changed greatly. The so-called smile curve continues to extend downwards, that is, as the assembled vehicle factory's status in the middle of the value chain continues to decline. Front-end R&D and core components as well as back-end marketing and after-sales service are increasingly in the middle of the value chain.
After China's domestic auto market, especially the car market, has experienced the period of supply shortage due to the blowout growth of 2003-2003, the vehicle companies relying solely on assembly and survival have continued to decline in market competition, similar to the laws of the global auto industry. The control of the entire automotive industry value chain is the key to the goals pursued by auto vehicle companies and the enhancement of their own value.
The market has passed an era of tight supply, and the buyer’s market has become inevitable. Production capacity is no longer a bottleneck that restricts the company’s development. The key is how to obtain models that consumers can identify through self-development and continuous introduction, and then deliver them to consumers through a well-organized sales system. Of course, high-quality and low-cost parts systems and vehicle assembly and manufacturing are also very important parts, and branding can enhance the value of products and the company's profitability.
In summary, an excellent automotive company needs the following five combinations: high-quality, rapid-response R&D system; high-quality, low-cost, profit-sharing parts supply system; complete vehicle assembly system; marketing network; brand. Relative to the joint ventures with multinational companies in China, the control of the industrial chain of local companies in the future will continue to increase.
Based on the fast-growing Chinese domestic market and the ever-increasing global competitiveness of the industry, the future development of the automotive industry can be viewed with pleasure. At the same time, companies with fierce competition in the industry, continuous improvement in the status of the investment market and continuous extension of the value of the industry chain are both offensive and defensive strategies.
The basic characteristics of a company whose market position has continued to improve: Strong profitability, ability to face downward pressure from market competition, strong research and development capabilities (including introduction and autonomy), and continuous introduction of new models to meet the diverse needs of the market.. Sales network and brand capabilities will continue to increase. Three types of companies will benefit: Companies with strong profitability - Honda, GM - Stronger latecomers - Toyota, Ford - Government-supported independent innovation companies - Chery, Most of the current mainstream multinational corporations in the seahorse have entered the Chinese market and have obtained production bases in China through joint ventures. In addition to the growth of independent brands, with the increasingly fierce competition in the Chinese sedan market, the future market position of joint venture companies can largely Refer to the joint venture partner's position in the world.
In the Chinese car market, which still has long-term rapid growth prospects, there is still room for further improvement in the valuation of the company with a relatively high market position:
Haima Motor: The autonomous auto dealers with a strong development potential, superior management and strategy, and one of the representative companies of China's own brands, have long-term development prospects.
Changan Ford Mazda: Mazda's shareholding and Ford China strategy have solved the problem of company's product competitiveness, and sales and revenue will grow rapidly in the future. The company's gross profit level is high and its net profit level is low, which has the potential to significantly reduce sales costs and management expenses.
FAW Xiali: Tianjin Toyota's current gross margin level is clearly suppressed, Crown, Corolla, Reiz in all forces in 2006, in 2007 the three plants will be put into production new Corolla, the company's future there is significant room for profit release.
Industrial Policy Trends and Technological Progress of China's Automotive Industry As the automotive industry has many influencing factors, the formulation and modification of relevant industrial policies have become an important factor affecting the development of the industry. The current focus of industrial policy is mainly on the healthy development of the automotive industry and the reduction of negative externalities in the manufacturing and use of automobiles.
The main driving force for the development and profitability of auto companies lies in the company's own core competitiveness. The external key influence factors are market demand, government policies, and industry competition. These three factors also constitute the key external influence factors that affect the investment value of the auto industry.
The development of self-owned brands has become the most concerned factor in the automobile industry policy. It has introspected the introduction of foreign investment policies and the adjustment of automobile industry policies, which has led to the development of national policies that support the introduction of independent innovation and self-owned brands.
"Market-for-technology" gradually specializes in "competing technology for competition", and forcing fierce market competition to force multinational companies to put the latest products and best technologies into the Chinese market, and to promote the technological advancement of China's auto vehicle and parts industry through technological spillovers. . Since the beginning of the 21st century, the gap between the level of China's auto technology and the international level has been significantly reduced, and the rapid growth of vehicle exports is proof. We believe that the export of Chinese cars will profoundly change the pattern of the world auto market in the next 5-10 years.
Industrial policy still strictly controls the industry's entry, but it will provide a lot of funding and policy support for the development of independent brands. The future technological progress and market share of independent brands will continue to increase.
Energy supply and oil price impact
Excessive fossil fuels have become the main challenge for China's energy supply: Over-reliance on fossil fuels has caused pressure on sustainable supply of resources. China's per capita energy recoverable reserves are far below the world average, and per capita oil extraction and reserves are only about 2.6 tons per capita. The recoverable reserves of natural gas is 1,074 cubic meters, and the per capita coal recoverable reserves are 90 tons, which are respectively 11.1%, 4.3% and 55.4% of the world average. The current energy structure is dominated by fossil fuels, which will put pressure on the sustainable supply of energy.
The requirements of China's energy strategy for the automotive industry: reduce the total consumption of petroleum fuels, increase the use of petroleum alternative fuels, and reduce the pressure on environmental pollution. In the medium to long term, the impact of energy issues will drive the average single vehicle fuel consumption of new vehicles to continue to decline, and alternative energy sources, hybrid power, and diesel cars will become the main direction for future development.
In the near term, the impact of fuel price fluctuations on the auto industry has been steadily increasing. In recent years, the oil prices for terminal sales have been constantly raised. The rise in oil prices has a significant impact on the sales volume and structure of passenger vehicles. Judging from the past experience of the developed countries, consumers who bought cars for the first time (accounting for more than 80% of the purchase of cars in China) are mainly concerned with vehicle prices and performance, and are relatively insensitive to oil prices. According to the results of market research and analysis, the price of oil rose to 5 yuan per liter. About 2-4% of potential consumers would abandon their purchases, while oil prices rose to 6 yuan per liter, and 5-8% of potential consumers gave up. Car purchase.
From the structural point of view, the increase in oil prices is conducive to the sale of vehicles with good fuel economy. China's low-emission cars generally have low technological level and their fuel consumption level is not significant, making it difficult for consumers of A-Class sedan to purchase A0 and A00 cars. Consumers of low-end models are more sensitive to oil prices. The order of the estimated impact of oil price increases should be: Economic SUV> Economy Car> Urban SUV> Compact Car> Intermediate Car> Large SUV> High Car. Considering the country of origin of the model: US Department> Autonomous> Korean> European> Japanese.
The impact of oil prices on macroeconomic trends indirectly affects the total amount of commercial vehicles and it is estimated that it will not have a significant negative impact on the total volume of commercial vehicles. However, the structural impact should still be relatively large. From the standpoint of different product competitions, the rise in oil prices is conducive to strengthening the gentrification and large-scale trend of passenger cars and trucks. Large passenger cars and heavy goods vehicles will be positively affected by medium-sized passenger cars and medium-sized buses. Trucks are unfavorable, while light trucks may be able to avoid the impact of oil prices through more agricultural vehicle licenses. Mini-cars have little impact.
Efficient capital market will improve the operation of the automotive industry. The auto industry is a typical capital and technology-intensive industry. The long-term development of the company needs the support of funds to a large extent. The Chery Automobile with its current increasing market share is developing. In the process, the government and the banks received strong support. When the valuation level of the capital market increases and the value discovery function is relatively fully reflected, we believe that the future development of many companies in the automotive industry will be more closely related to the securities market.
There are various forms of overall listing possibilities in most auto industry groups. Most of the mainstream companies in the global auto industry are listed companies. State-owned companies and many companies with less mature management mechanisms can also improve their governance structure through listing. Many autos The company's passenger car companies, which are mainly consumer groups, are also found to have a good influence on product sales as high-quality listed companies.
For historical reasons, listed companies in the domestic market mostly split off part of their assets. There is a possibility that the group's assets will be listed as a whole by injecting them. Non-listed companies are also listed on the backdoor.
The typical cases of the automotive industry in recent years are:
SAIC Group Injects Target Assets into Shanghai Automotive through Targeted Issuance (600104)
Haima Group backs up gold plate shares through asset replacement and private placement, realizing asset injection and renames Haima Automobile (000572)
Weichai Power (2338.HK, 000338) issued A shares to merge and merge with Hunan Torch (000549) to realize asset integration and domestic listing. Ningbo Huaxiang and Zongshen Power (Quote Forum) also purchased group premium assets through market increase. Ways to improve the investment value of the company We believe that in the future there will be a large number of auto companies that are expected to achieve IPO in the domestic A-share market or through the existing listed companies to achieve overall listing or partial asset injection. Companies that are currently willing to do so include: FAW Group, FAW Car, FAW Xiali, the controlling shareholder of FAW Sihuan), Southern Auto (Changan Automobile Parent Company), GAC Group, BAIC Group (the controlling shareholder of Foton Motor), Great Wall Motor (Hto A), China National Heavy Duty Truck Group, etc. In the future, almost all large auto groups and companies will put profitable assets into listed companies.
Equity incentives have become one of the major incentives for auto companies in the future. Auto companies have formed a market structure where both state-owned enterprises and private enterprises coexist. The long-term incentive mechanism for private enterprises has been resolved at the property level, and development is confronted with operational management issues. As auto companies are basically facing a severe market competition environment, the management team has high requirements for the capabilities and the design of incentive mechanisms has become an important issue for related companies.
The income level of the senior management of auto companies is relatively high, and the annual salary of the senior management of private enterprises or the higher design of the incentive mechanism is more than one million yuan. It is a common phenomenon that equity incentives have already been realized in some companies, and most other companies are exploring and implementing them. The possibilities:
The Shanghai Automotive, FAW Car, Changan Automobile, Foton Motors, and Fengfan Stock have already had some shares of management in the issuance process, but the incentive mechanism for senior executives is still insufficient.
Wanxiang Qianchao, Fuyao Glass, Yutong Bus, Haima Group, Zongshen Power, Wanfeng Aowei, Ningbo Huaxiang and other privately-held companies have achieved equity incentives.
Industry investment strategies and key companies' current valuations of the major companies in the international and domestic industries The cars in developed countries have entered a relatively saturated state, the main source of the demand for automobiles and replacement, the new demand is relatively small, the global automotive industry is more typical Cyclical industry.
Relatively low growth rate has lowered the valuation level of the industry. The profit-earning ratio of auto companies with a good profitability level is generally 10-15 times. From the perspective of PEG, most of them are in the 1.3-2.5 times range with an average of 1.9.
Industry growth is expected to further enhance the valuation
We are convinced that the long-term rapid growth prospects of the Chinese auto market and the improvement of the global competitiveness of the Chinese auto industry will profoundly change the pattern of the international auto industry. As the development of Japan and South Korea shows, in the next 5-10 years, there will be several Chinese companies. Auto companies rank among the world's leading automotive companies.
When China’s auto companies, which are still in the early stages of development, have grown into companies such as Toyota, Honda, Mazda, and Hyundai, they will provide investors with long-term investment opportunities.
From the perspective of market value, Toyota's market value is about 2 trillion yuan, and Honda Corporation is about 600 billion yuan. It is very likely that China will grow several auto companies with market capitalization of more than 100 billion yuan in the future.
From the perspective of PE, the valuation of domestic mainstream auto companies is about 20 times that in 2007, which is significantly higher than the international level of 12 times, slightly higher than the level of 16 times that of Hong Kong.
However, considering the growth factor, from the PEG perspective, the international market averaged 1.9 times and the Hong Kong market averaged 1.3 times. However, there are still some dominant companies in China that are less than 1 times, indicating that the industry growth has not obtained a full valuation premium. .
According to our forecast, the sales growth of passenger cars in 2007 is expected to be approximately 22%, and the price will drop by approximately 5%. Under such circumstances, the profitability of the sedan industry in 2007 will increase by approximately 20% compared with 2006. The growth rate of the overall auto industry's profit level is about 15%, and some companies with rising market positions are expected to achieve a speed that significantly exceeds market growth.
The demand for sedan market was active, the growth rate of the industry and the profit level performance improved significantly, and the “outperform†investment rating was maintained. Maintaining the investment rating for commercial vehicles, based on analysis of industry sentiment and investment value of listed companies, the investment rating of large and medium-sized passenger car sub-sectors is stronger than that of the big market, and the high-end heavy trucks are booming and rated stronger than the broader market.
Companies with improved market position and increased control of the value chain deserved to receive a premium Haima Motor (000572) as a representative company for the development of China's self-owned brands. The development momentum is strong, and Changan Automobile’s market status and performance improvement prospects have not gained full market recognition. Maintain Buy rating. Weichai Power (000338), China National Heavy Duty Truck (000951), Foton Motor (600166) benefited from the improvement in the prosperity of the high-end heavy truck industry and the structural changes in the transportation market. The current valuation is low, giving a “Buy†investment rating. , Yutong Bus (600066) optimistic about the long-term development prospects, maintain the "buy" rating, Tianjin FAW Xiali (000927) shares of Tianjin Toyota will enter the rapid increase in performance, maintaining the rating to "buy."
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