Great Wall Motor Company (H)

  • Ticker2333
  • ISINCNE100000338
  • ExchangeHong Kong Stock Exchange
  • SectorAutomobiles & Parts
  • CountryChina

Analysts

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Great Wall Motor Company (2333 HK): October sales growth slowed to 4.5% yoy, missing estimate, as inventories built up in channel. SELL

GWM’s sales volume growth slowed to 4.5% yoy in Oct 19 from 12% in 3Q19, missing management guidance, as inventories built up in the retail channel. We expect dealers’ destocking and inventory clearance to drag GWM’s sales and margins in 4Q19. In th longer term, GWM’s earnings will be continously pressured by lagging product R&D and stiff competition in China’s SUV market. Keep 2019-21 earnings estimates unchanged. Maintain SELL. Target price: HK$2.30.

UOB
Ivy Xu Da ...
  • Johnny Yum Chung Man
  • Ken Lee

Great Wall Motor Company (2333 HK): 3Q19: Profit rebounded on cost cuts; maintain SELL on still grim outlook.

GWM’s 3Q19 net profit came in above estimate at Rmb507m, up 507% yoy and 88% qoq, on a low base and cost cuts, including COGS, tax expenses and sales expenses. Management also guided for 20-30% mom growth in sales volume in Oct 19. We raise 2019F EPS by 17% on the better-than-expected 3Q19 results, but our earnings estimates still imply a 19%/14% profit drop in 2019-20, based on sustained price pressure amid escalating competition. Maintain SELL. Raise target price from HK$2.00 to HK$2.30.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - BMW may skip special rebates to dealers for 3Q19, pressuring dealers’ new car sales margins.

According to dealers, BMW may skip the special rebates for 3Q19, which would benefit Brilliance at the expense of auto dealers with high exposure to BMW, eg Yongda and Zhengtong. Upgrade Brilliance from HOLD to BUY and raise target price by 5% to HK$10.00. Cut 2019 EPS estimates for Yongda, Zhengtong, Meidong and Zhongsheng by 10%/7%/4%//2%. Downgrade Meidong from HOLD to SELL given its stretched valuation after share price rally. Maintain MARKET WEIGHT.

UOB
Greater China Research Team

Strategy - Alpha Picks: Greater China October Conviction List

As we continue to expect market volatility, we maintain exposure to names that have resilient earnings or are expected to enjoy an earnings growth recovery, such as Ausnutria Dairy (1717 HK), CSPC (1093 HK) and Dongfeng Motor (489 HK), and add PICC P&C (2328 HK) to our BUY list.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - PV sales remain weak, inventories fall to normal levels.

PV sales remained weak in the first half of September with retail sales down 16% yoy vs a 17% yoy drop in August. Nevertheless, the prices of auto stocks under our coverage rallied by an average of 9% post 1H19 results as the market expects to see an earnings recovery in 2H19. The valuations have become less attractive after the recent rally, albeit still below the historical means. We prefer defensive names and our top picks are DFM and GAC. SELL BYD and GWM. Maintain MARKET WEIGHT.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Great Wall Motor Company (2333 HK): October sales growth slowed to 4.5% yoy, missing estimate, as inventories built up in channel. SELL

GWM’s sales volume growth slowed to 4.5% yoy in Oct 19 from 12% in 3Q19, missing management guidance, as inventories built up in the retail channel. We expect dealers’ destocking and inventory clearance to drag GWM’s sales and margins in 4Q19. In th longer term, GWM’s earnings will be continously pressured by lagging product R&D and stiff competition in China’s SUV market. Keep 2019-21 earnings estimates unchanged. Maintain SELL. Target price: HK$2.30.

UOB
Ivy Xu Da ...
  • Johnny Yum Chung Man
  • Ken Lee

Great Wall Motor Company (2333 HK): 3Q19: Profit rebounded on cost cuts; maintain SELL on still grim outlook.

GWM’s 3Q19 net profit came in above estimate at Rmb507m, up 507% yoy and 88% qoq, on a low base and cost cuts, including COGS, tax expenses and sales expenses. Management also guided for 20-30% mom growth in sales volume in Oct 19. We raise 2019F EPS by 17% on the better-than-expected 3Q19 results, but our earnings estimates still imply a 19%/14% profit drop in 2019-20, based on sustained price pressure amid escalating competition. Maintain SELL. Raise target price from HK$2.00 to HK$2.30.

UOB
Greater China Research Team

Strategy - Alpha Picks: Greater China September Conviction List.

We expect equity markets to stay volatile in September, given the lack of progress on the Sino-US trade talks. Moreover, the global economic slowdown has deepened, bringing further pressure to corporate earnings. Hence, for the month, we add names that have more resilient earnings or are expected to enjoy an earnings growth recovery. These companies are Dongfeng Motor, Sany Heavy Equipment Int’l, Tencent Holdings, Tian Lun Gas Holdings and Wuxi Biologics.

UOB
Carol Dou Xiao Qin ...
  • Eric Wang Zhen
  • Jayson Kong
  • Johnny Yum Chung Man
  • Jonathan Koh
  • Julia Cheung Pui Man
  • Kader Farhan Bin Kader Ridzwan
  • Keith Wee Teck Keong
  • Ken Lee
  • Kong Ho Meng
  • Kowit Pongwinyoo
  • Lee Yuk Kei
  • Loke Pei Hao
  • Michael Cheung Ho Bun
  • Robin Yuen
  • Silvia Dwiputri
  • Thananchai Jittanoon

Regional Morning Notes - Tuesday, August 27, 2019

CHINA Results Anta Sports (2020 HK /BUY/HK$61.25/Target: HK$68.00): 1H19: Results beat profit alert. China Merchants Bank (3968 HK/BUY/HK$35.90/Target: HK$43.03): 1H19: Profit growth in line; asset quality beats expectations. Great Wall Motor (2333 HK/SELL/HK$4.93/Target: HK$2.00): 2Q19: Core profit slumps 59% yoy, in line; sustained earnings headwind from price cuts. Slash target price to HK$2.00. PICC Property and Casualty (2328 HK/BUY/HK$8.85/Target: HK$10.00): 1H19: Gross premiums growth in line; earnings boosted by tax reductions. Shenzhou International (2313 HK /HOLD/HK$109.80/Target: HK...

Ivan Su

Morningstar | Relaxation of EV Buying Restriction in China Does Not Move the Needle for Automakers Under Coverage

The National Development and Reform Commission, or NDRC, China’s economic planning body, recently announced a plan to remove license plate quotas and road space rationing on alternative fuel vehicles across the country. Although the scrapping of purchase restrictions will undoubtedly boost short-term demand for new energy vehicles, or NEVs, we believe the resulting impacts on automotive names under our coverage are negligible. As a result, we do not plan to change our fair value estimates for Great Wall, Dongfeng, or Hyundai. Among the cities that have license quotas on passenger vehicles, Be...

UOB
Greater China Research Team

Strategy - Alpha Picks: Greater China October Conviction List

As we continue to expect market volatility, we maintain exposure to names that have resilient earnings or are expected to enjoy an earnings growth recovery, such as Ausnutria Dairy (1717 HK), CSPC (1093 HK) and Dongfeng Motor (489 HK), and add PICC P&C (2328 HK) to our BUY list.

UOB
Greater China Research Team ...
  • Jayson Kong
  • Johnny Yum Chung Man
  • Joyce Chan Pui Lai
  • Katrina Chen Chucan
  • Ken Lee
  • Nick Liu Sunliang
  • Shaun Tan
  • Tham Mun Hon
  • Zhifeng Shen

Greater China Daily: Friday, August 2, 2019

KEY HIGHLIGHTS CHINA Strategy Alpha Picks: Greater China August Conviction List Add CSPC and Huaneng Renewables to our BUY list. Sector Automobile PV retail sales down 16% in July, worse than expected. Downgrade from OVERWEIGHT to MARKET WEIGHT. Gas Key takeaways from Lujiazui “Energy + Finance” forum. Property Real estate market a tool to stabilise the economy in the medium and long term. HONG KONG Results CK Asset Holdings (1113 HK/BUY/HK$57.20/Target: HK$68.70) 1H19: In line; a diversified yield vehicle. TRADERS’ CORNER Huadian Power (1071 HK): Trading Buy Range Great Wall Mo...

UOB
Carol Dou Xiao Qin ...
  • Daisy Chen
  • Johnny Yum Chung Man
  • Joyce Chan Pui Lai
  • Julia Cheung Pui Man
  • Ken Lee
  • Lee Yuk Kei
  • Michael Cheung Ho Bun
  • Neo Chen Wentao
  • Robin Yuen
  • Sandra Huang Jieqiong

Greater China Daily: Tuesday, March, 26, 2019

KEY HIGHLIGHTS CHINA Initiate Coverage WuXi Biologics (Cayman) (2269 HK/BUY/HK$73.95/Target: HK$103.50) Leveraging the biologics boom. Results Chaowei Power (951 HK/SELL/HK$3.09/Target: HK$1.65) 2018: Earnings beat our estimate but misses consensus. China National Building Material (3323 HK/BUY/HK$5.98/Target: HK$8.44) 2018: In line with our expectations; strong momentum to sustain into 2019 China Shenhua Energy (1088 HK/BUY/HK$18.30/Target: HK$22.42) 2018: Results in line with expectation; guidance of a slower 2019. Great Wall Motor (2333 HK/SELL/HK$5.48/Target: HK$3.00) 2018: Cor...

Despite a better risk assessment and improving to Neutral, GREAT WALL MOTOR CO.LTD. remains under pressure

GREAT WALL MOTOR CO.LTD. (HK), a company active in the Automobiles industry, improves its market behaviour and slightly increases its general evaluation. The independent financial analyst theScreener just upgraded the stock market behaviour as moderately risky. At a fundamental level, theScreener confirms 1 out of 4 possible stars; the general evaluation is slightly increased to Neutral but the title remains under pressure. As of the analysis date August 23, 2019, the closing price was HKD 5.00 and its target price was estimated at HKD 3.95.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - BMW may skip special rebates to dealers for 3Q19, pressuring dealers’ new car sales margins.

According to dealers, BMW may skip the special rebates for 3Q19, which would benefit Brilliance at the expense of auto dealers with high exposure to BMW, eg Yongda and Zhengtong. Upgrade Brilliance from HOLD to BUY and raise target price by 5% to HK$10.00. Cut 2019 EPS estimates for Yongda, Zhengtong, Meidong and Zhongsheng by 10%/7%/4%//2%. Downgrade Meidong from HOLD to SELL given its stretched valuation after share price rally. Maintain MARKET WEIGHT.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - PV sales remain weak, inventories fall to normal levels.

PV sales remained weak in the first half of September with retail sales down 16% yoy vs a 17% yoy drop in August. Nevertheless, the prices of auto stocks under our coverage rallied by an average of 9% post 1H19 results as the market expects to see an earnings recovery in 2H19. The valuations have become less attractive after the recent rally, albeit still below the historical means. We prefer defensive names and our top picks are DFM and GAC. SELL BYD and GWM. Maintain MARKET WEIGHT.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - PV sales deteriorated further in August.

PV demand deteriorated further in August with retail sales down 9% vs -5% in July, worse than we had expected, despite a lower comparison base. That was due to weaker consumer sentiment amid the ongoing US-China trade war. Given the disappointing July-August sales, we expect to see a 4% yoy drop in PV sales in 2H19 and market recovery will probably come by 2020. Maintain MARKET WEIGHT. Top pick: DFM. SELL BYD, GWM and Zhengtong. Downgrade Geely to SELL and Brilliance to HOLD.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - 1H19 results review.

1H19 earnings of automobile companies generally beat our estimates but missed consensus forecasts on margins given 2Q19 price cuts. The post-results earnings momentum remains mixed. DFM saw the most upgrade, while BYD, GWM, Zhengtong and Nexteer suffered the most downgrade. Looking ahead, management remains cautious, but has guided a modestly improved outlook for 2H19 after the completion of emission standard transition was completed in July. Maintain MARKET WEIGHT. Top pick: DFM.

UOB
Johnny Yum Chung Man ...
  • Ken Lee

Automobile - PV retail sales down 16% in July, worse than expected. Downgrade from OVERWEIGHT to MARKET WEIGHT.

July PV retail sales and wholesale shipment turned out weaker than expected due to a bigger-than-expected front-loading effect in June and a weaker-than-expected Chinese economy. As such, we cut our 2H19/2019/2020 PV sales growth estimates from +5%/-5%/+5% yoy to +1%/-7%/+3% yoy respectively. Downgrade the auto sector from OVERWEIGHT to MARKET WEIGHT, given fluctuations in auto sales and 17% stock price rally from the trough in May-June till now. Top picks: BUY DFM, SELL GWM.

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