瑞信-中国-汽车行业-中国乘用车2019年展望：需求将在即时刺激下触底-2019.1.17-48页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.17 January 2019Asia Pacific/ChinaEquity ResearchAutomobiles&Components China Passenger Vehicles Sector FORECAST CHANGEResearch AnalystsBin Wang852 2101 6702bin.wangcredit-Nick Li852 2101 6704nick.li.3credit-Carrie Jiang852 2101 6723carrie.jiangcredit-Wei Fang852 2101 6710wei.fangcredit-2019 Outlook:Demand to bottom out on immediate stimulusFigure 1:Chinese passenger vehicles demand growth outlook6 8 11 12 14 16 18 20 24 24 23 24 25 7.2%47.2%34.4%8.4%11.7%19.5%12.7%9.1%17.6%2.6%-3.8%4.9%1.0%-15%-5%5%15%25%35%45%55%051015202530200820092010201120122013201420152016201720182019e 2020eUnit mnTotal passenger vehicle salesYoYSource:CAAM,Credit Suisse estimates Note:the yellow bars are the first years of stimulus policies releaseAuto stimulus likely to surprise on the upside,not just boost rural demand/NEVs.Ning Jizhe,deputy head of National Development and Reform Commission(NDRC),said last week they will boost car consumption by supporting rural consumption and new energy vehicles(NEVs).We expect the government to take other more powerful measures in 1Q19,like easing purchase quota control in some regions,phasing out polluting cars,and tax reduction(value-added tax and purchase tax).Thus we forecast passenger vehicle(PV)demand growth to bottom out from 4Q18s-15%and return to+5%YoY in 2019,above consensus flat YoY.Prefer component makers to car makers.We expect both components and car makers to benefit from the stimulus policies,but we prefer the components sector.Thats because car makers are likely to be negatively impacted by other upcoming polices,including(1)earlier implementation of emission standard upgrade in some regions,and(2)NEV government subsidy reduction(down 50%YoY).In car-makers,we prefer private local brands over JV-partners.Chinese partners in Sino-foreign joint-ventures(JVs)are likely to face downward pricing pressure,as import vehicle tariff rate might drop from the current 15%to below 10%.Selling price of competing imported vehicle products might be lowered by passing on tariff-cut gains.Also,2019 may see more JVs stake transfer to foreign partners,after Brilliances 25%stake drop in BMW JV in 2018.Pecking order:Huayu Minth Great Wall Geely BYD GAC Dongfeng Brilliance BAIC SAIC Changan Auto.We like components makers better volume on stimulus,falling raw material prices,potential export tariff drop.We upgrade Geely to OUTPERFORM and downgrade BAIC to NEUTRAL.We have OUTPERFORM on Huayu,Minth,GWM,Geely,BYD,and GAC.We rate DFM,BCA,BAIC,SAIC at NEUTRAL and maintain UNDERPERFORM on Changan Auto.17 January 2019China Passenger Vehicles Sector2Focus charts and tablesFigure 2:Chinese auto ownership(vehicle on the road,or car PARC)by emission standardFigure 3:Car plate restriction in nine cities and provinces Probability of getting a car plate0.1%Beijing0.8%Shenzhen4.5%Shanghai1.5%Guangzhou0.8%Tianjin0.9%Hangzhou6.1 million potentialusersSource:Ministry of environmental protectionSource:Company data,MIITFigure 4:Emission standard upgrade schedule1H05On 1st July 2005,China 2 emission standard started implementation across the countryOn 1stJuly 2007,China 3 emission standard started implementation across the countryOn 1st July 2011,China 4 emission standard started implementation across the countryCertain cities and provinces targeted to early implement China 6 emission standard since 1st July 20191H072H071H112H112017Starting from 1 Jan 2017,China implemented China 5 emission standard for all new car import,sales,and registration 1H192H191H202H201H232H23The official China 6a emission standard is scheduled to start implementation since 1st July 2020The official implementation date of China 6b emission standard is 1st July 2023.1H062H062H05Source:Company data,Credit Suisse estimatesFigure 5:Valuation comparison Company NameRatingTickerUpside to TPCloseMarket CapCurrencyCSReuterslastes close CS16-Jan(US$m)Local2019202020192020PRICE_1mchgHuayu autoOUTPERFORM600741.SS56%30.019.38,976CNY8.28.11.21.1MinthOUTPERFORM0425.HK29%36.528.34,135HKD12.310.91.91.7Great Wall Motor Co LtdOUTPERFORM2333.HK20%6.25.27,488HKD8.87.90.70.7Geely Automobile Holdings LtdOUTPERFORM0175.HK22%14.011.513,190HKD8.07.41.71.4Byd Co LtdOUTPERFORM1211.HK26%58.046.118,491HKD39.829.41.81.7Guangzhou AutoOUTPERFORM2238.HK22%10.28.414,137HKD5.85.00.90.8Dongfeng Motor Group Co LtdNEUTRAL0489.HK7%8.27.78,403HKD4.64.60.40.4BAIC Motor Corp LtdNEUTRAL1958.HK13%5.34.74,792HKD6.16.70.70.6Brilliance China Automotive Holdings LtdNEUTRAL1114.HK11%7.56.84,354HKD5.14.70.80.7SAIC Motor Corp LtdNEUTRAL600104.SS0%25.525.543,953CNY7.87.71.21.1Chongqing Changan Automobile Co LtdUNDERPERFORM 000625.SZ-20%6.07.54,301CNY10.07.50.70.7simple Avg.10.69.11.11.0 market cap weighted Avg.12.310.41.21.1P/EP/B(x)Source:Company data,Credit Suisse estimates17 January 2019China Passenger Vehicles Sector3Demand to bottom out on immediate stimulusAuto stimulus likely to surprise on the upside,not just boost rural demand and NEVs Mr.Ning Jizhe,deputy head of NDRC,in a recent interview with China Central Television,said that they will take measures in 2019 to boost car consumption and help the economy.He said the government will support reasonable,green and upgrading car consumption,and consider launching policies to encourage rural auto consumption.This shows that the Chinese government plans to boost economic growth by stimulating consumption,given the auto sectors importance.Besides these regulatory movements,we expect the government to take other more powerful measures in 1Q19,like easing purchase quota control in some regions,phasing out polluting cars,and tax reduction(VAT and purchase tax).Thus we forecast PV demand growth to bottom out from 4Q18s 15%drop and return to 5%YoY rise in 2019,which is well above consensus flat YoY growth forecast.Prefer component makers to car makers We expect both components makers and car makers to benefit from the stimulus,but we prefer the components sector as car makers are likely to be negatively impacted by other upcoming unfavourable polices.These policies include(1)earlier implementation of emission standard upgrade in some regions,by 1 July 2019,which is a year earlier and may cause supply issues in 2H19 and Rmb2,000/unit higher parts cost,and(2)NEV subsidy reduction,like-50%YoY due to limited budget and bigger-than-expected subsidy-eligible NEV volume.On the contrary,parts makers will not only see volume growth on the stimulus but also their per-car content value will rise due to emission standard upgrade.Prefer locals to JV-partners in car makersIn car makers,we prefer private local brands(like Great Wall,Geely,BYD)to JV partners(like Dongfeng,SAIC,BAIC,Brilliance).Chinese partners in Sino-foreign JVs are likely to face pricing pressures as import vehicle tariff rate might drop from 15%(current)to below 10%.Then competing imported vehicle products might pass on tariff-cut gains to lower their selling prices.Meanwhile,more auto-JVs stake transfer to foreign partners may happen in 2019,after Brilliance transferring its 25%stake to BMW in China JVs in 2018.Pecking order:Huayu Minth Great Wall Geely BYD GAC Dongfeng Brilliance BAIC SAIC Changan As the stimulus policies will not only drive demand growth bottoming out from 4Q18s 15%YoY,but also boost the overall sentiment on auto stocks,we expect a sector-wide rally ahead.Between auto makers and parts makers,we prefer parts,as(1)parts could see bigger price drops in raw materials(like steel and rubber),(b)the risk of further tariff increase for US exports is removed,and(c)theres no exposure to JV stake change.In auto makers,we prefer Chinese local brands to Chinese partners in Sino-foreign JVs,due to the risk of further reduction in import vehicle tariff and drop in investment income from its Sino-foreign auto-JVs stake transfer.We have OUTPERFORM on Huayu,Minth,GWM,Geely,BYD,GAC,after upgrading Geely to OUTPERFORM.We rate DFM,BCA,BAIC,SAIC NEUTRAL,after downgrading BAIC to NEUTRAL.We stay UNDERPERFORM on Changan Auto.We expect the government to take more powerful measures in 1Q19.We prefer components sector as car makers are likely to be negatively impacted by other upcoming unfavorable polices.More auto-JVs stake transfer to foreign partners may happen in 2019.As the upcoming stimulus policies will not only drive demand growth bottoming out from 4Q18s 15%YoY,but also boost overall sentiment on auto stocks,we expect a sector-wide rally ahead.17 January 2019China Passenger Vehicles Sector4Table of contents2019 Outlook:Demand to bottom out on immediate stimulus1Focus charts and tables2Demand to bottom out on immediate stimulus3Auto stimulus likely to surprise on the upside not just boost rural demand and NEVs5Prefer component makers to car makers9Prefer locals to JV-partners in car makers11Pecking order:Huayu Minth Great Wall Geely BYD GAC Dongfeng Brilliance BAIC SAIC Changan Auto12Huayu Automotive Systems Co.,Ltd(600741.SS/600741 CH)14Minth Group Limited(0425.HK/425 HK)16Great Wall Motor(2333.HK/2333 HK)18Return to growth in 2019,thanks to stimulus polices18Geely Automobile Holdings Ltd (0175.HK/175 HK)20BYD Co Ltd(1211.HK/1211 HK)22Guangzhou Automobile Group (2238.HK/2238 HK)24Dongfeng Motor Group Company Limited(0489.HK/489 HK)26Brilliance China Automotive Holdings Limited(1114.HK/1114 HK)28Further tariff cut to hurt BMW JV margin28BAIC Motor Corporation Limited (1958.HK/1958 HK)30SAIC Motor Corp Ltd(600104.SS/600104 CH)32Chongqing Changan Automobile Company Limited(000625.SZ/000625 CH)3417 January 2019China Passenger Vehicles Sector5Auto stimulus likely to surprise on the upside not just boost rural demand and NEVs Mr.Ning Jizhe,deputy head of NDRC,in a recent interview with China Central Television,said that they will take measures in 2019 to boost car consumption and help the economy.He said the government will support reasonable,green and upgrading car consumption,and consider launching policies to encourage rural auto consumption.This shows that the Chinese government plans to boost economic growth by stimulating consumption,given the auto sectors importance.The auto industry is a significant contributor to Chinas GDP(4%),employment(4.7 mn workers),taxation(4.5%),and national retail sales(25%).Besides these regulatory movements,we expect the government to take other more powerful measures in 1Q19,like easing purchase quota control in some regions,phasing out polluting cars,and tax reduction(VAT and purchase tax).Thus we forecast PV demand growth to bottom out from 4Q18s 15%drop and return to 5%YoY rise in 2019,which is well above consensus flat YoY growth forecast.Figure 6:Chinese PV sales growth vs.auto stimulus 5.78.411.312.213.616.318.420.023.624.223.224.424.77%47%34%8%12%19%13%9%18%3%-4%5%1%-15%-5%5%15%25%35%45%55%0510152025302008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e2019e2020eUnit mnTotal passenger vehicle salesYoYSource:Company data,Credit Suisse estimatesNote:Yellow bars are the years with auto stimulus policies China has already implemented two rounds stimulus programs for the auto sector,reducing vehicle purchase tax rate from 10%to 5%.From mid-2008 to early-2009,China PV sales became sluggish after the global financial crisis.from August 2008 to January 2009,vehicle wholesales recorded-6.6%/-3%/11.7%/-11.2%/-7.2%/-12.3%YoY growth.In January 2009,the State Council of China announced its Plan on Adjusting and Revitalizing the Auto Industry document,which specified that vehicle purchase tax cut from 10%to 5%applies to vehicles with engine size 1.6 l.In March 2009,the government also invested Rmb6 bn to stimulate auto demand in rural areas and accelerate the disposal of aged vehicles.After the stimulation in 2009,new car wholesales YoY growth jumped to 47.2%YoY in 2009 from only 7.2%YoY growth in 2008.17 January 2019China Passenger Vehicles Sector6Over June-August 2015,China PV sales faced continuous three-month YoY declinedown 1.8%/5.9%/1.5%.It was the first YoY decline since January 2009,excluding the Chinese New Year festival impact.The Ministry of Finance and State Administration of Taxation jointly announced the Notification of vehicle purchase tax cut for vehicles with 1.6 litre engine size.The government cut vehicle purchase tax again from 10%to 5%for vehicles with 1.6 l engine size.In this round of stimulation,new-car wholesales YoY growth was 17.6%in 2016.In September 2018,the State Council had announced guidelines to stimulate consumption via removing inter-city transaction control for used cars,maintaining NEV purchase tax exemption and cash subsidy,constructing more NEV charging facility and vehicle parking facilities,encouraging rural auto consumption.This was followed by above-mentioned NDRC deputy heads recent remark on supporting reasonable,green and upgrading car consumption,and consider launching policies to encourage rural auto consumption.We think these measures will not be able to meaningfully boost auto demand in 2019,and we expect the government to launch other more impactful policies like easing purchase quota control in some regions,phasing off polluting cars,and further tax reduction(VAT and vehicle purchase tax).Auto demand stagnated in 2017 and 2018After a magnificent year in 2016,on favourable policy,Chinas PV sector slipped into a downturn in 2017,with worsening volume growth,edging up 2.6%YoY in 2017 and down 3.8%YoY in 2018.Key change was the negative policyvehicle purchase tax for smaller car(engine below 1.6 l)increased from 2016s 5%to 7.5%/10%in 2017/2018,not only triggering notable front-loading demand in 4Q16 and 4Q17,but also rising car buyers payment on the higher tax rate.Meanwhile,overall consumer willingness to spend money,especially for big-ticket consumer discretionaries like new cars,stagnated in 2017 and 2018 due to high-level household gear ratio.Chinese household gear ratio(household credit as percentage of GDP)is likely to exceed 50%in 2018,after 20 years of continuous increase,mainly due to the rising property-related loans.More importantly,recent years gear ratio increases were contributed by lower-tier areas which contributed most auto demand growth given their lower auto penetration.In other words,people in lower-tier areas had postponed their auto demand and shifted the same amount of money as property downpayment.Figure 7:Chinese household gear ratio trendFigure 8:Quarterly PV sales growth0%10%20%30%40%50%60%1Q083Q081Q093Q091Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q18Household credit as%of GDP9%15%31%18%6%0%5