pDongfengMotorRatingHoldValuation&RisksAutomobiles&ComponentsPriceat28Aug2017(HKD)10.24Pricetarget-12mth(HKD)10.7052-weekrange(HKD)11.14-7.50HANGSENGINDEX27,863ResultsAsiaChinaCompanyDongfengMotorReutersBloombergExchangeTicker0489.HK489HKHSI0489Date30August2017DeutscheBankMarketsResearchConferencecalltakeawaysDongfenghostedapost-1H17resultsconferencecallon29August.Thekeytakeawaysareasfollows:■Salestarget:Dongfengmaintaineditsfull-yearFY17EPVsalestargetof3.36munitssetatthebeginningoftheyear,butwitharevisedbreakdown.AmongstthemajorJVs,targetforDongfengNissanwasraisedfrom1.01munitsto1.10munitsandthatforDongfengHondawasraisedfrom630kunitsto700kunits.Meanwhile,salesforDongfengPSAwerereducedfrom630kunitsatthebeginningoftheyearto400kunits.■DongfengPSA:Therevenuedropin1H17wasmainlyduetoweaksalesfromDongfengPSASalesCompany,givenweakbrandpositioningandproductadjustmentperiod(latestageattheproductcycle).Havingsaidthat,managementhasobservedasalesimprovementinJulyandAugustwiththelaunchofPeugeot5008SUVinJulyandCitroenAirCrossSUVrecently.Accordingtothecompany,PSAJVs(wholesaleandmanufacturingcombined)willstillbeabletorecordasmallprofitiftheycanachievetherevisedfull-yearsalestargetof400kunits.■Dividend:Managementguidedforadividendpayoutofnotlessthan15%forthewholeyear.Meanwhile,thecompanywillconsiderincreasingpayoutratiodependingonbusinessoperationcondition.Inaddition,thecompanysaiditispossiblethattheinterimdividendwouldbesustainedgoingforward.■NewEnergyVehicle(NEV)development:DongfengplanstoparticipateintheNEVmarketthroughthreemeans:1)modificationofconventionalvehicleplatformwithfirstpure-electric(EV)model(E70)tobelaunchedinNovember;2)co-developmentwithPSAonitseCMPplatformwiththefirstNEVmodelexpectedtorolloutinFY19;and3)set-upofNEVR&DcentertogetherwithRenaultandNissantodevelopbudgetNEVmodels(ASPlikelyintherangebelowRMB70k).DeutscheBankview–maintainHoldonalackofstrongcatalystsWhileweexpectthePSAJVtoimprovesequentiallyin2H17Ewithmorenewmodels,wedonotexpectDongfengtostageastron...
