Microsoft word - mm 091410 hk eng.doc
"Honey & Ash"
Hong Kong Email Alert
14 Sep 2010
China Auto Industry (OUTPERFORM) – On the reliability of industry data
Event: On 1 Sep 2010, China Automotive Technology & Research Center (CATRC) announced that in Aug 2010, total automobile sales in China hit 1.22m units, representing a 15.09% increase MoM and a 55.72% jump YoY. The Mainland auto sector rallied on such upbeat figures. Then, on 10 Sep 2010, China Association of Automobile Manufacturers (CAAM) released data for the same month: national automobile sales tallied 1.32m units, up 6.3% MoM and 16.1% YoY. The disparity between the two sets of data is puzzling.
Comment: Reliability of CATRC data remains to be tested considering the short data history. CATRC was
established in 1985 as the sole organization overseeing auto industry technology in China while providing technological consultation to industry regulators. In 2003, CATRC was placed under direct leadership of the State-owned Assets Supervision & Administration (SASAC) of the State Council. Although CATRC holds considerable authority, it has a relatively short data history. The institution only began to release auto sales and output data in Apr 2010 and held its first industry development information press conference in May 2010. By contrast, CAAM was founded in 1987, as a government-approved industry association, with monthly data release tracing back to 1998 and an even longer history of data collection. The association has been widely regarded as a key source of information for auto industry analysis in China.
Due to methodological defects, CATRC data are not sufficiently reliable as measures of
absolute auto sales and growth. We learned that auto production and sales figures from CATRC are collected via different channels. While the output figure is based on the number of VIN codes and vehicle ex-factory certificates, the sales figure is based on the number of vehicle registrations with the Ministry of Public Security. We believe the tally of registrations does not reflect the whole picture, as it includes imported automobiles but excludes exported vehicles or those sold but not registered (such as military, farm and low-speed vehicles). As such, there is a gap between output and sales figures from CATRC (with an unlikely high auto inventory), which also explains the disparity between CATRC data and CAAM data. Considering the defects in CATRC’s data collection, it is currently not appropriate to use the absolute numbers from the CATRC as a base for our analysis of auto sales and sales growth.
Data from the two institutions will converge in the long run. While CATRC and CAAM differ in data
collection methods, we believe that in the long run, both will trail the overall trend of domestic auto market. CATRC data still need to undergo the test of time. This relatively young institution releases auto industry data on the first of every month. So, even though the absolute numbers may still lack in reliability, the trend shown through the data should still be of reference value.
With another high season for auto sales around the corner, we forecast Sep 2010E demand to
rise 10% YoY and increase estimated 2010E sales from 17m to 17.35m units. Given the “Golden September and Silver October” for the domestic auto market, we estimate that daily sales in Sep 2010E will tick up 15% MoM. Also considering the Mid-Autumn Festival holiday factor, we forecast total sales in Sep 2010E will rise at least 10% YoY. The upbeat prospects prompted us to revise our full-year 2010E auto sales forecast up 27%, to 17.35m units.
Reiterate our OUTPERFORM rating. We suggest focusing on three types of companies: (i) Mid/high-end
passenger vehicle producers with steadily rising demand and capacity utilization rate as well as sustainable profitability, such as FAWAY, Huayu Automotive Systems, Fuyao Glass, FAW Car and Dongfeng (00489.HK); (ii) Heavy-truck makers whose earnings may surpass expectations significantly due to recovery-driven demand growth, such as Sinotruk (03808.HK), Weichai Power (02338.HK), Foton Motor and Weifu Hi-Tech; and (iii) companies featuring steady growth, which can be both offensive and defensive, such as Yutong Bus and Jiangling Motors.
: (852) 2237 9250
IMPORTANT DISCLOSURE AT THE END OF THIS REPORT
"Honey & Ash" HK Email Alert
Peers’ comparisons – China Auto Industry
10E 10E 10E
Hong Kong - average
Source: Respective companies, Bloomberg, CSI
14 Sep 2010
"Honey & Ash" HK Email Alert
This research report is for information purposes only and should not be construed as an offer to sell or the solicitation of an offer to buy or sell any
securities in any jurisdiction. The securities referred to in this report may not be eligible for sale in some jurisdictions. The information contained in this report has been compiled by CITIC Securities Brokerage (HK) Limited (formerly known as CITIC Capital Securities Limited) ("CSBHK") from sources that it believes to be reliable and (subject to the next paragraph) the opinions, analysis, forecasts, projections and expectations contained in this report are based on such information and are expressions of belief only and no representation, warranty or guarantee is made or given by CSBHK or any other person as to its accuracy or completeness. All opinions and estimates expressed in this report are (unless otherwise indicated) entirely those of CSBHK as of the date of this report only and are subject to change without notice. Neither CSBHK nor its parent and affiliates accept any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report or otherwise arising in connection therewith.
The research analyst(s) primarily responsible for the preparation of this research report confirms that (i) all of the views expressed in this research report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (ii) that no part of his or her recommendation was, is or will be, directly or indirectly, related to the specific recommendations or views he or she expressed in this report.
Any investment referred to herein may involve significant risk, may be illiquid and may not be suitable for all investor. The value of or income from any
investment referred to herein may fluctuate and be affected by changes in exchange rate. Past performance is not indicative of futures results. This report does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors are expected to make their own investment decision without relying on this publication. Before acting on any advice or recommendation in this report, clients are recommended to consider seeking professional advice.
CSBHK, its parent and/or affiliates and their respective officers, directors and employees, including persons involved in the preparation or issuance of this
report, may from time to time (1) have a consulting, investment banking or broking relationship with any company referred to in this report; and (2) have provided significant advice or investment services to the companies referred to in this report. One or more directors, officers and/or employees of CSBHK, its parent and/or its affiliates may be a director of the issuers of the securities mentioned in this report.
If this report is being distributed by a financial institution other than CSBHK or its affiliates, that financial institution is solely responsible for distribution.
Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by CSBHK to the clients of the distributing financial institution, and neither CSBHK, its parent, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content.
This research report is strictly confidential to the recipient and is not intended for persons in places where the distribution or publication of this report is not
permitted under the applicable laws or regulations of such places.
This research report may not be reproduced, distributed or published by any person for any purpose without the prior consent of CSBHK. All rights are
No part of the analyst compensation was, is or will be directly related to the specific recommendations or views contained in this research report.
CSBHK and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities have no disclosable financial interests in the stocks reviewed in this research report.
CSBHK and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities have not received compensation from or mandated for investment banking services in the past 12 months to listed corporations whose stocks are being reviewed by CSBHK in this research report
CSBHK and each its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities do not have an individual employed by or associated with them serving as an officer of the listed corporation whose stocks are being reviewed by CSBHK in this research report
CSBHK and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities are not market makers in the stocks reviewed by CSBHK in this research report.
Further information on the securities discussed in this report is available upon request.
Investment rating system
Performance of stock or sector relative to MSCI-China Index over next 6 months after research publications
Relative performance over MSCI-China Index >20%
Relative performance over MSCI-China Index 5% ~ 20%
Relative performance over MSCI-China Index -10% ~ 5%
Relative performance over MSCI-China Index > -10%
Relative performance over MSCI-China Index >10%
Relative performance over MSCI-China Index -10% ~10%
Relative performance over MSCI-China Index > -10%
Disclaimer and Rating system
All communications should be addressed to Associated Beauty Therapists Ltd. The Courtyard, Wixford Park, George’s Elm Lane, Bidford-on-Avon, Alcester, Warwickshire, B50 4JS, telephone number 0845 017 5080. Associated Beauty Therapists Ltd is authorised and regulated by the Financial Conduct Authority and has FCA reference number 463052Balens Ltd Registered Offi ce:
Definitions: “Charge to Mobile” means the service by which O2 enables both prepay and bill pay O2 customers to charge certain goods and services within a limited network to their mobile phone bill; “Merchant” means a third party merchant whom O2 has selected to party to a limited network of Charge to Mobile Merchants who, can as a result, offer Charge to Mobile as a payment option to elig