China Specialist, Auto and Industrial Specialist

Victoria Li

Equity Bottom-Up

Chongqing Changan Automobile C / Equity Bottom-Up

We believe Chongqing Changan's share price has overshot compared to its fundamental outlook. Its local brand contributed first positive operating profit in 1Q2021, which is exciting. However its 24x.3 P/E on 2021E Bloomberg consensus has fully priced in this positive. Current valuation may also have priced in positive effect from Changan's planned brand new EV model with HI(Huawei Inside) system, which is still at very initial stage; and possible IPOs of Avetar Technology (previously known as Changan NIO) and Changan New Energy, whose business plans are still very blurry.Fundamentally, earnings outlook for Changan Ford, Chongqing Changan's key earnings contributor, is unclear. Changan Ford's Acceleration plan started in 2019 would not be able to bring this company's earnings back to a reasonable level by the end of 2021. While its outlook for the next three years is unclear after latest leadership change.

We believe Chongqing Changan's share price has overshot compared to its fundamental outlook. Its local brand contributed first positive operating profit in 1Q2021, which is exciting. However its 24x.3 P/E on 2021E Bloomberg consensus has fully priced in this positive. Current valuation may also have priced in positive effect from Changan's planned brand new EV model with HI(Huawei Inside) system, which is still at very initial stage; and possible IPOs of Avetar Technology (previously known as Changan NIO) and Changan New Energy, whose business plans are still very blurry.Fundamentally, earnings outlook for Changan Ford, Chongqing Changan's key earnings contributor, is unclear. Changan Ford's Acceleration plan started in 2019 would not be able to bring this company's earnings back to a reasonable level by the end of 2021. While its outlook for the next three years is unclear after latest leadership change.

Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

China’s market regulator, the State Administration for Market Regulation, met with Tesla’s local subsidiaries in February over increased consumer reports of vehicle problems and later on issued a statement saying it places high importance on the Shanghai auto show incident. The authority said it has instructed local regulators to protect consumer interests.
Tesla is mainly a US company but with the growing wealth in China and Tesla's market positioning as the high-end EV, it has managed to gain substantial traction in China and doubled its sales contribution from 20 to 40% by March 2021. 
BYD also announced that a total of 1500 Tang SUVs will be delivered to Norway before the end of the year as the company commits to accelerating its European and global strategies. The initial 100 cars are scheduled for delivery to Norwegian customers in the third quarter of this year.
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BYD is added into <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> and <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> at the same time while other names are involved with one or some are two - moving from one to another. 
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BYD is trading at 84% PER discount, 83% EV/EBITDA discount, and 73% PBR discount to Tesla while its share price also lagged behind Tesla's in the past 6 months. 
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Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time to start shorting Tesla and long BYD. 
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China’s market regulator, the State Administration for Market Regulation, met with Tesla’s local subsidiaries in February over increased consumer reports of vehicle problems and later on issued a statement saying it places high importance on the Shanghai auto show incident. The authority said it has instructed local regulators to protect consumer interests.
Tesla is mainly a US company but with the growing wealth in China and Tesla's market positioning as the high-end EV, it has managed to gain substantial traction in China and doubled its sales contribution from 20 to 40% by March 2021. 
BYD also announced that a total of 1500 Tang SUVs will be delivered to Norway before the end of the year as the company commits to accelerating its European and global strategies. The initial 100 cars are scheduled for delivery to Norwegian customers in the third quarter of this year.

BYD is added into Hang Seng China Enterprises Index (HSCEI INDEX) and Hong Kong Hang Seng Index (HSI INDEX) at the same time while other names are involved with one or some are two - moving from one to another. 

BYD is trading at 84% PER discount, 83% EV/EBITDA discount, and 73% PBR discount to Tesla while its share price also lagged behind Tesla's in the past 6 months. 

Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time to start shorting Tesla and long BYD. 


BYD (1211) Vs Tesla (TSLA): Fight over China

Thematic (Sector/Industry)

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production for a few days early December 2020, according to local media' reports on 8th Dec. CAAM (China Association of Automobile Manufacturers) estimate, based on survey over more than 60 OEMs, is that MCU short supply - which mainly lead to production issue of ESP(（Electronic Stability Program) and ECU(Electronic Control Unit) and hence mid-high end cars - might cause short term interruption on some OEMs in 1Q2021 before getting released afterwards. According to latest media reports, Honda JVs and VW JVs in JV brands are both impacted so far. Geely (175.HK) and Changan (000625.CH) are under pressure. However, as the short supply is led by short term reasons and actions have been taken in the whole supply chain, it would not change our positive view on China's auto sector 2021E. Instead, if any share performance weakness happens due to related components shortage, that would be buying opportunities for investors.

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production for a few days early December 2020, according to local media' reports on 8th Dec. CAAM (China Association of Automobile Manufacturers) estimate, based on survey over more than 60 OEMs, is that MCU short supply - which mainly lead to production issue of ESP(（Electronic Stability Program) and ECU(Electronic Control Unit) and hence mid-high end cars - might cause short term interruption on some OEMs in 1Q2021 before getting released afterwards. According to latest media reports, Honda JVs and VW JVs in JV brands are both impacted so far. Geely (175.HK) and Changan (000625.CH) are under pressure. However, as the short supply is led by short term reasons and actions have been taken in the whole supply chain, it would not change our positive view on China's auto sector 2021E. Instead, if any share performance weakness happens due to related components shortage, that would be buying opportunities for investors.  

China Auto: Short-Term Interruptions from Auto Chips Shortage

Due to the National Holiday, China's September car sales data is not yeat available. However, CAAM estimates that China's passenger vehicle sales in September increased by 7.6% yoy, indicating the sector recovery remains solidly on track.Meanwhile,  September sales data announcements from local leaders, including Geely, BYD, Great Wall and Changan Auto, confirmed that auto demand keeps warming up. In September, Geely (175.HK)auto sales increased by 11% yoy, within which its Lynk&amp;Co sales grew by 38% yoy. Great Wall (2333.HK) reported an 18% yoy sales growth. Changan Auto (000625.CH) reported a 28.6% yoy sales growth. BYD's (1211.HK) sales growth remained weak at 3.6% yoy.Reiterate BUY on Geely.

Due to the National Holiday, China's September car sales data is not yeat available. However, CAAM estimates that China's passenger vehicle sales in September increased by 7.6% yoy, indicating the sector recovery remains solidly on track.Meanwhile,  September sales data announcements from local leaders, including Geely, BYD, Great Wall and Changan Auto, confirmed that auto demand keeps warming up. In September, Geely (175.HK)auto sales increased by 11% yoy, within which its Lynk&amp;Co sales grew by 38% yoy. Great Wall (2333.HK) reported an 18% yoy sales growth. Changan Auto (000625.CH) reported a 28.6% yoy sales growth. BYD's (1211.HK) sales growth remained weak at 3.6% yoy.Reiterate BUY on Geely.

China's auto sales number might be weaker than market expected, due to short term interruptions from extreme weather and second wave of Covid-19. As summer normally is a low sales season in China due to hot weather, we estimate China's auto sales remain weak until September when biggest sales season of the year starts.Among leading OEMs, Brilliance China (1114.HK) might be the best buying option in short term, followed by Geely (175.HK). Changan (000625.CH) is our top Buy in A-share market. BYD (1211.HK)'s financial results might be weak this year, but valuation rerating might be the key share price momentum due to expected IGBT business carve-out. We remain cautious on Great Wall (2333.HK).

China's auto sales number might be weaker than market expected, due to short term interruptions from extreme weather and second wave of Covid-19. As summer normally is a low sales season in China due to hot weather, we estimate China's auto sales remain weak until September when biggest sales season of the year starts.Among leading OEMs, Brilliance China (1114.HK) might be the best buying option in short term, followed by Geely (175.HK). Changan (000625.CH) is our top Buy in A-share market. BYD (1211.HK)'s financial results might be weak this year, but valuation rerating might be the key share price momentum due to expected IGBT business carve-out. We remain cautious on Great Wall (2333.HK).

China Auto: Recovery Interruption from Extreme Weather and Second Covid-19 Wave

China

Chongqing Changan Automobile Company Limited develops, manufactures, and markets mini cars, mini sedans, full size sedans, and engines.

Chongqing Changan Automobile C (000625 CH)

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Chongqing Changan Automobile C (000625 CH)

BYD (1211) Vs Tesla (TSLA): Fight over China

Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time...

Henry Soediarko

China Auto: Short-Term Interruptions from Auto Chips Shortage

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production early December...

Victoria Li

China Auto: Sales Recovery on Track

Positive price momentum for China auto sector. Local leaders' car sales in September increased strongly, indicating sector demand recvoery remains...

Victoria Li

China Auto: Recovery Interruption from Extreme Weather and Second Covid-19 Wave

China's auto sales number might be weaker than market expected, due to short term interruptions from extreme weather and second wave of Covid-19....

Victoria Li

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Chongqing Changan: Local Brand Turning Profitable Alone Cannot Justify Share Price

We believe Chongqing Changan's share price has overshot compared to its fundamental outlook. Its local brand contributed first positive operating...

Victoria Li

BYD (1211) Vs Tesla (TSLA): Fight over China

Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time...

Henry Soediarko

China Auto: Short-Term Interruptions from Auto Chips Shortage

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production early December...

Victoria Li

China Auto: Sales Recovery on Track

Positive price momentum for China auto sector. Local leaders' car sales in September increased strongly, indicating sector demand recvoery remains...

Victoria Li

China Auto: Recovery Interruption from Extreme Weather and Second Covid-19 Wave

China's auto sales number might be weaker than market expected, due to short term interruptions from extreme weather and second wave of Covid-19....

Victoria Li