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

Equity Bottom-Up

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

China Specialist, Auto and Industrial Specialist

Victoria Li

Chongqing Changan Automobile C / Equity Bottom-Up

Chongqing Changan Automobile C (000625 CH)

With its key earnings contributor, Changan Ford, starting launching new models and introducing domestic produced Lincoln cars, Changan Auto's earnings is bottoming out from 2019E onwards. As the new model launches schedule is slow, and China's domestic auto market is weak, we estimate 2020 would be a better year for Changan Auto. Its EPS would reach Rmb1.2 per share in 2020E, vs. Rmb0.136 in 2018, with Changan Ford's earnings contribution going back to 60% of 2016 level.We estimate Changan Auto's share price to reach Rmb12 by 2020E, indicating 10x P/E. Current share price is under pressure due to weaker than expected sales data of its new Ford Focus and quiet auto market. New price momentum would not come until 2H2019 when new Ford Edge and new CS75 launch. We suggest investors to buy before 4Q2019 anytime when the share price is attractive.

With its key earnings contributor, Changan Ford, starting launching new models and introducing domestic produced Lincoln cars, Changan Auto's earnings is bottoming out from 2019E onwards. As the new model launches schedule is slow, and China's domestic auto market is weak, we estimate 2020 would be a better year for Changan Auto. Its EPS would reach Rmb1.2 per share in 2020E, vs. Rmb0.136 in 2018, with Changan Ford's earnings contribution going back to 60% of 2016 level.We estimate Changan Auto's share price to reach Rmb12 by 2020E, indicating 10x P/E. Current share price is under pressure due to weaker than expected sales data of its new Ford Focus and quiet auto market. New price momentum would not come until 2H2019 when new Ford Edge and new CS75 launch. We suggest investors to buy before 4Q2019 anytime when the share price is attractive. 

The recent negative sales in the Chinese auto industry and Nissan's case of Carlos Ghosn removal could put additional pressure on the already thin margin of auto supplier industry. One of the Carlos Ghosn early contribution to Nissan was to cut cost and outsource the auto parts maker to a wide variety of suppliers including to <a href="https://www.smartkarma.com/entities/11506" target="_blank" data-smartkarma-citation="entities:11506:1">Hanon Systems (018880 KS)</a> . Nissan's new management may want to undo some of Carlos Ghosn' legacy including changing the selection criteria of parts supplier.Hanon's global peers also experienced a decrease in the inventory turnover and most of them have been priced at PER &lt;10 but Hanon is still trading at 24x PER while its sales growth and profitability is still in low single digit? Facing the onset of the slowdown in the Chinese auto industry, won't it be another headwind for Hanon Systems?

The recent negative sales in the Chinese auto industry and Nissan's case of Carlos Ghosn removal could put additional pressure on the already thin margin of auto supplier industry. One of the Carlos Ghosn early contribution to Nissan was to cut cost and outsource the auto parts maker to a wide variety of suppliers including to Hanon Systems (018880 KS) . Nissan's new management may want to undo some of Carlos Ghosn' legacy including changing the selection criteria of parts supplier.Hanon's global peers also experienced a decrease in the inventory turnover and most of them have been priced at PER &lt;10 but Hanon is still trading at 24x PER while its sales growth and profitability is still in low single digit? Facing the onset of the slowdown in the Chinese auto industry, won't it be another headwind for Hanon Systems?

Hanon Systems (018880): Overvalued Stocks in The Low Margin Sector

In FY 2017, production and car sales in China were up a meager amount of 1.6% and 1.4% respectively. Consumers' are a lot more selective, preferring SUVs against sedans. Despite the slow growth in the production and car sales, NEV segment grew by 53.8% and 53.3%, production and sales respectively. Consistent with the thesis mentioned in the <a href="https://www.smartkarma.com/insights/when-your-car-needs-to-go-on-diet-call-minth" target="_blank" data-smartkarma-citation="insights:16346">When Your Car Needs to Go on Diet - Call Minth</a> , Minth's product is the main beneficiary from the increasing demand for a more ecological means of transport…

In FY 2017, production and car sales in China were up a meager amount of 1.6% and 1.4% respectively. Consumers' are a lot more selective, preferring SUVs against sedans. Despite the slow growth in the production and car sales, NEV segment grew by 53.8% and 53.3%, production and sales respectively. Consistent with the thesis mentioned in the When Your Car Needs to Go on Diet - Call Minth , Minth's product is the main beneficiary from the increasing demand for a more ecological means of transport…

With the coming of ADAS and autonomous driving as well as the Chinese government rule to reduce carbon footprint, <a href="https://www.smartkarma.com/entities/minth-group-ltd" target="_blank" data-smartkarma-citation="entities:9232:1">Minth Group Ltd (425 HK)</a> has made the necessary investment teaming up with Fujitsu for automotive camera module as well as a constant investment on aluminum's R&amp;D for a lighter car body part, which proves to be quite an effective way to increase fuel efficiency that will reduce carbon emission.  With international customers such as Daimler, BMW, VW, Fiat, Toyota, Peugeot, Ford, Suzuki and in China GAIC, Great Wall, Minth holds a steady position in the car manufacturing value chain and known as the trusted exterior body parts provider as well as an aluminum product that help to reduce car's body weight. As the world is moving towards an autonomous driving and a more eco-friendly car, Minth is well positioned to be the key beneficiary of this trend.Despite their position as market leader on the producer of exterior body parts, Minth is only trading at 20x earnings. Once their investment in automotive camera module starts producing a return, the stock should trade at a higher valuation than it is now.

With the coming of ADAS and autonomous driving as well as the Chinese government rule to reduce carbon footprint, Minth Group Ltd (425 HK) has made the necessary investment teaming up with Fujitsu for automotive camera module as well as a constant investment on aluminum's R&amp;D for a lighter car body part, which proves to be quite an effective way to increase fuel efficiency that will reduce carbon emission.  With international customers such as Daimler, BMW, VW, Fiat, Toyota, Peugeot, Ford, Suzuki and in China GAIC, Great Wall, Minth holds a steady position in the car manufacturing value chain and known as the trusted exterior body parts provider as well as an aluminum product that help to reduce car's body weight. As the world is moving towards an autonomous driving and a more eco-friendly car, Minth is well positioned to be the key beneficiary of this trend.Despite their position as market leader on the producer of exterior body parts, Minth is only trading at 20x earnings. Once their investment in automotive camera module starts producing a return, the stock should trade at a higher valuation than it is now. 

When Your Car Needs to Go on Diet - Call Minth

China

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

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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

Changan Auto: A Battle for Survival

With its key earnings contributor, Changan Ford, starting launching new models and introducing domestic produced Lincoln cars, Changan Auto's...

Victoria Li

Hanon Systems (018880): Overvalued Stocks in The Low Margin Sector

The recent negative sales in the Chinese auto industry and Nissan's case of Carlos Ghosn removal could put additional pressure on the already thin...

Henry Soediarko

Minth: Still Your Car's Diet Solution

In FY 2017, production and car sales in China were up a meager amount of 1.6% and 1.4% respectively. Consumers' are a lot more selective,...

Henry Soediarko

When Your Car Needs to Go on Diet - Call Minth

With the coming of ADAS and autonomous driving as well as the Chinese government rule to reduce carbon footprint, Minth Group Ltd (425 HK) has made...

Henry Soediarko

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