China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

A speech from Ministry of Commerce last week represented that China would introduce a few incentives to boost auto consumption soon. Among these incentives, allowing re-use of key parts from scrapped cars might increase up to 25% of China's annual passenger vehicle shipment. Removing restrictions on second-hand cars' regional migrations could shorten the average length of time car owners keeping their cars, improve existing cars' utilisation, and hence increase demand on new cars. Improving the market environment for car sales might release some auto dealers' abnormal operating pressures. Promoting development of aftermarkets could benefit some auto dealers who are expanding business in aftermarkets.

A speech from Ministry of Commerce last week represented that China would introduce a few incentives to boost auto consumption soon. Among these incentives, allowing re-use of key parts from scrapped cars might increase up to 25% of China's annual passenger vehicle shipment. Removing restrictions on second-hand cars' regional migrations could shorten the average length of time car owners keeping their cars, improve existing cars' utilisation, and hence increase demand on new cars. Improving the market environment for car sales might release some auto dealers' abnormal operating pressures. Promoting development of aftermarkets could benefit some auto dealers who are expanding business in aftermarkets.

China Auto: New Incentives Bring New Demand

2019 NEV subsidy policy announced on March 26th, which cut subsidies deeper than expected. However, as the new policy will take effect only on June 25th, its negative impact on OEM's FY2019 earnings would be less than our estimates. Amongst the start-ups, we estimate Yudo would be hurt the most, as its lower ASP makes its sales more sensitive to the subsidy reduction.Among traditional OEMs, BYD would be hurt the most by having its FY2019 net profit drop by nearly 14% yoy based on our estimates. BYD Yuan would be the biggest loser among BYD's existing NEV models.

2019 NEV subsidy policy announced on March 26th, which cut subsidies deeper than expected. However, as the new policy will take effect only on June 25th, its negative impact on OEM's FY2019 earnings would be less than our estimates. Amongst the start-ups, we estimate Yudo would be hurt the most, as its lower ASP makes its sales more sensitive to the subsidy reduction.Among traditional OEMs, BYD would be hurt the most by having its FY2019 net profit drop by nearly 14% yoy based on our estimates. BYD Yuan would be the biggest loser among BYD's existing NEV models.

China NEV: Subsidy Cut Deeper than Expected, Avoid BYD

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Dongzheng Automotive Finance / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27984" target="_blank" data-smartkarma-citation="entities:27984:1">Dongzheng Automotive Finance (2718 HK)</a> is looking to raise approximately US$300 - 500m in its upcoming IPO. 
DAF is a fast growing auto finance company which acquires customers through a network of dealership around China. Its net interest income grew by 66% CAGR from FY2016 to FY2018 while net fees/comms income and profit grew by 39.6% and 61% CAGR over the same period.
However, most of its growth originated from ZhengTong dealers and joint promotion arrangement. Excluding loans from joint promotion arrangement, gross outstanding loan had only grown by 12% CAGR.
In this insight, we will look at the company's business, analyze the competitive landscape, provide thoughts on valuation, and some questions for management.

Dongzheng Automotive Finance (2718 HK) is looking to raise approximately US$300 - 500m in its upcoming IPO. 
DAF is a fast growing auto finance company which acquires customers through a network of dealership around China. Its net interest income grew by 66% CAGR from FY2016 to FY2018 while net fees/comms income and profit grew by 39.6% and 61% CAGR over the same period.
However, most of its growth originated from ZhengTong dealers and joint promotion arrangement. Excluding loans from joint promotion arrangement, gross outstanding loan had only grown by 12% CAGR.
In this insight, we will look at the company's business, analyze the competitive landscape, provide thoughts on valuation, and some questions for management.

Dongzheng Auto Finance (东正汽车金融) Pre-IPO Review - Dependent on Dealership Network for Growth

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.  In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.  In our February International Strategy document, we explore various themes which lead to our overall constructive outlook, as well as a technical appraisal of each Sector and the investable opportunities therein.

Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues

Broad global indexes (MSCI ACWI, ACWI ex-U.S., and EAFE) are showing signs of bottoming due to positive short-term price inflections topside their respective downtrends. Additionally, cyclical Sectors Technology, Consumer Discretionary, and Manufacturing exhibit early signs of price and RS bottoms throughout Europe, Japan, and EM.  In today’s report we highlight attractive and actionable opportunities within these cyclical Sectors, and provide a technical appraisal of major global indexes.

Broad global indexes (MSCI ACWI, ACWI ex-U.S., and EAFE) are showing signs of bottoming due to positive short-term price inflections topside their respective downtrends. Additionally, cyclical Sectors Technology, Consumer Discretionary, and Manufacturing exhibit early signs of price and RS bottoms throughout Europe, Japan, and EM.  In today’s report we highlight attractive and actionable opportunities within these cyclical Sectors, and provide a technical appraisal of major global indexes.

Global Equity Strategy: Global Outlook Improving

China

Dongfeng Motor Group Company Limited, through joint ventures, designs, manufactures, and markets diesel engines, light trucks, automobiles, castings, and related spare parts.

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Dongfeng Motor (489 HK)

China Auto: New Incentives Bring New Demand

A speech from Ministry of Commerce last week represented that China would introduce a few incentives to boost auto consumption soon. Among these...

Victoria Li

China NEV: Subsidy Cut Deeper than Expected, Avoid BYD

2019 NEV subsidy policy announced on March 26th, which cut subsidies deeper than expected. However, as the new policy will take effect only on June...

Victoria Li

Dongzheng Auto Finance (东正汽车金融) Pre-IPO Review - Dependent on Dealership Network for Growth

Dongzheng Automotive Finance (2718 HK) is looking to raise approximately US$300 - 500m in its upcoming IPO. DAF is a fast growing auto finance...

Zhen Zhou, Toh

Global Equity Strategy: Constructive Outlook Intact, Bottoming Process Continues

We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist...

Vermilion Research

Global Equity Strategy: Global Outlook Improving

Broad global indexes (MSCI ACWI, ACWI ex-U.S., and EAFE) are showing signs of bottoming due to positive short-term price inflections topside their...

Vermilion Research

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