China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched lately target C-segment market. The second popular market is A-segment sedan, in which 3 new models were launched and would start delivery by the end of this year.  B-segment has the least new model announced.  Which models would be the best sellers in their target markets? Which OEM/brand would gain solid market position?

We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched lately target C-segment market. The second popular market is A-segment sedan, in which 3 new models were launched and would start delivery by the end of this year.  B-segment has the least new model announced.  Which models would be the best sellers in their target markets? Which OEM/brand would gain solid market position?

Equity Bottom-Up

Xpeng's share performance has been weak since its P5 sedan model launch. We think the reasons are 1) feedback from customers says that P5's external appearance is not attractive although the car features surprised the market positively; 2) no sales price has been announced. Huawei's HI system launched on Arcfox αS HI version might be taken as a negative momentum to Xpeng, too, as it seems to be a threat to Xpeng's NGP.However, with a target of mass market below Rmb200k, P5 would still be the most attractive and affordable smart EV model in China market once its sales price is released. It's hard to tell whether Huawei HI system could beat Xpeng P5 or not in daily driving scenario, as no test drive of P5 is done yet. But P5's price range of Rmb150-200k will largely determine that P5 model would prove to be more popular, compared to Arcfox αS HI's Rmb388.9k and above. According to Mr. He Xiaopeng, P5's NGP performance on city roads would be better than Arcfox αS HI's.Reiterate BUY on Xpeng.

Xpeng's share performance has been weak since its P5 sedan model launch. We think the reasons are 1) feedback from customers says that P5's external appearance is not attractive although the car features surprised the market positively; 2) no sales price has been announced. Huawei's HI system launched on Arcfox αS HI version might be taken as a negative momentum to Xpeng, too, as it seems to be a threat to Xpeng's NGP.However, with a target of mass market below Rmb200k, P5 would still be the most attractive and affordable smart EV model in China market once its sales price is released. It's hard to tell whether Huawei HI system could beat Xpeng P5 or not in daily driving scenario, as no test drive of P5 is done yet. But P5's price range of Rmb150-200k will largely determine that P5 model would prove to be more popular, compared to Arcfox αS HI's Rmb388.9k and above. According to Mr. He Xiaopeng, P5's NGP performance on city roads would be better than Arcfox αS HI's.Reiterate BUY on Xpeng. 

Launched on April 15th, Geely's highly anticipated EV model, Zeekr 001, beat market expectations by offering reasonable prices and attractive features. Market feedback shows that it's gaining interest from potential buyers who initially target to NIO, Xpeng, BYD Han and Tesla. Please see the details in the note. As a result, it's very likely that Zeekr 001 would become one of the most popular local brand EV models in China market. We believe Geely's valuation re-rating would be triggered. Compared to BYD which trades at 75.8x P/E 2021E due to market's preference on BYD's EV future, Geely trades at 18.7x P/E 2021E based on Bloomberg consensus.Furthermore, Geely and its parent company are seeking for IPO opportunities for Lotus and Zeekr (owned by Geely), and Polestar and Volvo Car (owned by Geely's parent company). These could become Geely's valuation re-rating triggers as well.

Launched on April 15th, Geely's highly anticipated EV model, Zeekr 001, beat market expectations by offering reasonable prices and attractive features. Market feedback shows that it's gaining interest from potential buyers who initially target to NIO, Xpeng, BYD Han and Tesla. Please see the details in the note. As a result, it's very likely that Zeekr 001 would become one of the most popular local brand EV models in China market. We believe Geely's valuation re-rating would be triggered. Compared to BYD which trades at 75.8x P/E 2021E due to market's preference on BYD's EV future, Geely trades at 18.7x P/E 2021E based on Bloomberg consensus.Furthermore, Geely and its parent company are seeking for IPO opportunities for Lotus and Zeekr (owned by Geely), and Polestar and Volvo Car (owned by Geely's parent company). These could become Geely's valuation re-rating triggers as well.

Geely (175.HK): New EV Model Starts New Era

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

BYD's battery business has always been less meaningful compared to the automobile and mobile handset business (which investors can access through <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>), but the long-term prospect has always been exciting. The recent BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EV makers, increasing the group's EBITDA by almost 40% depending on the various scenarios. Investors should be even more excited at the prospect that BYD's battery business can finally contribute to the group's more meaningfully. 
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Compared to other EV players such as <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> , <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> and <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> , BYD is trading at 22% PER discount, 32% EV/EBITDA discount, and 22% PBR discount whilst against <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> , BYD is trading at 154% PER premium, 61% EV/EBITDA discount and 6% PBR discount. From cash flow multiples (EV/EBITDA), BYD is undervalued compared to the other EV players and battery suppliers. 
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/873/original/image_90672331821618121444881.png?1618121444" class="editor-image img-responsive" data-smartkarma-image-id="199873"></figure>
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source: Reuters
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BYD's battery business has always been less meaningful compared to the automobile and mobile handset business (which investors can access through BYD Electronics (285 HK)), but the long-term prospect has always been exciting. The recent BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EV makers, increasing the group's EBITDA by almost 40% depending on the various scenarios. Investors should be even more excited at the prospect that BYD's battery business can finally contribute to the group's more meaningfully. 

Compared to other EV players such as Tesla Motors (TSLA US) , NIO Inc (NIO US) and Xpeng (XPEV US) , BYD is trading at 22% PER discount, 32% EV/EBITDA discount, and 22% PBR discount whilst against CATL (A) (300750 CH) and Samsung SDI (006400 KS) , BYD is trading at 154% PER premium, 61% EV/EBITDA discount and 6% PBR discount. From cash flow multiples (EV/EBITDA), BYD is undervalued compared to the other EV players and battery suppliers. 



source: Reuters


BYD (1211): In-Vehicle Batteries to Power Growth

Latest sales data from CPCA indicate auto chips shortage restricted car shipment in March and that has started limiting car retail sales. This issue might not be fully resolved until 3Q2021, according to industry experts.EV sales might continue growing strong based on individual brands' sales data released so far. All the three emerging brands' sales data rebounded MoM as expected.In April, Xpeng (XPEV.US) is expected to launched its new model, P5. While Geely (175.HK) is expected to launch its first pure EV model, Zeeker Zero. Both are critical to their fundamentals and share performance. Reiterate BUY on Xpeng.

Latest sales data from CPCA indicate auto chips shortage restricted car shipment in March and that has started limiting car retail sales. This issue might not be fully resolved until 3Q2021, according to industry experts.EV sales might continue growing strong based on individual brands' sales data released so far. All the three emerging brands' sales data rebounded MoM as expected.In April, Xpeng (XPEV.US) is expected to launched its new model, P5. While Geely (175.HK) is expected to launch its first pure EV model, Zeeker Zero. Both are critical to their fundamentals and share performance. Reiterate BUY on Xpeng.

China Auto: Except for EVs, March Sales Might Be Weaker than Expected

China

XPeng Inc. designs, produces, and distributes electric vehicles. The Company designs, develops, manufactures and markets smart smart electric vehicles, as well as finance, parts, and maintenance services. XPeng serves customers in China.

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XPeng (XPEV US)

China EV: Which Is the Next Best Seller?

We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched...

Victoria Li

Xpeng: The Future Getting Blurry?

Xpeng's share performance has been weak since its P5 sedan model launch. We think the reasons are 1) feedback from customers that P5's external...

Victoria Li

Geely (175.HK): New EV Model Starts New Era

Launched on April 15th, Geely's highly anticipated EV model, Zeekr 001, beat market expectations by offering reasonable prices and attractive...

Victoria Li

BYD (1211): In-Vehicle Batteries to Power Growth

BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EVs, increasing the group's EBITDA...

Henry Soediarko

China Auto: Except for EVs, March Sales Might Be Weaker than Expected

Latest sales data from CPCA indicate auto chips shortage restricted car shipment in March and that has started limiting car retail sales.

Victoria Li

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