中国汽车业时尚：科技而非品牌

1、ChinaEquitiesAutomobilesEn vogue 2019: Tech NOT brandChina AutosChinaEquitiesAutomobilesEn vogue 2019: Tech NOT brandChina AutosLatest data points indicate improving industry fundamentals; we forecast industry reversion to low growth in2019Technology focus driving our differentiated views on Benz an

2、d Hyundai growth; potential turnaround for GreatWallDowngrade GAC-H to Hold on strong share price performance and valuations; OEM top picks Brilliance and BAIC (both Buy)Time to get constructive: Chinas auto sector is starting to see some signs of improvement with retail sales declines moderating, r

3、etail inventory destocking and discount rates stabilising. We forecast that the sector will revert to positive growth in 2019. Contrary to end-2018 when investors recognised Chinese autos looked cheap but felt they could be a value trap, sentiment has improved to be more constructive.En vogue 2019:

4、A key finding of our recent proprietary auto survey is that sentiment has shifted, whereby tech is now considered the most important factor in purchasing avehicleimageWethisbeakeydifferentiating ininWeaof this trend given exposure to it from its two JVs, Beijing-Benz andBeijing-Hyundai.Top picks BAI

5、C and Brilliance: Our key picks are BAIC (1958 HK) and Brilliance (1114 HK). We like BAIC for its JVs focus on interior/tech which we think will drive better-than-expected growth in its two foreign JVs. After a crushing 2018 driven by19 February 2019Wei Sim* Analyst, AutosThe Hongkong and Shanghai B

6、anking Corporation Limited HYPERLINK mailto:weisim.hk weisim.hk+852 2996 6602Tracy Li*, CFA AnalystThe Hongkong and Shanghai Banking Corporation Limited HYPERLINK mailto:tracy.s.w.li.hk tracy.s.w.li.hk+852 2996 6751Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andis not registered/ qualified pu

7、rsuant to FINRAregulations HYPERLINK /regform.php?id=aTdlZjE6N21kazVgM2A Register now HYPERLINK /regform.php?id=aTdlZjE6N21kazVgM2A HYPERLINK /regform.php?id=aTdlZjE6N21kazVgM2A Register now HYPERLINK /regform.php?id=aTdlZjE6N21kazVgM2A will be driven by operational growth in BMW and faster-than-exp

8、ected turnaround of the newly formed JV with Renault. We have revised down 2018-20e sector earnings 3-5%; our revised forecasts are 3-5% below consensus. We are above consensus on Brilliance and Dongfeng. We also provide an earnings preview on page 12.Fig 1: Key changes to ratings and estimatesCurre

9、nt TP Rating Upside/ Market cap3m ADTVTarget priceimpliedPERFY18-20eCompanyTickerCurrency priceOldNewOldNewdownside(USDm)(USDm)FY19eFY20eearnings CAGRBrilliance1114 HKHKD7.598.50 9.40BuyBuy23.84,94410%BAIC1958 HKHKD5.165.40 6.30BuyBuy22.15,3332%Dongfeng489 HKHKD8.209.30 9.60BuyBuy17.18,822%GAC H2238

10、 HKHKD9.258.90 9.00BuyHold-2.715,7077%Geely175 HKHKD14.0015.90 11.80HoldHold-15.714,96514%Great Wall -H2333 HKHKD5.803.50 4.70Reduce Reduce-19.09,32621.05.95.512%GAC -A601238 CHCNY10.968.10 8.00 Reduce Reduce-27.015,7077%Changan -B200625 CHCNY4.253.00 3.10 Reduce Reduce-27.12,4731.820.118.34%Great W

11、all -A601633 CHCNY7.103.20 4.10 Reduce Reduce-42.39,32617.96.05.612%Changan -A000625 CHCNY8.062.70 2.80 Reduce Reduce-65.32,47322.318.116.54%Source: HSBC estimates. Priced as of close at 15 February 2019Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certificati

12、ons in the Disclosure appendix, and with the Disclaimer, which forms part of it.Issuer of report: The Hongkong and Shanghai Banking Corporation LimitedView HSBC Global Researchat: HYPERLINK / Contents HYPERLINK l _bookmark0 Executivesummary3 HYPERLINK l _bookmark1 En vogue 2019: TechNOT brand6 HYPER

13、LINK l _bookmark2 Macrooutlook9 HYPERLINK l _bookmark3 Latest data points indicate thesis HYPERLINK l _bookmark3 starting toplayout11 HYPERLINK l _bookmark4 Preview: FY18 results likely a HYPERLINK l _bookmark4 non-event12 HYPERLINK l _bookmark5 Earnings revisions /vs.consensus13 HYPERLINK l _bookma

14、rk6 Valuationsand risks14 HYPERLINK l _bookmark7 Disclosureappendix34 HYPERLINK l _bookmark8 Disclaimer37Executive summaryEn vogue 2019: Tech features NOT brandConsumer sentiment has shifted in recent years and we think this will be a key differentiating factor in driving auto sales in 2019. In our

15、recently conducted proprietary auto survey HYPERLINK /R/20/pBrxHrC (China HYPERLINK /R/20/pBrxHrC Autos: Our 2019 dashcam - After going in reverse, growth set to shift into first gear, 29 Nov 2018) we discovered a fundamental change in the way Chinese consumers think about autos whereby currently th

16、e most important consideration when purchasing a vehicle is the technology features and not the brand or exterior design of a vehicle.Fig 2: Most important considerationwhen buying a car (Oct2018)Fig 3: Most important consideration when buying a car (Sept 2016)7% 25%17%8%9%27%9%9%20%16%18%Technology

17、featuresBrand image/exteriorAftersalesnetworkSpeed/ acceleration Drivingcomfort/interiorVehicle longevity Environment/emissionsExteriordesignInteriordesignEnginepowerSpace inside thevehicleFuelconsumptionBrand PriceSource: HSBCResearch,TolunaSource: HSBC Research,TolunaThis change in mind-set has be

18、en a primary consideration for us in 2019 when forecasting the success of key models and in turn sales volume forecasts for each of the brands.Latest data points indicate improving industry fundamentalsChinas auto sector experienced a crushing 2018 whereby the shares of OEMs fell 50% vs. HSCEI and C

19、SI300 down 14% and 25%, respectively. The weak growth in auto sales was driven by poor stock market and real estate which further compounded in 2H18 with growing concerns over rising trade tensions between US and China. The already weak growth was optically further exacerbated by a high base effect

20、created in 2H17 as tax incentives pulled forward 1H18 demand partially into 2H17.Fig 4: China autos sector share price performance relative to HSCEI and CSI300120110100908070605040Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19AutosHSCEICSI300Source:

21、 Datastream, HSBCFinally, in 2019 the auto sector is starting to see some signs of improvement, with retail sales declines moderating, retail inventory destocking and discount rates stabilising. Headwinds faced in 2H18 have begun to normalise, with some turning into tailwinds going into 2019. Furthe

22、rmore recent data points on retail sales, inventory and discounting all point towards improving market fundamentals. Under normalised conditions we forecast a reversion to positive growth of 2-3% in2019-2020e.Growth outlook for OEMsThe following graph illustrates our forecast earnings growth rates f

23、or each of the OEM companies under our coverage over the coming one to two years. We have ordered them from highest to lowest in 2019-2020e earnings growth as we think this is more relevant given our target multiples are already set in FY19e PER which would already reflect the 2018-2019 growth. Grea

24、t Wall has the highest two-year CAGR but that is more so as a function of their very poor 2018 results rather than seeing very strong growth per se.Fig 5: Earnings growth CAGR forecast for OEMs under our coverage32%32%18%13%12%8%11%9% 9%6%2%3%-18%30%20%10%0%-10%-20%-30%GeelyBAICGACChanganBrillianceG

25、reatWallDongfengFY18-20eFY19-20eSource: HSBC estimatesOEM top pick highlights:BAIC (1958 HK): We like BAIC for its JVs focus on interior features/technology which we think will drive better-than-expected growth in its two foreign JVs.Beijing-Benz: Released the new A-class (domestic production) in No

26、vember 2018 which wowed us at the Guangzhou Auto Show with the integration of MBUX (Mercedes Benz User eXperience) in the premium configuration of its vehicle. Though we have seen similar layouts in newer internet-based auto start-ups this is the first of its kind we have seen rolled out by a tradit

27、ional OEM with an interactive touch panel which spans across from the driverstothepassengerssideinthefrontrow.Wethinkthislayoutwillbeagamechanger for Benz, allowing their current model cycle to maintain stronger for longer. The new MBUX layout will also be rolled out into new models released in2019.

28、Beijing Hyundai: After multiple of by anti-South Korean and a poor product cycle, we forecast Beijing-Hyundai to see a turnaround in 2019. We think their new product pipeline including the La Festa and 4th Gen Tucson (both released in 4Q18) as well as the new Santa Fe (1Q19) have technology features

29、 which are superior to peers, with the new La Festa including fingerprint recognition for unlocking and engine start-up the first weve seen of its kind. Given Chinese consumers affinity with technology we think these features will drive better-than-expected growth for a brand which has been dismisse

30、d by many analysts given its poor growth in the past couple of years inChina.Brilliance (1114 HK): One of our preferred picks of the Chinese OEMs is Brilliance. After its shares were punished last year by the announcement of the restructure of their JV with BMW (BBA) we think that all the bad news i

31、s already out and has now been fully digested by the market. We think any newsflow on restructuring is unlikely to be a share price catalyst for Brilliance in 2019, but we do think the share price catalysts are likely to be:Stronger-than-forecast sales for BMW: We think sales will continue to outper

32、form the industry in 2019 being in the luxury segment where we expect stronger growth and further driven by a full year contribution of domestically produced X3 and launch of the domestically produced X2 in2H19.Faster-than-guided turnaround of Renault JV: Brilliance guided for their newly formed JV

33、with Renault (RBJAC) to produce one model under its domestic brand in 2019 and to achieve breakeven in 2020. Thus we were pleasantly surprised to see two new models already announced at the Guangzhou Auto Show in November 2018 which have been guided for launch in 2Q19. We think RBJAC could hit EBITD

34、A breakeven by this year, beating consensus expectations whose expectations are for losses to continue into2020.En vogue 2019: Tech NOT brandWe forecast for Benz to outpace BMW growth in 2019One key thematic we see driving the China Auto sector this year is the shift in perception from auto consumer

35、s that tech features are the most important consideration when purchasing a vehicle not brand or exterior design which was the case previously.This fundamental change in mentality has been at the crux of our on-the-ground analysis where we have spent more time inspecting the inside of vehicles and u

36、nderstanding the tech features available rather than just focusing on external appearance, pricing or the technical specifications of a car.Below is a select compilation of photos and quick takeaways from the previous few months relating to our key thoughts as to tech features in key brands.Beijing-

37、Benz to stay stronger for longer: We are particularly impressed by the layout of the new MBUX which was introduced to the premium configuration of Benz A-class (domestically production introduced November 2018). Though we think BMW will also see better growth above industry trend, we forecast for Be

38、nz to marginally outpace where we forecast Beijing- Benz to see 9% sales volume growth in 2019e vs. BMW at 5%.Fig 6: MB new A-class (premium config.) has a widescreen display with MBUX (Mercedes Benz User Experience)Fig 7: BMW 5-series also has an impressive looking interior panelSource:HSBCResearch

39、Source: HSBCResearchSanta Fe which will have fingerprint unlocking and fingerprint ignitionBeijing-Hyundai to see turnaround (non-consensus view): After facing headwinds from anti South Korean sentiment in 2017 and a poor product pipeline in 2018, we think that Hyundai is likely to see a turnaround

40、in 2019. We have seen a marked improvement in their new generation from the La Festa and 4th Gen Tucson (both launched in 2H18) as well as the much anticipated Santa Fe which will have fingerprint unlocking and fingerprint ignition (1Q19 launch). Though their previous generation of models was poorer

41、 or in-line with Japanese and US brands (which would be Hyundais closest competitors along with premium Chinese brands), we think their new generation looks superior and includes the kind of technology features lacking in its competitorsmodels.We think Hyundais new generation looks superior and incl

42、udes more advanced tech vs. Japanese and US peersFig 8: 4th Gen Hyundai Tucson a major upgrade with digital driver displayand centre touchscreenFig 9: 3rd Gen Tucson looks very much similar to Fords current layoutSource:HSBCResearchSource: HSBCResearchFig 10: Toyota Hybrid Camry not wow: analogue dr

43、iver display; no touchscreen; no models offer mobile connectionFig 11: Imported models like Ford had small screens, a CD player and an analogue speedometer somewhat datedSource:HSBCResearchSource: HSBCResearchWe are becoming more positive on the Great Walls longer-term outlook, based on both the F-s

44、eries as well as the companys new Ora brandBeginning of the long (turnaround) road for GWM: We have been quietly impressed by the upgrades made to Havals new F-series relative to their H-series of vehicles. From the looks to the features we think Great Wall have begun to finally offer a more competi

45、tive product rather than re-hashing the same old. Below weve pictured the H9 which is the largest and top of the range in Havals H-series. It still has analogue driver display and small non-touch recessed screen in centre panel. Come the F5 (introduced October 2018) we see some refinement in an upgr

46、aded digital driver display and centre panel, but the layout still looks slightly clumsy with protruding buttons below the centre display. The F7, however, is something else. It comes with a fully digital interior similar to F5, but with a much more refined and better integrated design and even incl

47、udes a wireless mobile phone charger in the centre panel.According to the sales salespeople the F-series is targeted more for the younger and trendier generation. We think that the F7 could be the next big model for Great Wall. We are becoming more positive on the companys longer-term outlook, where

48、 we think both the F-series as well as the companys new Ora brand are likely to see good growth in 2019. However, given the large weighting of the existing H-series it will take time to see growth in the new brand and modelsbeginning tooffsetdeteriorationinitsexistingmodels.WeforecastforGreatWalltos

49、ee 6% sales volume growth (units) in 2019e.Fig 12: Haval H9 has a better interior than the most popular H6, but still looks datedFig 13: Haval F5, in contrast, shows a vast improvement with digital driver display and touchscreenSource:HSBCResearchSource: HSBCResearchFig 14: Haval F7 Could this be th

50、e new H6? Even more refined than F5 with wireless charging built inFig 15: Roewe i5 Decent look and user experience via Banma OSSource:HSBCResearchSource: HSBCResearchMacro outlookOur macro outlook remains is unchanged as of end 2018 HYPERLINK /R/20/pBrxHrC (China Autos: Our 2019 dashcam - HYPERLINK

51、 /R/20/pBrxHrC After going in reverse, growth set to shift into first gear, 29 Nov 2018) where we forecast for 2-3% sales volume growth for new passenger vehicles (PV) in China for 2019. Our views on China growth are in-line with our global views as highlighted in this HSBC report: HYPERLINK /R/10/z

52、rSqCF7 European HYPERLINK /R/10/zrSqCF7 Autos The Year Ahead: Top ten themes for 2019, 29 November 2018.Fig 16: We forecast reversion to mild growth in China auto sales in 2019-202060%53%60%53%50%40%38%33%33%30%Forecast for reversionto mild growth in 2019-202030%22%20%14%14%13%17% 14%16%15%10%10%7%3

53、%5% 7%7%2%2.6%3.0%-0.0%-4.3%98A 99A 00A 01A 02A 03A 04A 05A 06A 07A 08A 09A 10A 11A 12A 13A 14A 15A 16A 17A 18A 19E 20EPassenger VehiclePassenger & Commercial VehiclesHSBC PV forecastSource: IHS, CPCA, HSBC estimatesOur thesis behind growth is that the drastic deterioration in growth we saw in 2H18

54、was driven by two factors:Uncertainty in the market driven by high volatility of US-China trade negotiations which had a direct impact on sentiment for car purchases but also a secondary impact through declining wealth impact due to weak stock and propertymarkets.The impact of the above was further

55、exacerbated by a high base effect which was created in 4Q17 (which subsequently created a low base in 1Q18) as purchase tax incentives rolled off going into 2018 which shunted forward auto purchases from early 2018 into late2017.Going into 2019 we think that the first factor, though persistent, has

56、seen normalisation and is unlikely to result in further negative growth in 2019 as expectations and demand normalise. The second factor above, which was a headwind to growth in 2H18, has now become a tailwind inFig 17: China autos new PV sales exacerbated the deterioration in 2H1825%20%15%10%-5%19%1

57、1%11%8%0.4%-0%2%19%11%11%8%0.4%-0%2%3% 5% 4% 3%3%2%-3% -2%0.4%-0% -1%-1.2%-5% -5%-10%-12%-13%-16%-16%Source: CPCA, HSBC1Q19 as a low base was created in 1Q18 from consumers which pushed forward their auto purchases to 4Q17 from 1Q18. Assuming PV sales were to see flat m-o-m growth from December leve

58、ls into 1Q19, we already see growth reverting into positive territory in 1Q19 (Figure 16).Mild growth outlook under a normalised environmentIn reality our conviction on 2019 is not high and we would be more confident of providing a range whereby we think that growth is likely to be within the range

59、of +/-2%. We have pinned our growth forecast at the upper end of that range however, as we think that China is likely to experience a more normalised growth environment in 2019 and under these conditions we still see structural growth for new PV sales where we forecast new PV sales to peak at closer

60、 to30m units per annum (2018: 24m) over the longer term. The trajectory to 30m units henceforth however will be one of moderate growth where we forecast 2-3% growth CAGR over the coming 5-10 years.We recognise there are differences in Chinas auto market relative to other DM (e.g. licence plate restr