麦格理中国汽车2020展望：缓慢复苏之路-2019.12.2-21页.pdf

Please refer to page 19 for important disclosures and analyst certification,or on our website December 2019 China EQUITIES Macquarie China auto coverage Note:updated as of 28 November closing prices;Prices are denominated in Rmb for A-share stocks,and HKD for B/H-share stocks.Source:FactSet,Macquarie Research November 2019 Analysts Macquarie Capital Limited Allen Yuan +86 21 2412 9009 Macquarie Capital Securities(Japan)Limited Janet Lewis,CFA +81 3 3512 7856 China autos 2020 outlook slow lane to a full recovery Key points Cautious outlook for 2020 PV demand,mainly considering weak demand from lower-tier cities,increased household leverage and rising CPI.We expect to see further relaxation of the license plate quota in 2020.Sector preference:higher-end lower-end NEVs.Near-term risks on the downside.OP:Brilliance,DFG,GAC;UP:GWM,BYD,CATL.Conclusions A slow road back to recovery:We lower our 2020 China auto sales by 5%and expect passenger vehicle(PV)sales to edge up 0.5%YoY,after a sharp fall in 2019.Our cautious demand outlook,despite the low base,reflects the concerns around 1)continued macro headwinds,especially a weak private economy that will impact demand from lower-tier cities;2)the negative impact on consumption for discretionary items like autos from increased household leverage and rising CPI;3)low consumer confidence levels.Policy expectations:We expect to see further relaxation of license plate restrictions in key cities in 2020,following Shenzhen and Guangzhou.We see lower chances for the government to release supportive policies that require intense fiscal support,mainly considering the fiscal pressure that the government faces in the context of tax reform and slower economic growth,the possible lower-than-expected boost for real demand and potential distortion to the industry.For new energy vehicles(NEV),our base scenario factors in no further subsidy cuts in 2020 to avoid too-aggressive market contraction.Eased regulatory burden:Following the shift to National 6 emission standards from 1 July 2019 in most regions,key OEMs have completed the transition.We dont expect to see intense industry distortion in 2020 during emission standard upgrades for the remaining regions.That said,we expect to see continued margin dilution for most OEMs from NEV sales in their efforts to meet NEV credit requirements.A quick ramp-up of scale is key to achieving early profit contribution.Sector preference:higher-end lower-end NEVs:We continue to like premium and stronger JV brands as key beneficiaries of the rising replacement demand,favourable demographic and wealth trends and potential relaxation of license plate restrictions.We are concerned about increased competition in the lower-end segments and would turn more positive when we see a major recovery in demand from lower-tier cities.We are cautious on the NEV sector,considering the negative impact from subsidy cuts for the whole industry,the lack of individual demand from cities without license plate restrictions and the slowdown of demand from operating fleets.Stock picks Near-term risks on the downside:In the near term,we see more downside risks for the sector as auto sales should remain under pressure in 1H20,considering the calendar shift of the Spring Festival and a relative high base in 2Q19 distorted by the emission standard upgrades.In addition,the trading PE multiple of the sector has moved above the five-year average level.We suggest investors stick with OEMs with less demanding valuation and exposure to higher-end brands like Brilliance(BWM),DFG(Honda/Nissan)and GAC(Toyota/Honda).We are cautious on BYD,CATL and GWM.NameTickerPriceRatingTP+/-Brilliance1114 HK8.17 Outperform10.1023.6%Dongfeng489 HK7.64 Outperform8.106.0%GAC2238 HK8.52 Outperform9.6012.7%SAIC Motor600104 CH23.04 Outperform31.5036.7%Nexteer1316 HK6.66 Outperform12.1582.4%Minth425 HK27.30 Outperform25.80-5.5%Geely175 HK15.08 Neutral11.20-25.7%Yutong Bus600066 CH14.31 Neutral12.70-11.3%BAIC1958 HK4.51 Neutral4.20-6.9%BYD1211 HK38.15 Underperform20.70-45.7%CATL300750 CH87.41 Underperform60.30-31.0%Great Wall2333 HK6.04 Underperform3.70-38.7%Changan-B200625 CH3.54 Underperform3.10-12.4%Changan-A000625 CH8.31 Underperform3.60-56.7%Macquarie Research China autos 2 December 2019 2 Cautious about 2020 auto demand Fig 1 We expect China total auto sales to grow at a CAGR of 3%in 2019-22E Note:RED implies key assumptions.Source:Wind,CADA,CAAM,Macquarie Research,November 2019 We incorporate both new car and used car markets into our analytical framework for the China auto market as the used car market is materializing,representing 57%of total car sales in 2019,on our estimate.We expect the overall China auto market,including used cars,to grow at a CAGR of 3%between 2019-2022E,with used car sales growth outperforming new cars.Fig 2 We lower our 2019/20 China new car sales estimates Source:CAAM,Macquarie Research,November 2019 20122013201420152016201720182019E2020E2021E2022E 2019-22 CAGRNew car sales(m units)19.3 22.0 23.5 24.7 28.0 28.9 28.0 25.7 25.9 26.6 27.3 1%Used car sales(m units)7.98.59.29.410.412.413.8 14.7 15.9 17.5 19.1 7%Total car sales(m units)27.230.532.734.138.441.341.940.541.844.146.43%New car sales YoY growth4.3%13.9%6.9%4.9%13.7%3.0%-2.9%-8.2%0.5%2.7%2.8%Used car sales YoY growth16.4%6.7%8.6%2.4%10.3%19.4%11.4%6.5%8.3%9.6%9.2%Total car sales7.6%11.8%7.4%4.2%12.7%7.4%1.4%-3.4%3.4%5.4%5.3%Total car ownership(m units)109.3 126.7 146.0 162.8 185.7209.1 228.7 245.3 261.4 277.5 293.7 Used car sales as%of total auto ownership7.3%6.7%6.3%5.8%5.6%5.9%6.0%6.0%6.1%6.3%6.5%Used car sales as%of new car sales41.1%38.5%39.2%38.2%37.1%42.9%49.3%57.2%61.6%65.8%69.9%k units20092010201120122013201420152016201720182019E2020E2021E2022EPassenger vehicleSedan7,4619,49410,12210,74512,01012,38011,74512,15011,84811,51610,37710,48110,69110,904MPV2494454984931,3041,9142,1092,4972,0711,7281,4361,3641,4051,447SUV6571,3181,5942,0002,9894,0826,2579,04710,2539,9699,3079,4469,82410,217Mini-bus1,9482,4922,2582,2571,6251,3321,099684547458401341324308Sub-total10,31513,74914,47215,49517,92819,70821,21024,37724,71823,67221,52021,63222,24322,876Commercial vehicle14%Bus272356403426478530525488481450432432441456Truck2,2472,8202,7022,6532,7262,4482,2562,3642,5922,8712,6442,6442,6962,750Trailer212354258191263279250398583483561590619650Bus-chassis8387848282777055463533312928Truck-chassis498675585460507457349346458532548548548548Sub-total3,3124,2934,0333,8114,0563,7913,4513,6514,1614,3714,2184,2444,3344,433Grand total13,62718,04218,50519,30621,98423,49924,66228,02828,87928,04225,73825,87626,57727,308YoY change(%)Passenger vehicleSedan48.0%27.3%6.6%6.1%11.8%3.1%-5.1%3.4%-2.5%-2.8%-9.9%1.0%2.0%2.0%MPV26.1%78.9%11.7%-0.9%164.3%46.8%10.2%18.4%-17.1%-16.5%-16.9%-5.0%3.0%3.0%SUV47.4%100.4%21.0%25.5%49.4%36.6%53.3%44.6%13.3%-2.8%-6.6%1.5%4.0%4.0%Mini-bus83.2%27.9%-9.4%-0.1%-28.0%-18.1%-17.5%-37.8%-20.0%-16.2%-12.5%-15.0%-5.0%-5.0%Sub-total52.9%33.3%5.3%7.1%15.7%9.9%7.6%14.9%1.4%-4.2%-9.1%0.5%2.8%2.8%SUV penetration6.4%9.6%11.0%12.9%16.7%20.7%29.5%37.1%41.5%42.1%43.2%43.7%44.2%44.7%Commercial vehicleBus10.9%31.1%13.3%5.5%12.4%10.7%-0.9%-7.0%-1.6%-6.3%-4.0%0.0%2.0%3.5%Truck36.9%25.5%-4.2%-1.8%2.7%-10.2%-7.8%4.8%9.7%10.7%-7.9%0.0%2.0%2.0%Trailer9.1%67.2%-27.3%-26.0%38.2%5.9%-10.3%59.1%46.6%-17.2%16.2%5.0%5.0%5.0%Bus-chassis-2.4%4.3%-2.8%-3.2%0.0%-5.5%-8.9%-21.9%-15.5%-24.9%-6.7%-5.0%-5.0%-5.0%Truck-chassis11.0%35.5%-13.3%-21.5%10.3%-9.8%-23.6%-0.9%32.3%16.1%3.0%0.0%0.0%0.0%Sub-total26.7%29.6%-6.1%-5.5%6.4%-6.5%-9.0%5.8%13.9%5.1%-3.5%0.6%2.1%2.3%Grand total45.6%32.4%2.6%4.3%13.9%6.9%4.9%13.7%3.0%-2.9%-8.2%0.5%2.7%2.8%Macquarie Research China autos 2 December 2019 3 Remain cautious about 2020 PV demand,especially in lower-tier cities We lower our China auto sales estimates for 2019 and 2020 by 4%and 5%,respectively.We expect passenger vehicle market to post 0.5%YoY sales growth in 2020,coming off a low base in 2019.The conservative outlook mainly reflects our cautious view for the demand in lower tier cities,which has been the main drag in 2019,considering Fig 3 Sales growth in 10M19 lower-tier cities drag Fig 4 Tier 3-6 cities contributed 67%of China auto sales Note:based on 10M19 insurance data;only include passenger vehicles.Source:ThinkerCar,Macquarie Research November 2019 Note:based on 10M19 insurance data;only include passenger vehicles.Source:ThinkerCar,Macquarie Research November 2019 1)Continued macro headwinds,especially a weak private economy Chinas economy has been under a broad down-trend for almost eight quarters since 4Q17.Macquarie economist Larry Hu expects real GDP growth to slow further in 4Q19 from 6.0%in 3Q19.A weakened GDP has led to narrowed disposable income growth as well.Fig 5 GDP growth continues to trend down Fig 6 Overall disposable income also slowed Source:CEIC,Wind,Macquarie Macro Strategy,November 2019 Source:Wind,Macquarie Research,November 2019 We believe the private sector economy has been under intense operating pressure.We reviewed the profit data for above designated size industrial enterprises,as reported by the National Bureau of Statistics(NBS).One of the key observations is that there is a significant discrepancy in the%change for accumulated industrial output for private enterprises between the%data for YoY change in accumulated industrial output,as directly reported by the NBS the%results calculated using the absolute value of accumulated industrial output -8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%TotalmarketTier 1Tier 2Tier 3Tier 4Tier 5Tier 6Total marketTier 1Tier 2Tier 3Tier 4Tier 5Tier 6Tier 110%Tier 223%Tier 323%Tier 421%Tier 514%Tier 69%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%2013-122014-032014-062014-092014-122015-032015-062015-092015-122016-032016-062016-092016-122017-032017-062017-092017-122018-032018-062018-092018-122019-032019-062019-09Actual disposal personal income accumulated YoY growthMacquarie Research China autos 2 December 2019 4 The NBS attributes this to the change in the number of enterprises included in the basket of above designated size industrial enterprises.We attribute the discrepancies to survivorship bias,i.e.more private enterprises fall below the threshold of an above designated size industrial enterprise.This could reflect the shrinking size of many private companies.In addition,gearing ratios of private enterprises remain elevated.Interest spread between SOEs and private enterprises is also at historically high levels.Per the PBoC Governor(LINK),small and micro businesses,mostly private enterprises,contributed 80%of the total employment in China.Continued sluggish performance of private enterprises should dampen auto demand.Fig 7 Industrial output well matched for SOEs Fig 8 Industrial output discrepancies since mid-2017 Source:Wind,Macquarie Research,November 2019 Source:Wind,Macquarie Research,November 2019 Fig 9 Gearing ratio for SOEs vs.private enterprise Fig 10 Interest spread between SOEs and private companies Source:Wind,Macquarie Research,November 2019 Source:Wind,Macquarie Research,November 2019 2)Negative impact from increased household leverage Overall China household leverage has gone up meaningfully over the past few years.We observe that there is negative correlation between China household leverage and China annual auto sales growth.This may reflect the tendency that the household sector may want to pay down their debt first before spending more,especially on discretionary items.Per PBoCs estimates,every 1%increase in consumer leverage will lead to a 0.1ppt decrease in consumer confidence.-60.0%-40.0%-20.0%0.0%20.0%40.0%60.0%80.0%100.0%120.0%2015-022015-052015-082015-112016-022016-052016-082016-112017-022017-052017-082017-112018-022018-052018-082018-112019-022019-052019-08Industrial output-SOE(reported accumulated%change)Industrial output-SOE(calculated accumulated%change)-40.0%-30.0%-20.0%-10.0%0.0%10.0%20.0%2015-022015-052015-082015-112016-022016-052016-082016-112017-022017-052017-082017-112018-022018-052018-082018-112019-022019-052019-08Industrial output-private enterprises(reported accumulated%change)Industrial output-private enterprises(calculated accumulated%change)50.052.054.056.058.060.062.064.02015-022015-052015-082015-112016-022016-052016-082016-112017-022017-052017-082017-112018-022018-052018-082018-112019-022019-052019-08Overall industrial sectorSOEsPrivate enterprises-50050100150200250Interest spread between SOEs and private enterprisesMacquarie Research China autos 2 December 2019 5 Fig 11 Negative correlation between household leverage and China auto sales Source:Wind,Macquarie Research November 2019 3)Consumer confidence at low levels With the slowdown of economic growth and other macro uncertainties such as the trade war,consumers are likely to remain cautious about making purchase decisions,especially about discretionary items like automobiles.The rising urban deposit growth rate from 2018 should also reflect consumers cautious about spending,especially on discretionary items.Fig 12 Flat consumer confidence since mid-2018 Fig 13 Rural consumer confidence dipping more Source:Wind,Macquarie Research November 2019 Note:The survey is based on the sample in Zhejiang.Source:Wind,Macquarie Research November 2019 -120%-100%-80%-60%-40%-20%0%20%40%60%80%199820012004200620092012201420172020Correlation:-0.6Household leveargeChina auto salesLinear(Household levearge)Linear(China auto sales)95.00100.00105.00110.00115.00120.00125.00130.00PBoC consumer confidence index115.0117.0119.0121.0123.0125.0127.0129.0131.0OverallUrban consumerRural consumerMacquarie Research China autos 2 December 2019 6 Fig 14 Urban household deposit balance growth on the rise since 2018 Fig 15 Relatively lower growth for discretionary items(yellow columns)Source:Wind,Macquarie Research November 2019 Source:Wind,Macquarie Research November 2019 4)Extra burden from rising CPI In October,China CPI inflation jumped to 3.8%YoY,mainly due to the surging pork prices.There could be two negative impacts from the elevated inflation pressure:Squeezing spending on discretionary items:Higher costs of daily necessities like food should squeeze spending on discretionary items like automobiles.Lower income groups or rural consumers should bear a greater negative impact from this as a higher percentage of their spending goes into food.Fig 16 CPI has been rising,mainly on the back of surging pork prices Fig 17 Engels Coefficient higher spending on food for rural consumers Source:Wind,Macquarie Research November 2019 Note:Engels Coefficient represents the part of spending on food.Source:Wind,Macquarie Research November 2019 Delayed monetary policy:In Larry Hus view(LINK),although the PBoC should ignore pork and focus on core CPI inflation(excluding food and energy),PMI,Profit and PPI,government officials have a natural tendency to minimize risks and are putting monetary policy on hold for now.5)Government policies we expect to see more relaxation in vehicle purchases Considering the importance of the aut