20170830-德意志银行-上汽集团-600104.SH-1H17 in line; Hold on mild growth outlook.pdf

Deutsche Bank Markets Research Rating Hold Asia China Automobiles&Components Company SAIC Motor Alert Date 30 August 2017 Results 1H17 in line;Hold on mild growth outlook Reuters Bloomberg Exchange Ticker 600104.SS 600104 CH SHH 600104 _ Deutsche Bank AG/Hong Kong The views expressed above accurately reflect the personal views of the authors about the subject companies and its(their)securities.The authors have not and will not receive any compensation for providing a specific recommendation or view.Deutsche Bank does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters,Bloomberg and other vendors.FOR OTHER IMPORTANT DISCLOSURES PLEASE VISIT http:/ MCI(P)083/04/2017.Price at 29 Aug 2017(CNY)30.20 Price target-12mth(CNY)28.35 52-week range(CNY)32.69-21.13 Shanghai Composite 3,363 Vincent Ha,CFA Research Analyst(+852)2203 6247 Fei Sun,CFA Research Analyst(+852)2203 6130 Stock data Market cap(CNYm)352,841 Market cap(USDm)53,130 Shares outstanding(m)11,683.5 Major shareholders SAIC Group(71.2%)Free float(%)17 Avg daily value traded(USDm)141.9 Source:Deutsche Bank Key data FYE 12/31 2016A 2017E 2018E Sales(CNYm)748,895 851,052 915,246 Net Profit(CNYm)32,008.6 35,406.1 38,148.3 DB EPS(CNY)2.75 3.04 3.27 PER(x)7.7 9.9 9.2 Yield(net)(%)8.2 6.0 6.5 Source:Deutsche Bank SAIC Motor-PV monthly sales volume-40%-20%0%20%40%60%0100,000200,000300,000400,000500,000600,000700,000800,000Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17(Units)(YoY%)Source:CAAM 6%earnings growth on rising SG&A ratio and soft JVs contribution SAIC Motor released its 1H17 results after market close on 29 August.The companys 1H17 net revenue grew by 13.0%YoY to RMB393.0bn,on the back of 5.8%growth in vehicle sales volume to 3.2m units during the period.Meanwhile,SAICs 1H17 gross profit grew by 18.6%YoY to RMB51.6bn with 62.3bps YoY gross profit margin improvement,possibly due to decent sales for new local brand models such as Roewe RX5 SUV,Roewe i6,MG ZS,and Baojun 510,in our view.However,with 1)21.1%YoY increase in SG&A expenses and 2)only 3.7%YoY increase in profit contribution from its JVs/associates,1H17 net profit only increased 6.0%YoY to RMB16.0bn.On a quarterly basis,SAICs 2Q17 net profit reached RMB7.7bn,implying an 8.0%YoY growth(-6.8%QoQ due to seasonality),on 8.9%YoY increase(8.3%QoQ drop)in vehicle sales.2Q17 JVs earnings was down 3.9%YoY on 5.6%sales growth at Shanghai-Volkswagen(SVW)and SAIC-GM(SGM).Deutsche Bank view stable earnings growth outlook;Hold on valuation SAICs 1H17 net profit accounts for 45%of DBe and 44%of Bloomberg estimates.We consider the results in line as 1H15/1H16 net profits account for 47-48%of full year net profits.Going forward,we expect 2H17E sales momentum to further ease on a higher base,but we still expect stable sales and earnings growth with more new SUV rollouts going forward.All in all,we envision a stable earnings growth trajectory for SAIC,with full-year growth in SVW and SGM,driven by new models,and strong Roewe local brand sales.This should support the companys generous dividend payout.We have a Hold rating on SAIC on fair valuation,and have our target benchmark at 9.0 x FY17/18E P/E,which is about one standard deviation above the companys historical trading average.This is justified,in our view,as we expect SAIC to achieve a three-year EPS CAGR of 8%in FY16-19E.Figure 1:SAIC Motor 1H17 and 2Q17 results summary(RMBm)1H17 1H16 YoY 2Q17 2Q16 YoY 1Q17 QoQ Net revenueNet revenue 393,016393,016 347,856347,856 13.0%13.0%198,593198,593 164,482164,482 20.7%20.7%194,423194,423 2.1%2.1%Gross profit 51,568 43,475 18.6%25,585 20,346 25.8%25,983-1.5%Gross profit margin 13.1%12.5%12.9%12.4%13.4%Operating profit(EBIT)9,764 8,945 9.1%4,399 3,381 30.1%5,365-18.0%Operating profit margin 2.5%2.6%2.2%2.1%2.8%Share of JV/associates 13,689 13,201 3.7%6,550 6,813-3.9%7,139-8.3%Net profitNet profit 15,95815,958 15,06015,060 6.0%6.0%7,6977,697 7,1267,126 8.0%8.0%8,2618,261 -6.8%6.8%Net profit margin 4.1%4.3%3.9%4.3%4.2%Source:Company data,Deutsche Bank Distributed on:29/08/2017 17:39:29 GMT0bed7b6cf11c