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Jiangling Motors-A:Volume and price declines cause H1earnings to miss expectations

发布时间:2016-08-26    研究机构:瑞银证券

H116 net profit down 35% YoY, missing UBS-S expectations.

Jiangling's H116 net profit was Rmb0.7bn (UBS-Se: Rmb1bn), down 35% YoY. Corebusiness revenue was Rmb10.8bn (-9.8% YoY), representing only 42% of its full-yeartarget, mainly caused by a 10.8% YoY drop in the number of vehicles sold in H116.

Q216 revenue was Rmb5.5bn (-3% YoY) and net profit was Rmb290m (-43% YoY).

H116 gross margin was c22.7% (-2.3ppt YoY) and selling expenses increased 19% YoYto Rmb760m, driving up the selling expense ratio to 7% (+1.7ppt YoY), mainly due tothe company's increased efforts to promote its models amid a continued slump in salesvolume.

Old models continued sales slump; new ones with no meaningful contributions.

The company sold 121,000 vehicles in H116, down 10.8% YoY. By product, sales ofFord commercial vehicles were 31,565 units (-5.5% YoY); JMC light-duty trucks,50,237 units (-16% YoY); JMC pickups, 27,819 units (-4.5% YoY); and Yusheng SUVs,5,755 units (-47.3% YoY). We mostly attribute the company's ongoing sales slump to:1) a significantly negative impact on its light-duty truck sales due to China'smacroeconomic weakness and China IV-compliant product launches from rivals; and 2)the Transit is sold via the same channels as Ford commercial vehicles, including just100-110 4S dealerships. The low dealership count and being sold alongside commercialvehicles makes it challenging to market the Transit in a targeted manner. New modelsEverest and Tourneo have yet to make meaningful contributions since their launch lastyear.

We are cautious on the outlook for Yusheng S330 sales.

We expect the company to launch its new model Yusheng SUV S330 in late September.

Positioning it as a compact urban SUV, we believe the company could price the modelat Rmb88,800-142,800. Rival products include Hover H6, Chang'an CS75 andTrumpchi GS4. Given intensifying competition for this SUV class and the limiteddistribution channels and brand awareness of Yusheng, we are relatively cautious in ouroutlook for its sales volume and estimate monthly sales to average about 5,000 units in2017.

Valuation: Maintain Neutral and Rmb27 price target.

Our price target is based on DCF and assumes an 8% WACC.

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