Automotive Industry: December 2007 Sales Data Review

In 2007, China sold 8.791 million cars of various types, a year-on-year increase of 21.8%. It exceeded the 8 million mark for the first time. If forecasted at a growth rate of 15%, China’s auto production and sales volume is expected to exceed 10 million in 2008!

In 2007, SAIC Motor Corporation became the leading company in the industry with 15.54 million complete vehicle sales. In the market segment, FAW-Volkswagen, China National Heavy Duty Truck (67.20, -3.22, -4.57%, stocks) and Jinlong Auto (28.60, - 0.11, -0.38%, stocks) It has become the largest sales company in the passenger car, heavy truck and passenger car industries. In 2007, the passenger vehicle price index fell by 5.7%, while the full-year decline in 2006 was 5.5%. 2007 The biggest feature of the sedan market is that the price center of high-class cars has fallen to around 200,000 yuan;

In 2007, Guangzhou Toyota became the fastest growing company in the passenger vehicle industry, selling 170,000 passenger cars, an increase of 178% year-on-year; and Sinotruk became the fastest growing commercial vehicle (including passenger cars and trucks) Enterprises, selling 100,619 vehicles of various types, an increase of 66% over the previous year;

At the end of 2007, we proposed in the annual investment proposal: the preferred rating of Changan Automobile (18.95, -0.48, -2.47%, stocks), heavy truck preferred Sinotruk, and the preferred Jinlong Automobile for passenger cars, and it is recommended to use the stock portfolio. Ways to invest in auto parts companies. At present, we still maintain this view. In the near term, the valuation of major listed vehicle companies is not low, and small and medium-sized auto stocks are more active. We highly recommend ST Zhongding and Wanfeng Aowei (13.58, 0.16, 1.19%, Stock it);

Key listed company investment advice

For listed vehicle companies, we continue to maintain the recommended ratings for Changan Automobile, Changchun Heavy Duty Truck, China National Heavy Duty Truck, and the preferred Jinlong Motor Bus. However, the valuation of major listed vehicles is not low, and small and medium-sized auto stocks are more active. We highly recommend ST Zhongding and Wanfeng Aowei; Wanfeng Aowei: The worst period is about to pass

We believe that the aluminum wheel industry has bottomed out and the business environment is likely to continue to deteriorate. The investment opportunities have already emerged:

The gross profit rate of the world's largest wheel company, American Excellence Industrial, at the end of the third quarter of 2007 was only 2.9%, and the gross profit margin of Wanfeng Aowei was only 11.4%. Such a profitability level cannot sustain the company's operation;

We understand that currently there are 4-5 of the top 15 companies in the country that are interested in selling assets. In 2008, industry consolidation and merger and acquisition will kick off.

The main cause of poor business operations, in addition to rising raw material costs, more importantly, due to the full competition, the higher bargaining power of automakers, aluminum wheel prices can hardly make up for the cost increase, but this situation will be Changed due to industry consolidation and withdrawal of loss-making enterprises;

In addition to industry factors, we believe that there are two things that Wanfeng Aowei can improve:

At the beginning of the company’s overseas operations, the US-based OEMs were the main supporting customers. About 70% of the overseas export revenue was in US dollar-denominated orders. The appreciation of the RMB and the substantial losses of the US-based OEMs constrain the profitability of the company’s overseas operations.

The downstream of the company's aluminum wheels is being transferred from the retail market (AM) to OEMs. In order to compete for market share, the company has the possibility of sacrificing some of its profits. At present, its leading position in the industry has basically been laid, and future products have improved profitability. space;

The company's downstream customers are shifting from loss-making US-based manufacturers to profitable European- and Japanese-based manufacturers. The quality of future orders will continue to increase. At the same time, after the company has stabilized the OEM market, there will be room for improvement in product prices and cost control.

Therefore, we believe that with the release of new production capacity by the company in 2008, the main revenue will continue to maintain a growth rate of nearly 30%. Due to the optimization of downstream customers and the increase in bargaining power of automakers, the gross profit margin of the company will bottom out. ;

We expect the company's performance to increase significantly in 2008. We forecast that the 07-09 EPS will be 0.204, 0.370, and 0.494 yuan respectively, giving a target price of 14.82 yuan in the next 6-12 months, corresponding to 73-, 40-, and 30-times P/E ratios in 07-09. , suggesting "buy"

Key risks: There is uncertainty in the “U” or “V” type reversal of the aluminum wheel industry, and the increase in raw material prices may exceed our expectations;