市场放缓之际买入消费升级受益者；维持对吉利的买入评级...

2017 年 2 月 28 日

中国：汽车证券研究报告

市场放缓之际买入消费升级受益者；维持对吉利的买入评级（强力买入），上调上汽至买入 (摘要) 重申吉利汽车为我们的首选股尽管年初至今吉利汽车已上涨 43%（同期恒生指数上

涨 9%，我们覆盖范围内 H 股平均上涨 24%），但受

销量增长势头的推动，该股仍为我们的首选股（位于

强力买入名单），原因包括：其独特定位将受益于消费升级趋势，因中国购车者

日益青睐更大、质量更优的车型。借助沃尔沃的技术实力，产品结构/销售均价持续改

善；Lynk & Co.品牌将帮助吉利应对主流国际品牌

在中国及海外市场的争夺战（主流国际品牌目前占

到中国市场总量的 50%）。到 2019 年将成为年销量达 150 万辆的汽车生产

商，而 2015 年销量为 50 万辆。推出上行假设（2019 年销量/每股盈利较基本假设

高 11%/26%）以反映新产品上市带来的潜在上行

空间。我们新的 12 个月目标价格（基本/上行假设

各占权重 75%/25%，目前基于市盈率）上调 28%至 13.21 港元，隐含 25%的潜在上行空间，在我们

覆盖范围内最高。我们还注意到吉利汽车吸引了港股通资金兴趣，可能

得益于该股较 A 股同业增长强劲但估值较低。

因盈利回归增长轨道，上调上汽集团评级至买入得益于相对强劲的 SUV 产品周期，上汽集团 2016-19年盈利年均复合增速应回归个位数高端。其持股计划

可能提升管理层积极性并推动成本控制改善及业绩提

升。如果在蓝天情景下并加入奥迪品牌，则上汽大众

（与大众的合资公司）盈利到 2024 年可能增长一倍以

上。目前我们将基于市盈率的 12 个月目标价格上调

38%至人民币 30.11 元（潜在上行空间 18%），并将

该股评级由中性上调至买入。

汽车市场将放缓 2017 年 1 月乘用车市场销售同比下滑 9%，这支撑了

我们认为车市增长将从 2017 年起放缓的观点，原因是

2017 年购置税优惠力度下降导致购买力在 2016 年提

前释放。我们将 2017-18 年卡车市场销量上调 1%-4%，因反超载监管及基本面需求复苏，但预计 2019年增长将放缓至个位数水平，受高基数及卡车使用寿命

延长的拖累。基于估值法变动及公司层面的盈利推动因素，我们调

整了覆盖范围内股票 12 个月目标价格/预测。因潜在下

行空间最大，维持对长城汽车 A/H 股的卖出评级。 *全文翻译随后提供

覆盖范围内股票估值概要

*该股位于亚太地区强力买入名单。资料来源：Datastream、高华证券研究

相关研究上汽集团：驶向盈利正增长；上调评级至买入，2017 年 2 月 28日

中国：汽车：刺激政策可能延期以保持经济增速；重申强力买入吉利汽车，将长城汽车下调至卖出，2016 年 11 月 11 日

杨一朋执业证书编号: S1420511100006 +86(10)6627-3189 [email protected] 北京高华证券有限责任公司

北京高华证券有限责任公司及其关联机构与其研究报告所分析的企业存在业务关系，并且继续寻求发展这些关系。因此，投资者应当考虑到本公司可能存在可能影响本报告客观性的利益冲突，不应视本报告为作出投资决策的唯一因素。有关分析师的申明和其他重要信息，见信息披露附录，或请与您的投资代表联系。

丁妤倩执业证书编号: S1420515060002 +86(10)6627-3327 [email protected] 北京高华证券有限责任公司

北京高华证券有限责任公司投资研究

Valuation Summary - China Auto 2/27/2017 12m PotentialTicker Company name Currency Rating Close TP up/downside0175.HK Geely HKD Buy* 10.58 13.21 24.9%3836.HK Harmony HKD Buy 3.67 4.54 23.8%000581.SZ Weifu (A) CNY Buy 23.63 28.79 21.8%2238.HK GAC (H) HKD Buy 13.06 15.61 19.5%600104.SS SAIC CNY Buy 25.48 30.11 18.2%1316.HK Nexteer HKD Buy 10.14 11.50 13.4%3808.HK Sinotruk HKD Neutral 6.21 6.85 10.3%600741.SS Huayu CNY Neutral 16.58 17.20 3.7%0425.HK Minth HKD Neutral 25.10 25.75 2.6%1114.HK Brilliance HKD Neutral 12.26 12.31 0.4%0489.HK Dongfeng HKD Neutral 9.09 8.92 -1.8%1211.HK BYD HKD Neutral 46.30 44.52 -3.9%000338.SZ Weichai (A) CNY Neutral 11.19 10.62 -5.1%0881.HK Zhongsheng HKD Neutral 11.20 10.29 -8.2%000625.SZ Changan (A) CNY Neutral 16.19 14.74 -9.0%1728.HK Zhengtong HKD Neutral 2.99 2.69 -10.0%600418.SS JAC CNY Neutral 12.15 10.92 -10.1%1293.HK Baoxin HKD Neutral 3.54 3.07 -13.2%2338.HK Weichai (H) HKD Neutral 13.74 11.92 -13.2%000800.SZ FAW Car CNY Sell 11.55 8.56 -25.9%601633.SS Great Wall (A) CNY Sell 13.00 8.36 -35.7%2333.HK Great Wall (H) HKD Sell 9.71 5.79 -40.4%

2017 年 2 月 28 日中国：汽车

全球投资研究 2

Table of contents

Overview: Cautious on sector growth due to purchase tax rebate cut; buy ‘upgraders’ like Geely (CL-Buy) and SAIC (up to Buy) 3

Moderating car market growth outlook; keep positive on selective ‘upgraders’; truck estimation changes 5

Companies 10

Geely (0175.HK): Riding the consumption upgrade wave to a 1.5mn car maker; CL-Buy 11

SAIC (600104.SS): Upgrade to Buy (from Neutral) on earnings growth resumption 22

Valuation and estimate changes 24

Appendices 39

Appendix: Autos/Parts/Dealer – China and global peers comps 40

Disclosure Appendix 43

The prices in the body of this report are based on the market close of February 27, 2017, unless otherwise stated.

Gao Hua Securities acknowledges the role of Longjin Li of Goldman Sachs in the preparation of this product.

Exhibit 1: Valuation summary – China Auto coverage

* denotes the stock is on our Regional Conviction List.

Source: Datastream, Gao Hua Securities Research.

Valuation Summary - China Auto 2/27/2017 12m PotentialTicker Company name Currency Rating Close TP up/downside0175.HK Geely HKD Buy* 10.58 13.21 24.9% Lower car market growth; higher price erosion on tough competition; lower vol./price and higher SG&A expenses for Lynk & Co3836.HK Harmony HKD Buy 3.67 4.54 23.8% Lower luxury market volume/ pricing; slower new car sales GPM recovery (mainly BMW); slower EV launch000581.SZ Weifu (A) CNY Buy 23.63 28.79 21.8% Weaker truck/industrial growth; weaker emissions standard regulation enforcement; slower than expected emissions upgrade2238.HK GAC (H) HKD Buy 13.06 15.61 19.5% Slower new product vol./ GPM ramp-up of local bands on tough competition; and lower JV profitability (especially GAC-Fiat/GAC-Honda)600104.SS SAIC CNY Buy 25.48 30.11 18.2% Weaker total car market/SUV segment growth; weaker volume/pricing/margin of SAIC new products on competition; uncertainty in Audi negotiation1316.HK Nexteer HKD Buy 10.14 11.50 13.4% Lower US/China light vehicle volume/ pricing; higher competition; weaker execution in cost optimization; potential increase in trade barriers3808.HK Sinotruk HKD Neutral 6.21 6.85 10.3% Quicker/slower HDT market volume recovery; high/lower Sinotruk market share; quicker/slower export increase; expense control600741.SS Huayu CNY Neutral 16.58 17.20 3.7% Faster/slower cost optimization of interiors/exteriors; worse/better synergies from Johnson Controls consolidation; faster/slower ADAS progress0425.HK Minth HKD Neutral 25.10 25.75 2.6% Higher/lower overseas revenues/GPM, quicker/slower revenue ramp-up from camera business1114.HK Brilliance HKD Neutral 12.26 12.31 0.4% Higher/lower luxury market volume/pricing; quicker/slower new BMW product volume/NPM; higher/lower minivan market volume/pricing0489.HK Dongfeng HKD Neutral 9.09 8.92 -1.8% Higher/lower new product sales volumes/ASP/OP; higher/lower headquarter expenses1211.HK BYD HKD Neutral 46.30 44.52 -3.9% Higher/lower total market size, BYD market share and credit income for NEV; higher/lower ASP/OPM for NEV bus000338.SZ Weichai (A) CNY Neutral 11.19 10.62 -5.1% Quicker/slower HDT market volume growth; higher/lower Weichai market share in HDT engine; higher/lower Kion earnings growth0881.HK Zhongsheng HKD Neutral 11.20 10.29 -8.2% Higher/lower marker share of key brands (esp. Mercedes and Japanese brands); stronger/weaker new car sales GPM000625.SZ Changan (A) CNY Neutral 16.19 14.74 -9.0% Higher/lower total market; lower/higher volume/pricing/NPM of local brand and JVs1728.HK Zhengtong HKD Neutral 2.99 2.69 -10.0% Higher/lower overall market/marker share/new car sales GPM; Higher/lower revenue/gross profit contributed from auto finance business600418.SS JAC CNY Neutral 12.15 10.92 -10.1% Higher/lower China car market, higher/lower volume/price/margin of new launches, quicker/slower NEV cooperation with NextEV1293.HK Baoxin HKD Neutral 3.54 3.07 -13.2% Higher/lower luxury volume/GPM; higher/lower revenue/GPM in aftersales2338.HK Weichai (H) HKD Neutral 13.74 11.92 -13.2% Quicker/slower HDT market volume growth; higher/lower Weichai market share in HDT engine; higher/lower Kion earnings growth000800.SZ FAW Car CNY Sell 11.55 8.56 -25.9% Higher-than-expected volume/price/margin; quicker-than-expected potential group restructuring activities601633.SS Great Wall (A) CNY Sell 13.00 8.36 -35.7% Higher volume/ GPM of SUV new launches; slower price erosion2333.HK Great Wall (H) HKD Sell 9.71 5.79 -40.4% Higher volume/ GPM of SUV new launches; slower price erosion

Risks

2017 年 2 月 28 日中国：汽车


Overview: Cautious on sector growth due to purchase tax rebate cut; buy ‘upgraders’ like Geely (CL-Buy) and SAIC (up to Buy)

Reiterate CL-Buy on Geely as it rides the wave of consumption upgrade to become a 1.5mn car maker by 2019E Amid a continuation of the consumption upgrade trend in China, we see Geely as uniquely positioned to leverage Volvo tech strength and to upgrade product mix/ASP. The new Lynk & Co. brand should help the company tackle the bigger market turf of the mainstream international brands in China (currently ~50% volume share of the total car market) as well as the overseas market. As a result we expect Geely to transform into a 1.5mn unit car maker by 2019E (vs. 0.5mn in 2015) in our base case volume assumption. In an upside case scenario we assume it could achieve a higher sales volume due to its strong new product launches, with sales volume/NPM in 2019E increasing by 11%/26% vs. our base case. We are also positive on Geely’s high earnings growth in the near-term due to: 1) a sustainable high level of monthly volume growth before September 2017 on a low comp, 2) more visibility on Lynk & Co.; and 3) GPM/OPM expansion on ASP/product mix improvement. While we make no earnings changes, adjusting our valuation methodology from P/B-ROE to a weighted TP calculation (based on P/E), incorporating an upside case for sales volume/ASP/margin in 2017-2019E, and then assigning a 75% weighting to our base case valuation and 25% to an upside case scenario, leads us to increase our 12m target price by 28% to HK$13.21, implying 25% potential upside (full details in Exhibit 33). A near-term catalyst includes Geely’s inclusion in the Hang Seng Index effective March 6, 2017; while we also note that there has been growing interest from Southbound money given the company’s growth and valuation profile vs. A-share peers. Reiterate CL-Buy.

Upgrade SAIC to Buy (from Neutral) on earnings growth resumption We expect SAIC earnings to resume high single digit CAGR in the coming three years given its relatively strong SUV product cycle (SVW: 3-4 new models, SGM: 1 model, local brands: 3 models). We also believe that following the completion of SAIC’s private placement amounting to Rmb15bn in January 2017, there are now 2,207 managers of SAIC holding a total of 48mn shares of the company (0.4% of total share count), amounting to Rmb11.1bn. This shareholding scheme could improve the management incentive, potentially bringing better cost control and performance improvement. In addition, a blue-sky scenario (not included in our earnings estimation) could see SVW net earnings more than double by 2024E given the potential cooperation with Audi. Overall, reflecting a stronger-than-expected SUV product cycle (especially for SVW) and the potential for better costs savings, we raise our 2018E/2019E earnings by 9%-30%. Now based on a target P/E multiple applied to 2017E (previously P/B-ROE with historical discount applied), we raise our 12m target price by 38% to Rmb30.11, implying 18% potential upside, among the highest in our China Autos coverage. As such, we upgrade SAIC to Buy from Neutral.

2017 年 2 月 28 日中国：汽车


Car market to hit the brakes and squeeze the low-end brands; room for upgraders to outperform For China’s car market, we believe the 9% yoy decrease seen in passenger car retail volumes in January 2017 backs up our existing view for moderate car market growth in 2017 onwards1. Our 2017E-19E China car market growth forecasts are unchanged at 3.0%/2.0%/4.0%. In addition, we remain cautious on the 1Q17 market outlook following the pre-buying activity seen in 2016 as a result of a cut in the purchase tax rebate by the Ministry of Finance (MOF) from 5% in 2016 to 2.5% in 2017. While a weaker car market may have a negative impact on the low-end brands targeting less affluent customers who are more sensitive to purchase tax changes, we believe the OEMs who are upgrading product/mix/ASP (like Geely, GAC, and SAIC) may benefit from the trend.

HDT market to sustain strong growth in near term but potentially at the cost of mid-term growth As per China Association of Automobile Manufacturers (CAAM) data, the heavy-duty trucks (HDT) market recorded the sale of 730k units (+27.4% yoy) in 2016, 6% higher than we expected and accordingly we raise our 2017E-18E market estimates by 1%-4% (to 803k and 851k respectively). The strong growth momentum continued into January 2017 with HDT volumes up 125% yoy and 10% mom. We expect this strong growth to sustain in the coming 1-2 quarters, mainly due to: 1) total trucks-in-use are stabilizing in numbers and are ageing too, which implies a strong replacement cycle; 2) strong logistics truck demand on continuously solid e-commerce growth and a lower total load limit per new regulations; and 3) potential recovery of dumper/construction-related truck demand due to an improvement in FAI/ property/commodity growth. Nevertheless, we believe growth in 2018-19E might slow to mid-single digits on the high base as a result of the fading impact from anti-overloading regulation since 4Q16, the prolonged lifespan of trucks (better truck and lower total loading might lead to longer lifespan), and the high-comps effect (we expect 2017E total HDT sales to reach 80% of the peak level seen in 2010 which was a time when FAI grew >30% yoy).

Update sector-relative valuation post recent rally; A-share methodology change to individual P/E Since we published our report last November that discussed the potential for extension of the purchase tax stimulus2 (introduced in September 2015), our A-share auto coverage has increased on average by +4% which compares to the CSI 300 up +1%, and our H-share auto coverage is +18% vs. the HSI +6%. On valuation methodology for our coverage: 1) we continue to use mark-to-market 2017E P/B vs. 2019E ROE for our H-share car OEM coverage; 2) due to a negative P/B-ROE slope and low correlation among A-share car makers currently, we now value A-share car makers using target P/E multiples applied to 2017E with a premium/discount applied based on a range of qualitative factors (sub-sector growth, product cycle, dividend yield, etc.); and 3) we separate truck makers from car makers in the H-share P/B-ROE line, and now value truck stocks vs. global truck peers. Incorporating these valuation methodology changes and updating our forecasts to reflect a number of company specific drivers (sales volumes, margins, SG&A, etc.), leads us to revise 12m target prices and estimates across our coverage (see pages 24-38 for full details).

1 See ‘China: Automobiles: Likely extended stimulus to keep growth motoring’, November 11, 2016, and ‘2017 purchase tax hiked to 7.5% as expected; Geely remains top pick’, December 15, 2016. 2 See ‘China: Automobiles: Likely extended stimulus to keep growth motoring’, November 11, 2016.

2017 年 2 月 28 日中国：汽车


Moderating car market growth outlook; keep positive on selective ‘upgraders’; truck estimation changes

Weak passenger car market growth on pre-buy activities; ‘upgraders’ preferred

On February 13, ChinaAutoMarket released January 2017 passenger car volume data. Local-made passenger car retail volumes (export and minivan) were down 9% yoy, which we attribute to pulled forward demand to December 2016 (pre-buying before purchase tax hike) from 1Q17 and also fewer working days in January 2017 vs. 2016 (18 vs. 20). We believe that the real demand in January 2017 might have been even weaker than reported, with our recent channel checks with dealers implying that some sales in December 2016 may have been reported in January 2017 due to early fulfillment of OEMs’ 2016 sales targets. We remain cautious on the 1Q17E market outlook given the pre-buying activity in 2016 as a result of the purchase tax rebate cut from 5% in 2016 to 2.5% in 2017 (announced by the MOF on December 15, 2016). The weak January sales data also underpins our view of more moderate growth for the China car market in 2017 onwards and we keep our 2017E-19E car market growth forecasts unchanged at 3.0%/2.0%/4.0%.

Exhibit 2: January 2017 car market volumes down 9.0% yoy Total passenger car retail volume in units and yoy growth in %

Exhibit 3: We keep our China 2017E-19E car growth forecast at 3.0%/2.0%/4.0% China passenger car market (mn units) and yoy growth (%), 2000-19E

Source: ChinaAutoMarket.

Source: IHS, Gao Hua Securities Research.

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8.6

11.7 12.7 13.6

16.9 19.1

20.8 24.3

25.1 25.6

26.6 16.5%

1.7%

80.3%65.7%

13.8%

24.1%32.5%

22.4%

7.4%

51.1%35.4%

8.7% 7.5%

24.1%

13.0%8.6%

17.3%3.0% 2.0% 4.0%

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Passenger Car Sales Volume (mn) Passenger Car growth rate (YoY) (RHS)

2017 年 2 月 28 日中国：汽车


With our expectation for slowing demand growth, we forecast the industry utilization rate falling in 2017 to 72% from 79% in 2016, which could lead to further price erosion of 4%-8% in 2017E.

Exhibit 4: Capacity utilization rate to decline in 2017E China passenger car industrial capacity utilization rate, 2008-18E

Exhibit 5: We forecast 2017E price erosion of 4%-8% Monthly price erosion (January 01 = 100) , 2010-2017

Source: Company data, Gao Hua Securities Research.

Source: ChinaAutoMarket.

We expect that different OEMs may have different sensitivity to the purchase tax rebate change. For example, low-end brands targeting less affluent customers who are more sensitive to purchase tax changes are likely to be negatively impacted by the weakening market. By contrast, we believe OEMs who are upgrading their product/mix/ASP (like Geely, GAC, and SAIC) should benefit from the trend as the more affluent customers are less sensitive to the price/purchase tax rebate cut.

Truck market: Strong growth to sustain near term on logistics and construction-related demand

Based on CAAM data, the heavy-duty trucks (HDT) market recorded 730k units sold in 2016 (+27.4% yoy) and this strong growth momentum has continued into January 2017 with volumes in the HDT market up 125% yoy and 10% mom. We expect this strong monthly growth to sustain in the coming 1-2 quarters, mainly due to: 1) total trucks-in-use are stabilizing in number and are ageing too, which implies a strong replacement cycle; 2) strong logistics truck demand on continuously solid e-commerce growth and a lower total load limit per the new regulations; and 3) potential recovery of dumper/construction-related truck demand due to the improvement in FAI/ property/commodity growth.

73%

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Utilization -total Utilization -JVs Utilization - Locals

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2017 年 2 月 28 日中国：汽车


After incorporating the latest CAAM data, which was 6% ahead of our expectations for 2016, we revisit our HDT volume growth assumptions, marginally raising 2017E-2018E by 1%-4%, to 803k and 851k respectively. We now expect the HDT market in China to grow at 10%/6%/5% in 2017E/2018E/2019E, with the slowdown in growth for 2018E/2019E mainly due to: 1) the positive impact from the new anti-overload regulation (which started in September 2016) might fade out gradually in 2H17 on higher comps and increased logistic truck fleets to meet the new regulation; 2) relatively high comps with total HDT market volumes in 2017E likely to reach >800k units, higher than 80% of historical peak in 2010 (when FAI grew >30%) at 970k units; and 3) gradually prolonged HDT lifespan and replacement cycle given the improved quality of trucks and decline in maximum loading capacity.

Exhibit 6: Strong monthly growth continues HDT monthly sales volume (units) and yoy growth rate (%)

Exhibit 7: We expect the HDT market to grow 10%/6%/5% in 2017E/18E/19E HDT sales volumes (k units) and yoy growth (%), 2000-19E

Note: Wholesale - export + import = retail

Source: CAAM.

Source: CAAM, Gao Hua Securities Research.

- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

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2016 monthly vol. RHS 2017 monthly vol. RHS

2016 monthly yoy 2017 monthly yoy

83 147

245 256 371

237 307

495 496 605

970 856

603

774 774

573 730 803

851 894

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HDT Sales Volume HDT yoy growth rate

2017 年 2 月 28 日中国：汽车


Exhibit 8: Stabilizing number of total trucks-in-use HDT net sales vs. scrappage volume (k units)

Exhibit 9: We see ageing truck fleet likely to support replacement demand Average age (years) of total trucks-in-use

Note: HDT net increase = HDT wholesale + import - export

Note: FAI related truck average at 3-5 years (highlighted in light blue); logistics related truck average at 5-7 years (highlighted in light grey).



Exhibit 10: Inter-city parcel growth looks sustainable Inter-city parcel delivery volume (mn units) and growth rate

Exhibit 11: Trailers are used for logistics and the mix has been increasing HDT sales volume (units) breakdown

Source: CEIC.

Source: CAAM.

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2017 年 2 月 28 日中国：汽车


Exhibit 12: New regulation lowers the maximum weight per truck/maximum number of cars transported per carrier Summary of key points from the GB1589-2016 new regulation announced on August 1, 2016

Exhibit 13: Infrastructure and property FAI is showing signs of recovery FAI and machinery growth

Source: National Technical Committee of Auto Standardization, Gao Hua Securities Research.

Source: CEIC, China National Bureau of Statistics.

Policies ImpactMax weight of 6‐axis truck to be reduced from 55 tons to 49 tons for 6X4 tractor, and 46 tons for 6X2 tractor

Max weight per truck to be reduced thus more trucks are needed to transport the same amount of freight

Current refitted two‐row car carrier to be banned and replaced by new type of trucks with better safety, and max no. of cars transported per carrier to be cut half (from 24 to 10)

Max no. of cars transported per carrier to be cut half thus more car carriers are needed to transport the same number of cars

The dimension and weight requirements on special processing vehicles (i.e. wrecker etc.) to be loosened to facilitate cross‐region operations

Demand for special processing vehicles transportation to be increased thus more vehicles are needed

0%

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Excavator - 12-month rolling change

Loader - 12-month rolling change

Infra + Prop FAI rolling YOY

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ava

tor/

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ader

vo

lum

e yo

y g

row

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FA

I YO

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2017 年 2 月 28 日中国：汽车


Companies

Companies

2017 年 2 月 28 日中国：汽车


Geely (0175.HK): Riding the consumption upgrade wave to a 1.5mn car maker; CL-Buy What’s changed

Despite the rally seen by Geely YTD (+43% vs. HSI +9%), which in our view has been driven by its strong monthly volume growth momentum, it remains our top pick (CL-Buy) in the sector given the following: 1) key beneficiary of the consumption upgrade trend, with Chinese customers buying bigger, better, and more expensive cars, even the less affluent local brand buyers; 2) continuous improvement in product mix/ASP via its unique position through leveraging the Volvo tech strength; the new Lynk & Co. brand should help Geely tackle the bigger market of mainstream international brands in China (currently >50% of total car market volume) as well as the overseas market; 3) transforming into a 1.5mn unit car maker by 2019E (vs. 0.5mn in 2015) as a result of its strong product cycle and support from Volvo; we also don’t expect its growth to stop after 2019E given more new models to be launched under both the Geely and Lynk & Co. umbrella brands; 4) high earnings growth in the near-term, given: i) its January retail volumes were up 71% yoy, and we expect monthly yoy volume growth to sustain at a level >50% until September 2017 on a low comp; ii) more visibility on Lynk & Co. given upcoming product launches; and iii) GPM/OPM expansion on ASP/product mix improvement; and 5) introducing an upside case, which identifies the products/brands we could see upside surprises from; sales volume/NPM for Geely in 2019E increases by 11%/26% respectively vs. our base case estimation.

Catalyst (1) Ongoing new product launches: Sub-compact SUV, MPV, and Lynk & Co. models in 2017E; (2) High monthly volume growth likely in 1Q17 on removal of capacity bottleneck and low comps; (3) Better visibility on the new Lynk & Co. product (1-2 new models to debut at the Shanghai Autoshow in April 2017), production and dealer development plan; (4) Growing interest from Southbound money given Geely’s growth/valuation profile vs. A-share peers; (5) Geely is due to be added to the Hang Seng Index effective March 6, 2017.

Valuation We change our valuation methodology from 2017E P/B vs. 2019E ROE to a weighted target price based on 75% base case + 25% upside case to better factor in its high earnings/volume growth potential. Under each case, we separately estimate the growth outlook (comparing its future EPS growth vs. historical range) and set the valuation premium with reference to its growth stage. We also refer to a qualitative review with key factors like sub-sector growth, product cycle, dividend yield, special events, etc. Our revised 12m TP of HK$13.21 (from HK$10.35) implies 25% potential upside. Our valuation cross-check using a discounted 2022E P/E, which would incorporate secular growth beyond 2017E, results in a similar valuation. Geely is trading at 11.4X 2017E P/E and 2.8X 2017E P/B vs. H-share coverage peers at 12.4X/1.7X, with an EPS CAGR of 31% (2016E-19E) vs. peers at 12%.

Key risks Slower car market growth on economic slowdown and/or phase-out of purchase tax rebate; higher price erosion on tough competition; lower volume/price and higher SG&A expenses for Lynk & Co.

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the investment

profile measures please refer to the

disclosure section of this document.

Geely Automobile Holdings (0175.HK)

Asia Pacific Autos & Autoparts Peer Group Average

Key data Current

Price (HK$) 10.58

12 month price target (HK$) 13.21

Market cap (HK$ mn / US$ mn) 93,125.0 / 11,998.4

Foreign ownership (%) --

12/15 12/16E 12/17E 12/18E

EPS (Rmb) 0.26 0.51 0.82 1.03

EPS growth (%) 58.0 100.3 59.9 24.6

EPS (diluted) (Rmb) 0.26 0.51 0.82 1.02

EPS (basic pre-ex) (Rmb) 0.26 0.51 0.82 1.03

P/E (X) 11.7 18.2 11.4 9.1

P/B (X) 1.4 3.5 2.8 2.2

EV/EBITDA (X) 6.7 12.5 7.6 5.8

Dividend yield (%) 1.1 0.7 1.1 1.4

ROE (%) 12.3 21.1 27.2 26.7

CROCI (%) 25.6 25.9 31.1 29.9

7,500

8,000

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Feb-16 Jun-16 Sep-16 Dec-16

Price performance chart

Geely Automobile Holdings (L) Hang Seng China Ent. Index (R)

Share price performance (%) 3 month 6 month 12 month

Absolute 27.9 74.3 261.1

Rel. to Hang Seng China Ent. Index 21.2 61.1 180.8

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 2/27/2017 close.

2017 年 2 月 28 日中国：汽车


Geely (0175.HK): Summary financials

Profit model (Rmb mn) 12/15 12/16E 12/17E 12/18E Balance sheet (Rmb mn) 12/15 12/16E 12/17E 12/18E

Total revenue 30,138.3 51,143.1 76,325.9 93,096.4 Cash & equivalents 9,166.9 7,634.5 6,399.5 7,581.9

Cost of goods sold (23,524.9) (40,075.2) (58,320.0) (70,788.8) Accounts receivable 11,796.8 16,515.7 24,648.0 30,063.7

SG&A (3,805.4) (5,076.7) (7,805.5) (9,287.8) Inventory 1,226.2 2,308.4 3,359.3 4,077.5

R&D (258.8) (439.1) (655.3) (799.3) Other current assets 3,157.9 3,789.5 3,979.0 4,177.9

Other operating profit/(expense) 94.1 228.5 341.1 509.1 Total current assets 25,347.9 30,248.1 38,385.7 45,901.1

EBITDA 2,902.0 6,219.7 10,541.4 13,529.0 Net PP&E 8,034.4 8,973.8 11,600.5 13,770.4

Depreciation & amortization (1,142.7) (1,605.0) (2,056.2) (2,531.7) Net intangibles 5,262.8 7,713.6 10,281.7 12,096.9

EBIT 1,759.3 4,614.7 8,485.2 10,997.3 Total investments 2,015.5 2,057.0 2,098.5 2,140.0

Interest income 96.9 62.7 52.2 43.8 Other long-term assets 1,631.9 2,200.5 2,742.3 3,043.5

Interest expense (103.3) (102.6) (138.7) (161.9) Total assets 42,292.5 51,193.1 65,108.7 76,952.0

Income/(loss) from uncons. subs. 41.5 41.5 41.5 41.5

Others 1,080.4 1,087.2 738.7 590.9 Accounts payable 11,204.9 15,245.0 21,386.5 24,989.3

Pretax profits 2,874.8 5,703.5 9,179.0 11,511.6 Short-term debt 0.0 500.0 1,500.0 1,500.0

Income tax (586.1) (1,126.1) (1,863.0) (2,396.0) Other current liabilities 9,244.3 9,526.3 9,863.6 10,085.3

Minorities (28.1) (48.5) (73.0) (89.4) Total current liabilities 20,449.3 25,271.2 32,750.1 36,574.5

Long-term debt 1,928.9 1,978.9 1,978.9 1,978.9

Net income pre-preferred dividends 2,260.5 4,528.9 7,242.9 9,026.2 Other long-term liabilities 174.8 175.3 175.8 175.8

Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 2,103.7 2,154.2 2,154.7 2,154.7

Net income (pre-exceptionals) 2,260.5 4,528.9 7,242.9 9,026.2 Total liabilities 22,552.9 27,425.4 34,904.8 38,729.2

Post-tax exceptionals 0.0 0.0 0.0 0.0

Net income 2,260.5 4,528.9 7,242.9 9,026.2 Preferred shares 0.0 0.0 0.0 0.0

Total common equity 19,523.8 23,489.8 29,832.5 37,736.8

EPS (basic, pre-except) (Rmb) 0.26 0.51 0.82 1.03 Minority interest 215.7 277.9 371.4 485.9

EPS (basic, post-except) (Rmb) 0.26 0.51 0.82 1.03

EPS (diluted, post-except) (Rmb) 0.26 0.51 0.82 1.02 Total liabilities & equity 42,292.5 51,193.1 65,108.7 76,952.0

DPS (Rmb) 0.03 0.06 0.10 0.13

Dividend payout ratio (%) 12.4 12.4 12.4 12.4 BVPS (Rmb) 2.22 2.67 3.39 4.29

Free cash flow yield (%) 13.9 (3.8) (2.0) 2.5

Growth & margins (%) 12/15 12/16E 12/17E 12/18E Ratios 12/15 12/16E 12/17E 12/18E

Sales growth 38.6 69.7 49.2 22.0 CROCI (%) 25.6 25.9 31.1 29.9

EBITDA growth 57.9 114.3 69.5 28.3 ROE (%) 12.3 21.1 27.2 26.7

EBIT growth 82.5 162.3 83.9 29.6 ROA (%) 5.7 9.7 12.5 12.7

Net income growth 58.0 100.3 59.9 24.6 ROACE (%) 18.1 29.6 32.2 30.0

EPS growth 58.0 100.3 59.9 24.6 Inventory days 22.1 16.1 17.7 19.2

Gross margin 21.9 21.6 23.6 24.0 Receivables days 149.0 101.0 98.4 107.3

EBITDA margin 9.6 12.2 13.8 14.5 Payable days 173.2 120.5 114.6 119.6

EBIT margin 5.8 9.0 11.1 11.8 Net debt/equity (%) (36.7) (21.7) (9.7) (10.7)

Interest cover - EBIT (X) 273.2 115.7 98.2 93.1

Cash flow statement (Rmb mn) 12/15 12/16E 12/17E 12/18E Valuation 12/15 12/16E 12/17E 12/18E

Net income pre-preferred dividends 2,260.5 4,528.9 7,242.9 9,026.2

D&A add-back 1,142.7 1,605.0 2,056.2 2,531.7 P/E (analyst) (X) 11.7 18.2 11.4 9.1

Minorities interests add-back 28.1 48.5 73.0 89.4 P/B (X) 1.4 3.5 2.8 2.2

Net (inc)/dec working capital 3,469.7 (1,761.0) (3,041.6) (2,531.2) EV/EBITDA (X) 6.7 12.5 7.6 5.8

Other operating cash flow 507.8 (1,241.2) (772.2) (541.7) EV/GCI (X) 1.2 3.4 2.4 1.9

Cash flow from operations 7,408.8 3,180.2 5,558.3 8,574.3 Dividend yield (%) 1.1 0.7 1.1 1.4

Capital expenditures (3,708.7) (6,341.7) (7,251.0) (6,516.8)

Acquisitions (450.8) 0.0 0.0 0.0

Divestitures 0.0 1,346.5 0.0 0.0

Others (374.9) 0.0 0.0 0.0

Cash flow from investments (4,534.4) (4,995.2) (7,251.0) (6,516.8)

Dividends paid (common & pref) (173.8) (281.0) (562.9) (900.2)

Inc/(dec) in debt (691.6) 550.0 1,000.0 0.0

Common stock issuance (repurchase) 0.0 0.0 0.0 0.0

Other financing cash flows (45.2) 13.6 20.5 25.1

Cash flow from financing (910.7) 282.7 457.6 (875.1)

Total cash flow 1,963.8 (1,532.4) (1,235.1) 1,182.5 Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.

2017 年 2 月 28 日中国：汽车


Riding the consumption upgrade wave in China via continuous improvement in product/ASP

Exhibit 14 shows evidence of a continuous consumption upgrade trend in China. In 1Q2001 the small and mini size SUV consisted of close to 40% of local brands’ SUV sales volume but this had shrunk to less than 10% by 4Q16. The main market for SUV is now compact and mid-size SUV, which shows that Chinese car buyers, even the less affluent ones who tend to buy the local brands, are upgrading their demands to buy bigger and more expensive cars.

As an example of OEMs launching upgraded models to meet the demand, we have seen Geely upgrading its product mix as well as ASP. Exhibit 15 shows that in the past two years the newly launched Geely models have enjoyed higher prices than the old models with similar size. Its Boyue SUV now achieves more than 20k units of sales per month vs. 7k units of peak monthly sales volume of the old GX7 model, despite its 40%+ higher price.

Exhibit 14: Local brands have been selling a higher proportion of bigger SUVs over the past seven years Local brand’s segment mix in SUV, retail volumes %, 2010Q1-2016Q4

Exhibit 15: Geely is launching more expensive and upgraded models Geely new models vs old models, entry MSRP in Rmb’000 (as of Feb 22, 2017)

Note: A00/A0/A/B represent mini/small/compact/mid-sized cars.

Source: CPCA.

Source: Company data.

0%10%20%30%40%50%60%70%80%90%

100%

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Boyue GX7 Borui EC8 GL EC7

SUV Mid-size sedan

Compact sedan

2017 年 2 月 28 日中国：汽车


Geely boasts a unique position via its ability to leverage Volvo’s tech strength

Amid the trend of consumption upgrade, we believe Geely enjoys a unique position as it is able to leverage the Volvo tech strength (Geely parentco. acquired Volvo Car in 2010). We expect that by the end of 2017 Geely will start to tackle the bigger market turf of mainstream international brands (currently more than 50% of total car market volume in China) via the launch of more upgraded models like Lynk & Co products (1-2 models in 2017E followed by three in 2018E) based on Volvo’s CMA architecture technology. As per company guidance, the first Lynk & Co. model, the 01, will be built directly on a Compact Modular Architecture (CMA) platform in Volvo’s Luqiao plant, which we believe can help Geely reduce R&D cost, lower component costs via joint sourcing, as well as reduced technological uncertainty when developing upgraded products.

Exhibit 16: Geely Group to rationalize three umbrella brands’ positioning after2018E Geely planned brand portfolio after 2018

Exhibit 17: Volvo products to standardize to two architectures: SPA and CMA Volvo product portfolio

Notes: SPA = Scalable Product Architecture; CMA = Compact Modular Architecture.



• Geely is targeting local brands• New brand Lynk & Co. is targeting int’l mainstream brands

(which currently consists 50% of total car market in China)

050

100150200250300350400450500550600650

Geely A New brand basedon CMA platform

Volvo

Price

（RM

B000

）

Included in the listco Owned by parentco.

Volvo: XC40/S40/V40 will be based on CMA platform

Lynk & Co.

Sedan MPV/Cross SUV Platform

Full size S80, S90 V70, V90, V90 XC XC70, XC90 SPA

Mid size S60 V60 XC60 SPA

Compact size S40 V40 XC40 CMA

2017 年 2 月 28 日中国：汽车


Transforming from a 0.5mn unit car maker in 2015 into 1.5mn by 2019E in our base case; introducing an upside case with 11%/26% higher volume/EPS in 2019E

As a result of consumption upgrade, a strong product pipeline, and the unique positioning vis-à-vis leveraging Volvo’s tech strength, we believe Geely has the ability to transform itself into a 1.5mn unit car maker by 2019E (vs. 0.5mn in 2015), our base case volume assumption. In addition, we believe Geely’s growth beyond 2019 to continue, driven by: 1) more new products for the Lynk & Co. brand (per company guidance there will be three new models launched in 2019); and 2) potential entrance to sub-segments, such as the mid-size SUV and MPV, where Geely has no product offering yet.

We assume that in an upside case Geely achieves higher sales volume (11-12% yoy increase vs. our base case in 2017-19E) due to strong new product launches and an increasing consumer demand for better cars. We also expect Geely’s net income in 2017-19E to increase by a range of 13%-26% in our upside case vs. the base case estimate due to improved volume and lower expenses assumptions.

Exhibit 18: Upside case vs. base case (1/2): Volumes up by 11%-12% on stronger sales of Emgrand sedan, Boyue SUV, and new models from Lynk & Co. brand Sales volume forecast comparison, upside case vs. base case, in thousand units

Source: Gao Hua Securities Research.

2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019ESales (units)

Panda/GX2/GX3/Panda SUV 3 3 3 3 3 3 0% 0% 0%Kingkong/Jinying 27 20 16 27 20 16 0% 0% 0%Vision/GC7 95 90 81 95 90 81 0% 0% 0%EC7/Xindihao/GL 295 314 329 350 324 340 19% 3% 3%Emgrand SUV (1Q17E) 45 52 58 45 52 58 0% 0% 0%EC7 EV 16 20 25 16 20 25 0% 0% 0%Emgrand GS 123 132 143 123 132 143 0% 0% 0%NL-3 SUV (Boyue) 250 253 273 300 330 356 20% 30% 30%NL-4 SUV (Vision SUV) 135 138 149 135 138 149 0% 0% 0%King Kong SUV (1Q17E) 32 38 44 32 38 44 0% 0% 0%EV7/EV8 (MPV, 18E) ‐ 15 19 ‐ 15 19 NA 0% 0%GC9 (Borui) 49 50 53 49 50 53 0% 0% 0%New products (CMA, joint platform with Volvo) 10 120 290 20 180 360 100% 50% 24%Others ‐ ‐ 20 ‐ ‐ 20 NA NA 0%

Total sales volume (units) 1,079 1,245 1,503 1,194 1,393 1,667 11% 12% 11%

Base case Upside case Var%

2017 年 2 月 28 日中国：汽车


Exhibit 19: Upside case vs. base case (2/2): We estimate lower SG&A as % of revenue in upside case Earnings forecast comparison, upside case vs. base case


2016E 2017E 2018E 2019E 2016E 2017E 2018E 2019E 2016E 2017E 2018E 2019ESales volume 000 unit 766 1,079 1,245 1,503 766 1,194 1,393 1,667 0% 11% 12% 11%Revenue Rmb'mn 51,143 76,326 93,096 120,639 51,143 85,481 108,118 137,166 0% 12% 16% 14%Revenue Rmb'mn 51,143 76,326 93,096 120,639 51,143 85,481 108,118 137,166 0% 12% 16% 14%GP (before D&A) Rmb'mn 11,068 18,006 22,308 27,821 11,068 20,039 25,782 31,770 0% 11% 16% 14%SG&A Rmb'mn (5,077) (7,805) (9,288) (12,699) (5,077) (8,656) (10,678) (13,273) 0% 11% 15% 5%Other operating income/(expense) Rmb'mn 229 341 509 660 229 382 591 887 0% 12% 16% 34%

EBITDA Rmb'mn 6,220 10,541 13,529 15,782 6,220 11,765 15,695 19,384 0% 12% 16% 23%EBIT Rmb'mn 4,615 8,485 10,997 12,729 4,615 9,655 13,031 16,121 0% 14% 18% 27%Net interest income/expense Rmb'mn (40) (86) (118) (87) (40) (86) (124) (94) 0% 0% 5% 8%Non‐operating income/(loss) Rmb'mn 1,129 780 632 514 1,129 780 632 514 0% 0% 0% 0%

PBT Rmb'mn 5,703 9,179 11,512 13,157 5,703 10,349 13,540 16,541 0% 13% 18% 26%Income taxes Rmb'mn (1,126) (1,863) (2,396) (2,805) (1,126) (2,102) (2,820) (3,529) 0% 13% 18% 26%Minority interest Rmb'mn (49) (73) (89) (114) (49) (82) (104) (131) 0% 12% 16% 15%

Net income Rmb'mn 4,529 7,243 9,026 10,238 4,529 8,165 10,616 12,881 0% 13% 18% 26%EPS Rmb/share 0.51 0.82 1.03 1.16 0.51 0.93 1.21 1.46 0% 13% 18% 26%

Ratios (as % of revenue)COGS % 78.4% 76.4% 76.0% 76.9% 78.4% 76.6% 76.2% 76.8% 0.0% 0.1% 0.1% ‐0.1%SG&A % 9.9% 10.2% 10.0% 10.5% 9.9% 10.1% 9.9% 9.7% 0.0% ‐0.1% ‐0.1% ‐0.9%Other operating (income)/expense % ‐0.4% ‐0.4% ‐0.5% ‐0.5% ‐0.4% ‐0.4% ‐0.5% ‐0.6% 0.0% 0.0% 0.0% ‐0.1%Gross margins % 21.6% 23.6% 24.0% 23.1% 21.6% 23.4% 23.8% 23.2% 0.0% ‐0.1% ‐0.1% 0.1%EBITDA margin % 12.2% 13.8% 14.5% 13.1% 12.2% 13.8% 14.5% 14.1% 0.0% 0.0% 0.0% 1.1%EBIT margin % 9.0% 11.1% 11.8% 10.6% 9.0% 11.3% 12.1% 11.8% 0.0% 0.2% 0.2% 1.2%Pre‐tax margin % 11.2% 12.0% 12.4% 10.9% 11.2% 12.1% 12.5% 12.1% 0.0% 0.1% 0.2% 1.2%Tax rate % 19.9% 20.4% 20.9% 21.4% 19.9% 20.4% 20.9% 21.4% 0.0% 0.0% 0.0% 0.0%Net margins % 8.9% 9.5% 9.7% 8.5% 8.9% 9.6% 9.8% 9.4% 0.0% 0.1% 0.1% 0.9%

Base case Upside case Var%

2017 年 2 月 28 日中国：汽车


We remain positive on Geely’s high volume growth in the near-term

In January 2017, Geely recorded a 71% increase in sales volume yoy, and we expect that its monthly yoy volume growth could sustain at a level higher than 50% until September 2017 on a low comp and strong new product launches. The four new models launched in 2016 contributed to more than 50% of the January 2017 sales volume, which we believe proves that upgrade demand in China is strong and that a company with suitable products and quality can deliver relatively higher growth.

On potential upcoming catalysts: 1) in April 2017 at the Shanghai Autoshow, Geely is expected to unveil its first two models under the Lynk & Co brand, which should help give us more visibility on the detail of, and potential orders for, new models; and 2) in March 2017, at its full year results, we expect Geely to report GPM/OPM expansion on ASP/product mix improvement.

Exhibit 20: Geely reported strong January volume growth Monthly sales volume (units) and growth rate (yoy), 2016 Jan-2017 Jan

Exhibit 21: Strong performance of Boyue/GS/Vision SUV models as well as Emgrand GL sedan model Sales volume (unit) and growth (%) of key models for Geely



0%

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Jan Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 monthly volume 2017 monthly volume2016 monthly growth (yoy) (RHS) 2017 monthly growth (yoy) (RHS)

2016 Total yoy EC7/Xindihao yoy Emgrand GL yoy New vision yoy Boyue yoy GS yoy Vision SUV yoyJan 60,093 2.1% 22,512 -8.4% 14,646 26.0%Feb 33,327 0.6% 14,236 -3.8% 8,379 15.6%Mar 49,903 2.9% 20,643 0.1% 12,914 23.5% 1,018 NAApr 44,590 11.1% 16,498 13.8% 12,032 14.9% 4,002 NAMay 45,850 19.4% 16,101 15.6% 10,885 31.1% 6,049 NAJun 46,574 40.8% 16,969 43.7% 9,069 31.5% 8,142 NAJul 48,522 64.0% 15,876 39.6% 8,213 47.2% 10,128 NA 6,728 NAAug 53,638 68.9% 14,610 24.0% 8,282 19.0% 10,130 NA 7,541 NA 7,051 NASep 76,544 81.6% 21,121 30.7% 2,874 NA 11,114 1.7% 14,053 NA 8,524 NA 10,056 NAOct 96,158 94.3% 25,015 24.6% 7,050 NA 15,721 14.5% 16,779 NA 10,028 NA 10,867 NANov 102,422 99.4% 28,842 32.8% 10,010 NA 14,404 5.3% 18,402 NA 10,078 NA 10,942 NADec 108,230 101.8% 28,539 21.5% 10,527 NA 12,028 -8.8% 20,377 NA 10,222 NA 10,527 NASum 765,851 50% 240,962 18% 30,461 NA 137,687 16% 109,080 NA 53,121 NA 49,443 NA

510,097 204,839 119,069

2017 Total yoy EC7/Xindihao yoy Emgrand GL yoy New vision yoy Boyue yoy GS yoy Vision SUV yoyJan 102,653 70.8% 26,314 16.9% 10,208 NA 14,716 0.5% 20,147 NA 10,333 NA 10,226 NA

Sedan SUV

Sedan SUV

2017 年 2 月 28 日中国：汽车


Geely valuation now based on weighted target price, which increases by 28%

Amid a continuation of the consumption upgrade trend in China we see Geely as uniquely positioned to leverage Volvo tech strength and to upgrade product mix/ASP. Against this backdrop, we adjust our valuation methodology from P/B-ROE to a weighted TP calculation (based on P/E), incorporating the aforementioned upside case when estimating sales volume/ASP/margin in 2017-2019E. We assign a 75% weighting to our base case valuation and 25% to an upside case scenario, leading to a 28% increase in our 12m target price to HK$13.21 (25% potential upside). We also cross check the valuation with H-share car makers’ P/B-ROE method as well as Geely 2022E discount P/E method, which derives a similar valuation range vs. our weighted method.

Exhibit 22: Valuation cross-check (1/2): Sector P/B-ROE regression gives a valuation of HK$13.46 2017E P/B (X) vs. 2019E ROE, auto sector, H-share

Note: Dotted line is the previous valuation line; solid line is the current mark-to-market line, which is the new valuation line used in the cross -check.

Source: Datastream, Bloomberg, Gao Hua Securities Research.

y = 14.909x - 0.7094R² = 0.9041

-

1.0

2.0

3.0

0% 5% 10% 15% 20% 25% 30% 35% 40%

Dongfeng

GAC

Geely

Great Wall (H)

Brilliance

ROE (2019E)

P/B (2017E)

2017 年 2 月 28 日中国：汽车


Exhibit 23: Valuation cross-check (2/2): 2022E discounted P/E method gives a valuation of HK$13.22 2022E discounted P/E method walk-through, base case and upside case

Note: Valuation = valuation under base case*75% + valuation under upside case*25% = 12.55*0.75 + 15.24*0.25 = HK$13.22


Base case 2016E 2017E 2018E 2019E 2020E 2021E 2022ERevenue 51,143 76,326 93,096 120,639 142,553 167,328 195,523

yoy 70% 49% 22% 30% 18% 17% 17%GM 21.6% 23.6% 24.0% 23.1% 23.3% 23.3% 23.3%OP EXP (4,848) (7,464) (8,779) (12,039) (14,511) (17,368) (20,686)

as % of revenue -9.5% -9.8% -9.4% -10.0% -10.2% -10.4% -10.6%EBIT 4,615 8,485 10,997 12,729 15,050 17,340 19,858 Non-op income 1,089 694 514 427 418 419 406 Tax rate 19.9% 20.4% 20.9% 21.4% 21.9% 22.4% 22.9%Net income 4,529 7,243 9,026 10,238 11,956 13,634 15,451 Share count 8,802 8,802 8,802 8,802 8,802 8,802 8,802 EPS 0.51 0.82 1.03 1.16 1.36 1.55 1.76

Exit multiple 9.6x2020E valuation (HK$) 19.04 Discount rate 8.7%Implied 2017E valuation (HK$) 12.55 Implied Year 1 P/E 13.5x

Upside case 2016E 2017E 2018E 2019E 2020E 2021E 2022ERevenue 51,143 85,481 108,118 137,166 159,542 181,790 207,517

yoy 70% 67% 26% 27% 16% 14% 14%GM 21.6% 23.4% 23.8% 23.2% 23.4% 23.3% 23.3%OP EXP (4,848) (8,274) (10,087) (12,386) (14,725) (17,142) (19,983)

as % of revenue -9.5% -9.7% -9.3% -9.0% -9.2% -9.4% -9.6%EBIT 4,615 9,655 13,031 16,121 18,802 20,590 22,963 Non-op income 1,089 694 509 420 420 435 435 Tax rate 19.9% 20.4% 20.9% 21.4% 21.9% 22.4% 22.9%Net income 4,529 8,165 10,616 12,881 14,871 16,153 17,856 Share count 8,802 8,802 8,802 8,802 8,802 8,802 8,802 EPS 0.51 0.93 1.21 1.46 1.69 1.84 2.03

Exit multiple 10.1x2020E valuation (HK$) 23.12 Discount rate 8.7%Implied 2017E valuation (HK$) 15.24 Implied Year 1 P/E 14.6x

2017 年 2 月 28 日中国：汽车


Exhibit 24: We believe there is Southbound money interest in Geely and GAC H due to their relatively high growth but low valuations vs. A-share peers A-share auto stocks vs. Geely and GAC H on 2017E PE vs. 2016E-18E EPS CAGR

Source: Wind, Datastream, Gao Hua Securities Research.

0

10

20

30

40

50

60

70

80

0% 50% 100% 150% 200% 250% 300%

GAC HGeely

2017E PE

2016E‐18E EPS CAGR

2017 年 2 月 28 日中国：汽车


Exhibit 25: Geely is trading at 2.6X 12m forward P/B vs. its historical median of 1.4X 12m forward P/B vs. ROE

Exhibit 26: Geely is trading at 10.8X 12m forward P/E vs. its historical median of 9.8X 12M forward P/E

Source: Company data, Datastream, Gao Hua Securities Research.

Source: Company data, Datastream, Gao Hua Securities Research.

0%

5%

10%

15%

20%

25%

30%

0.0X

0.5X

1.0X

1.5X

2.0X

2.5X

3.0X

3.5X

4.0X

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

12m Fwd P/B (LHS) Median P/B ROE (RHS)

Median P/B = 1.4 X

0.0X

5.0X

10.0X

15.0X

20.0X

25.0X

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

12m Fwd P/E Median P/E

Median P/E = 9.8 X

2017 年 2 月 28 日中国：汽车


SAIC (600104.SS): Upgrade to Buy (from Neutral) on earnings growth resumption Source of opportunity

We raise our 2018E-19E EPS by 9%/30% to factor in a strong SUV product cycle from 2017, and better alignment of management and key employees’ interests post private placement. Our 2019E EPS is 14% above Bloomberg consensus likely due to our higher SUV volume and mix improvement assumptions. We believe SAIC’s recent share price rise (up 9% YTD vs. 4% for our A-share OEM coverage) is beginning to reflect our positive earnings growth expectation for the company in 2018-19 (we previously forecast negative growth). In line with our earnings revisions, we raise our 12m TP 38% to Rmb30.11 (18% upside), and upgrade SAIC to Buy from Neutral.

Catalyst

(1) Strong sales driven by 7-8 new SUV models; we believe this will lead to market share gains from 12.4% in 2H16 to 15.6% in 2H17E.

(2) Post completion of the private placement in January, where 2,000+ managers invested Rmb500k in SAIC shares on average, we see management and key employees’ interests as being better aligned. We believe this may lead to better

cost control and thus earnings improvement (we expect this to kick in from 1Q17 result at end April).

(3) SAIC signed a memorandum with VW Group on the potential production of Audi cars via SVW (existing JV with VW in China); our blue-sky scenario suggests SVW’s net earnings could more than double in 2024.

Valuation

Given the negative slope and low correlation for our previous P/B-ROE regression valuation method, we now base our target price on P/E (9.85X target multiple; based on a premium to its historical median 12m forward P/E of 7.52X, given its stronger earnings growth profile vs. coverage). SAIC trades at a 2017E P/E and P/B discount to peers against a 7% EPS CAGR in 2016E-19E vs. peers’ 0%.

Key risks

Weaker car market growth in China on reduction in purchase tax rebate; weaker volume/margin on competition; uncertainty in Audi JV negotiation.

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the investment

profile measures please refer to the

disclosure section of this document.

SAIC Motor (600104.SS)

Asia Pacific Autos & Autoparts Peer Group Average

Key data Current

Price (Rmb) 25.48

12 month price target (Rmb) 30.11

Market cap (Rmb mn / US$ mn) 216,996.3 / 31,575.5

Foreign ownership (%) --

12/15 12/16E 12/17E 12/18E

EPS (Rmb) 2.70 2.90 3.06 3.29

EPS growth (%) 6.5 7.5 5.3 7.7

EPS (diluted) (Rmb) 2.70 2.90 3.06 3.29

EPS (basic pre-ex) (Rmb) 2.70 2.90 3.06 3.29

P/E (X) 8.1 8.8 8.3 7.7

P/B (X) 1.4 1.5 1.3 1.3

EV/EBITDA (X) 12.7 12.2 11.7 10.0

Dividend yield (%) 6.2 5.7 6.6 7.8

ROE (%) 17.9 17.5 17.3 16.7

CROCI (%) 9.3 8.6 8.7 9.7

2,800

2,900

3,000

3,100

3,200

3,300

3,400

3,500

3,600

3,700

18

19

20

21

22

23

24

25

26

27

Feb-16 Jun-16 Sep-16 Dec-16

Price performance chart

SAIC Motor (L) Shanghai - Shenzhen 300 (R)

Share price performance (%) 3 month 6 month 12 month

Absolute 2.2 13.2 41.0

Rel. to Shanghai - Shenzhen 300 4.4 8.6 20.6

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 2/27/2017 close.

2017 年 2 月 28 日中国：汽车


SAIC (600104.SS): Summary financials

Profit model (Rmb mn) 12/15 12/16E 12/17E 12/18E Balance sheet (Rmb mn) 12/15 12/16E 12/17E 12/18E

Total revenue 661,373.9 763,478.2 821,794.7 838,818.1 Cash & equivalents 72,672.7 74,320.3 94,344.9 100,428.0

Cost of goods sold (585,479.7) (665,508.6) (715,220.8) (724,129.3) Accounts receivable 72,285.1 83,444.6 89,818.3 91,678.9

SG&A (59,812.8) (79,401.7) (87,521.1) (91,011.8) Inventory 37,243.4 42,334.2 45,496.5 46,063.2

R&D (8,371.0) (9,663.3) (10,401.4) (10,616.9) Other current assets 87,729.5 87,729.5 87,729.5 87,729.5

Other operating profit/(expense) 6,681.8 8,858.6 10,357.0 11,410.4 Total current assets 269,930.7 287,828.7 317,389.3 325,899.7

EBITDA 22,763.3 27,426.4 29,409.7 35,087.4 Net PP&E 50,546.9 61,576.4 72,400.4 82,548.4

Depreciation & amortization (5,951.6) (7,026.2) (8,153.0) (9,209.5) Net intangibles 8,824.4 8,207.8 7,591.2 6,974.7

EBIT 16,811.6 20,400.2 21,256.7 25,877.9 Total investments 127,199.6 144,036.6 160,977.8 175,881.0

Interest income 1,137.5 1,029.3 1,052.7 1,336.3 Other long-term assets 55,129.1 55,129.1 55,129.1 55,129.1

Interest expense (809.1) (971.1) (1,381.6) (1,792.8) Total assets 511,630.7 556,778.5 613,487.8 646,432.9

Income/(loss) from uncons. subs. 0.0 0.0 0.0 0.0

Others 28,669.6 28,817.6 33,075.4 32,960.7 Accounts payable 124,634.4 141,670.7 152,253.2 154,149.6

Pretax profits 45,809.7 49,276.1 54,003.2 58,382.0 Short-term debt 72,722.5 72,722.5 72,722.5 72,722.5

Income tax (5,735.7) (6,169.7) (6,761.6) (7,601.8) Other current liabilities 60,310.9 61,431.0 65,047.7 68,515.7

Minorities (10,280.2) (11,087.1) (11,579.0) (12,324.8) Total current liabilities 257,667.8 275,824.1 290,023.4 295,387.8

Long-term debt 9,606.9 9,606.9 9,606.9 9,606.9

Net income pre-preferred dividends 29,793.8 32,019.3 35,662.6 38,455.5 Other long-term liabilities 33,438.7 33,438.7 33,438.7 33,438.7

Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 43,045.6 43,045.6 43,045.6 43,045.6

Net income (pre-exceptionals) 29,793.8 32,019.3 35,662.6 38,455.5 Total liabilities 300,713.4 318,869.7 333,069.0 338,433.4

Post-tax exceptionals 0.0 0.0 0.0 0.0

Net income 29,793.8 32,019.3 35,662.6 38,455.5 Preferred shares 0.0 0.0 0.0 0.0

Total common equity 175,128.7 191,033.2 221,964.2 237,220.1

EPS (basic, pre-except) (Rmb) 2.70 2.90 3.06 3.29 Minority interest 35,788.5 46,875.6 58,454.6 70,779.4

EPS (basic, post-except) (Rmb) 2.70 2.90 3.06 3.29

EPS (diluted, post-except) (Rmb) 2.70 2.90 3.06 3.29 Total liabilities & equity 511,630.7 556,778.5 613,487.8 646,432.9

DPS (Rmb) 1.36 1.46 1.69 1.99

Dividend payout ratio (%) 50.3 50.3 55.2 60.3 BVPS (Rmb) 15.88 17.33 19.00 20.30

Free cash flow yield (%) 3.8 1.5 2.0 2.9

Growth & margins (%) 12/15 12/16E 12/17E 12/18E Ratios 12/15 12/16E 12/17E 12/18E

Sales growth 5.5 15.4 7.6 2.1 CROCI (%) 9.3 8.6 8.7 9.7

EBITDA growth 6.0 20.5 7.2 19.3 ROE (%) 17.9 17.5 17.3 16.7

EBIT growth 0.6 21.3 4.2 21.7 ROA (%) 6.4 6.0 6.1 6.1

Net income growth 6.5 7.5 11.4 7.8 ROACE (%) 21.4 18.5 18.5 18.3

EPS growth 6.5 7.5 5.3 7.7 Inventory days 23.7 21.8 22.4 23.1

Gross margin 11.5 12.8 13.0 13.7 Receivables days 35.3 37.2 38.5 39.5

EBITDA margin 3.4 3.6 3.6 4.2 Payable days 69.7 73.0 75.0 77.2

EBIT margin 2.5 2.7 2.6 3.1 Net debt/equity (%) 4.6 3.4 (4.3) (5.9)

Interest cover - EBIT (X) NM NM 64.6 56.7

Cash flow statement (Rmb mn) 12/15 12/16E 12/17E 12/18E Valuation 12/15 12/16E 12/17E 12/18E

Net income pre-preferred dividends 29,793.8 32,019.3 35,662.6 38,455.5

D&A add-back 5,951.6 7,026.2 8,153.0 9,209.5 P/E (analyst) (X) 8.1 8.8 8.3 7.7

Minorities interests add-back 10,280.2 11,087.1 11,579.0 12,324.8 P/B (X) 1.4 1.5 1.3 1.3

Net (inc)/dec working capital 6,331.1 785.9 1,046.5 (530.9) EV/EBITDA (X) 12.7 12.2 11.7 10.0

Other operating cash flow (26,364.1) (28,551.0) (31,088.9) (30,080.9) EV/GCI (X) 1.2 1.3 1.2 1.1

Cash flow from operations 25,992.6 22,367.5 25,352.2 29,378.0 Dividend yield (%) 6.2 5.7 6.6 7.8

Capital expenditures (15,426.9) (17,426.8) (18,347.0) (18,727.1)

Acquisitions 0.0 0.0 0.0 0.0

Divestitures 571.1 0.0 0.0 0.0

Others 1,119.0 11,701.7 14,134.3 15,163.8

Cash flow from investments (13,736.9) (5,725.1) (4,212.7) (3,563.3)

Dividends paid (common & pref) (14,333.2) (14,994.8) (16,114.8) (19,731.6)

Inc/(dec) in debt 447.8 0.0 0.0 0.0

Common stock issuance (repurchase) 0.0 0.0 15,000.0 0.0

Other financing cash flows (13,646.2) 0.0 0.0 0.0

Cash flow from financing (27,531.7) (14,994.8) (1,114.8) (19,731.6)

Total cash flow (15,276.0) 1,647.7 20,024.6 6,083.1 Note: Last actual year may include reported and estimated data.

Source: Company data, Goldman Sachs Research estimates.

2017 年 2 月 28 日中国：汽车


Valuation and estimate changes

Valuation and estimate changes

2017 年 2 月 28 日中国：汽车


Valuation changes post recent rally Since we published our report last November that discussed the potential for extension of the purchase tax stimulus3 (introduced in September 2015), our A-share auto coverage has increased on average by +4% which compares to the CSI 300 up +1%, and our H-share auto coverage is +18% vs. the HSI +6%. After mark-to-marking the sector valuations, we now re-assess valuation methodologies used for our A/H-share autos coverage.

Exhibit 27: A-share autos coverage average price up 4% since Nov 11, 2016

Exhibit 28: H-share autos coverage average price up 18% since Nov 11, 2016

Source: Datastream.

Source: Datastream.

A-share car maker valuation methodology switched from sector P/B-ROE regression to individual target P/E multiples As shown in Exhibit 29, we now believe it is not suitable to use the A-share P/B vs. ROE line as a valuation basis as the latest sector line demonstrates a slightly negative slope (-0.5358X), which implies that a company with higher return should deserve a lower P/B multiple, and no correlation (R2=0.0027), which means ROE may not be a good variable to explain P/B differences for A-share auto coverage peers.

3 See ‘China: Automobiles: Likely extended stimulus to keep growth motoring’, November 11, 2016.

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2/1

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2/2

4/2

017

CSI300 A share coverage average

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HSI H share coverage average

2017 年 2 月 28 日中国：汽车


Exhibit 29: P/B vs. ROE line is no longer suitable for valuation of A-share car makers given the negative slope and no correlation 2017E P/B (X) vs. 2019E ROE, China auto sector, A-share

Note: Dotted line is the previous valuation line; solid line is the current mark-to-market line.

Source: Datastream, Wind, Gao Hua Securities Research.

We thus change our A-share OEMs’ valuation methodology from 2017E P/B vs. 2019E ROE to one where we set individual target P/E multiples for the companies, including the following steps (see Exhibit 30 for additional detail):

We estimate the growth outlook for each company by comparing its future EPS growth vs. its own historic growth;

We set the valuation premium/discount (vs. its own historical median 12m forward P/E) of each company with reference to its growth outlook vs. historic growth;

We set target P/E multiples based on the valuation premium/discount as well as a qualitative review of key factors like sub-sector growth, product cycle, dividend yield, special events, etc.;

For FAW Car, P/E multiple is not applicable due to its current loss-making status, so we adopt a P/B multiple to calculate a fundamental value (previously used A-share OEM P/B-ROE regression) and then add an M&A value (unchanged methodology) to derive a weighted TP (see Exhibit 37).

We maintain a P/B-ROE valuation methodology for Huayu, consistent with the other auto parts companies we cover, but we change its relevant peers from A-share OEMs to global commodity parts makers to make it more comparable and to factor in Huayu’s globalization.

y = -0.5358x + 1.6071R² = 0.0027

-

1.0

2.0

3.0

0% 5% 10% 15% 20% 25% 30%

SAIC

Changan(A)

Weichai (A)

JAC

Huayu

Great Wall (A)

ROE (2019E)

P/B (2017E)

Faw Car(Excluded from regression)

2017 年 2 月 28 日中国：汽车


Exhibit 30: We set a target 2017E P/E for each individual A-share car maker with reference to its historical trading range and future growth profile A-share coverage: Historical trading range, growth profile, qualitative review factors, target P/E multiples, 12m TP, and upside/downside potential

Note: ‘Subsector’ primarily stands for body-type including SUV, sedan, MPV.

Source: Datastream, Wind, Gao Hua Securities Research estimates.

We separate truck makers from car makers in the H-share P/B-ROE line, and now value truck stocks vs. global truck peers As truck and car makers are exposed to different growth drivers, economic cycles and valuation ranges, we now separate truck makers from car makers in the H-share P/B-ROE line and instead use the P/B-ROE of global truck peers when valuing the truck stocks.

On the other hand, we continue to use 2017E P/B vs. 2019E ROE valuation methodology to value the H-share OEMs due to a consistently high correlation (R2=0.9041). We also review the premium/discount for each stock upon changes in valuation line and peers.

We also update technology component maker Nexteer and H-share dealers valuation lines with no change in methodologies or relevant peers.

Max Median Min Current STD09‐16E CAGR

16E‐19E CAGR

Future vs. history

Delta vs. industry average

1. Subsector

2. product cycle

3. Dividend

4. Special events

5. others

Valuation premium/discount (in X of STD vs. Median)

Premium/discount *

STD(X)

Target P/E multiple

(X)

close(Rmb)

TP(Rmb)

potentials(%)

600104.SS SAIC 13.33 7.53 4.79 8.16 1.55 21% 7% ‐14% 20% Average Average + 6%New JV with

Audi Management

incentive scheme1.50 2.33 9.85 25.48 30.11 18.2%

000625.SZ Changan A 29.66 9.16 4.78 6.77 5.75 39% ‐6% ‐45% ‐12% Average ‐ Worst 4% n/a Ford NPM peaked (0.50) ‐2.87 6.29 16.19 14.74 ‐9.0%

600418.SS Jianghuai 31.80 14.47 7.16 17.96 5.35 17% 2% ‐15% 18% Average + Average 2%VW's EV JV in

ChinaOEM for NextEV 0.25 1.34 15.81 12.15 10.92 ‐10.1%

601633.SS Great Wall A 20.20 10.58 5.82 11.73 3.63 48% ‐11% ‐59% ‐26%Best, SUV specialist

Average 3% n/aProduct internal cannibalization

(0.75) ‐2.72 7.86 13.00 8.36 ‐35.7%

Average n/a 10.43 n/a 11.16 n/a 31% ‐2% ‐33% 0% n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

000800.SZ FAW Car 5.69 2.62 1.11 2.59 0.84 average Average + 0% Group listing n/a 1.78 11.55 8.56 ‐25.9%

Historical 12MF P/B trading range (X)

Historical 12MF P/E trading range (X) EPS growth profile (%) Qualitative review Target 17E P/E multiple setting Upside/downside potentials

2017 年 2 月 28 日中国：汽车


Exhibit 31: We now value truck stocks vs. global truck makers 2017E P/B (X) vs. 2019E ROE, global truck peers

Exhibit 32: New H-share auto stocks valuation without truck names 2017E P/B (X) vs. 2019E ROE, auto sector, H-share

Note: Dotted line is the previous valuation line; solid line is the current mark-to-market line, which is the new valuation line we use.

Source: Datastream, Goldman Sachs Global Investment Research, Gao Hua Securities Research.

Source: Datastream, Bloomberg, Gao Hua Securities Research.

Geely valuation is now based on a weighted TP (75% base case + 25% upside case) Amid a continuation of the consumption upgrade trend in China we see Geely as uniquely positioned to leverage Volvo tech strength and to upgrade product mix/ASP. Against this backdrop, we adjust our valuation methodology from P/B-ROE to a weighted TP calculation (based on P/E), incorporating an upside case when estimating sales volume/ASP/margin in 2017-2019E. We assign a 75% weighting to our base case valuation and 25% to an upside case scenario, leading to a 12m target price of HK$13.21.

y = 7.2575x + 0.6742R² = 0.4768

0.0

0.5

1.0

1.5

2.0

2.5

0% 5% 10% 15% 20%

2017

E PB

2019E ROE

Sinotruk

Weichai Power (A)

Weichai Power (H)Hino Motors

Isuzu Motors

Volvo

Foton

Jiangling

Dongfeng A

y = 14.909x - 0.7094R² = 0.9041

-

1.0

2.0

3.0

0% 5% 10% 15% 20% 25% 30% 35% 40%

Dongfeng

GAC

Geely

Great Wall (H)

Brilliance

ROE (2019E)

P/B (2017E)

2017 年 2 月 28 日中国：汽车


Exhibit 33: Our 12-m target price for Geely is now based on a weighted value (75% base case, 25% upside case) Geely: Historical trading range, growth profile, qualitative review factors, target P/E multiples, 12m TP and potential upside (base and upside cases)

Source: Datastream, Wind, Gao Hua Securities Research estimates.

Exhibit 34: We change Huayu’s valuation peer group to global parts peers Global parts 2017E P/B vs. average 2017E-2019E ROE regression

Exhibit 35: We update Nexteer’s valuation regression line Global parts 2017E P/B vs. average 2017E-2019E ROE regression



Max Median Min Current STD09‐16E CAGR

16E‐19E CAGR

Future vs. history

1. Subsector

2. product cycle

3. Dividend

4. Special events

Final valuation

premium/discount (in X of STD vs. Median)

Premium/discount *

STD(X)

Target P/E multiple

(X)

close(HK$)

TP(HK$)

Posibility %

potentials(%)

0175.HK Geely ‐ base 21.94 9.74 2.92 11.09 3.88 17% 31% 14% average+ strongest risingNew brand with Volvo

1.00 3.88 13.63 10.58 12.56 0.75 18.7% 0.82

0175.HK Geely ‐ upside 21.94 9.74 2.92 11.09 3.88 17% 41% 24% average+ strongest risingNew brand with Volvo

1.25 4.86 14.60 10.58 15.17 0.25 43.4% 0.93

Average 10.58 13.21 n.a. 24.9%

Historical 12MF P/E trading range (X) EPS growth profile (%) Target 17E P/E multiple setting Upside/downside potentialsQualitative review

2017 EPS

y = 6.4604x + 0.3221R² = 0.7355

0.00

0.50

1.00

1.50

2.00

2.50

5% 10% 15% 20% 25% 30% 35%

2017E PB

avg. 2017‐2019E ROE

Huayu

Hyundai Mobis

Toyota Boshoku

Adient

Magna

Faurecia

y = 7.2974x + 0.8968R² = 0.6119

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

5% 10% 15% 20% 25% 30%

2017E PB

Avg. 2017E‐19E ROE

NSK

JTEKT

Conti

BorgWarner

Weifu A

Minth

Nexteer

Valeo

Autoliv

2017 年 2 月 28 日中国：汽车


Exhibit 36: We continue to value auto dealers based on the 2017E P/B vs. 2017E ROE line 2017E P/B (X) vs. 2017E ROE, H-share auto dealers

Note: Dotted line is the previous valuation line; solid line is the current mark-to-market line that we use.

Source: Datastream, Wind, Gao Hua Securities Research.

Summary of valuation premiums/discounts applied to our China Auto coverage We assign a premium of 1.5X historical P/E STD (standard deviation) (vs. its historical medium 12m forward P/E at 7.52X) on SAIC

given its above industry average EPS growth profile in 2016-19E as a result of its relatively strong product cycle (especially the four new SUV models to be launched in 2017E in SVW), potential for better cost control post introduction of the recent management incentive scheme, and potential cooperation with Audi;

For Huayu, we remove a previous 20% historical discount applied after changing its P/B-ROE valuation peers from China OEMs to global commodity parts makers who are exposed to similar growth drivers and operating environment;

We introduce a discount at 0.5X historical P/E STD on Changan A (vs. its historical medium 12m forward P/E at 9.16X) due to its below industry average EPS growth profile. We also have concerns on the weak product cycle for its major profit contributor Changan-Ford in the coming two years and believe the high NPM (at 14.5% in 2016E, the highest among our China autos coverage) of Changan-Ford might not be sustainable.

We assign a premium of 0.25X historical P/E STD (vs. its historical medium 12m forward P/E at 14.46X) on JAC given its above industry average EPS growth profile in 2016-19E. We also believe it may speed up development in the high-growth new energy vehicle (NEV) subsector via its announced cooperation with NextEV (a new EV maker in China) and through the potential formation of a JV with Volkswagen in China for NEV manufacturing as reported by JAC on September 8, 2016;

We assign a discount of 0.75X historical P/E STD (vs. its historical medium 12m forward P/E at 10.58X) on Great Wall A given its below industry average EPS growth profile in 2016-19E. We have concerns that its high market share in the SUV segment might not sustain due to slowing sector growth and intense competition. We also see the potential for internal cannibalization of its new SUV launches due to already extensive coverage of its existing SUV models;

y = 11.845x ‐ 0.2884R² = 0.9684

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

4% 6% 8% 10% 12% 14% 16%

2017E PB

2017E ROE

Zhongsheng

Zhengtong

Baoxin

Harmony (excl. EV)

2017 年 2 月 28 日中国：汽车


For FAW Car, we adopt a historical P/B valuation median to calculate a fundamental value (previously used A-share OEM P/B-ROE regression) and apply no valuation premium/discount given low visibility on the timing and progress of the announced restructuring of its parentco (FAW Group). We then add an M&A value (unchanged methodology) and derive a weighted TP (70% fundamental value, 30% M&A value) – please see Exhibit 37 for more detail.

We cut our P/B-ROE valuation discount for Dongfeng from 50% to 35% (note: this discount only applies to the Dongfeng excl. PSA portion of the SOTP valued using P/B-ROE, not to the valuation of Dongfeng’s investment in PSA). The narrowing of the discount applied is mainly due to changes in the H-share P/B-ROE peers after removal of the truck makers (35% is the same as historical median of Dongfeng’s (excl. PSA portion) valuation discount to the new line) ;

We change our Geely valuation methodology to a weighted target price by applying 75% to the base case value and 25% to the upside case value. Under each case, we separately estimate the growth outlook (comparing its future EPS growth vs. historical range) and set the valuation premium with reference to its growth stage. We also refer to a qualitative review with key factors like sub-sector growth, product cycle, dividend yield, special events, etc.

For GAC H, we introduce a 10% P/B-ROE valuation premium, in-line with the historical median of GAC’s valuation premium to the new H-share line (upon removal of the truck makers) ;

We remove the 20% valuation premium on Weichai H (excluding Kion part) as we see no historical valuation premium to the sector line after we change the P/B-ROE valuation peers from H-share car makers to global truck makers;

We add a 10% valuation discount to Sinotruk due to its continuously 4th quartile return profile (Exhibits 41 and 42);

We maintain our 20% valuation discount on Great Wall H (in-line with the historical valuation discount to the new H-share P/B-ROE line), mainly on concerns that its high market share in the SUV segment might not sustain due to slowing sector growth and intense competition. We also see the potential for internal cannibalization of its new SUV launches due to already extensive coverage of its existing SUV models;

We maintain our 15% valuation premium for Brilliance as we expect further new product localization e.g., X3 SUV will continue to fuel its medium-term growth beyond 2018E in our view;

We maintain our valuation methodologies for the following stocks:

Weichai A/H: We continue to use a SOTP valuation and also maintain its 12% conglomerate discount.

Dongfeng: We continue to use a SOTP valuation due to its acquisition of a ~14% stake of PSA on May 22, 2014, although we do narrow the discount applied to Dongfeng (excl. PSA) as discussed above.

BYD H: We continue to use a SOTP valuation to value Handset Components & Assembly Services, Automobiles, and Rechargeable Batteries and Others separately.

Weifu A: We maintain a SOTP valuation methodology as we think the Weifu-Bosch JVs and Weifu’s own business should be valued separately given differing growth momentum.

Nexteer: We continue to use P/B-ROE with select global parts suppliers to reflect the critical nature of technology parts and Nexteer’s secular positioning in the ADAS/AV cycle.

Minth: We continue to use P/B-ROE for select global parts suppliers to reflect the critical nature of technology parts for Minth.

2017 年 2 月 28 日中国：汽车


Exhibit 37: A-share OEMs changed to absolute valuation; trucks valued separately; Geely changed to weighted TP calculation; decrease in Dongfeng valuation discount; introduce valuation premium on GAC H China auto coverage valuation methodology and valuation premium/discount summary

Note: 1) *Denotes the stock is on our Conviction List; 2) For Harmony, we assign a 85% weighting to our SOTP-based fundamental value and a 15% weighting to the M&A value which is equal to the fundamental value plus a 34% premium, with the premium derived from the GAC/Changfeng acquisition case; 2) For FAW, we assign a 70% weighting to our P/B-ROE based fundamental value and a 30% weighting to the M&A value which is equal to the fundamental value plus a 34% premium, with the premium derived from the GAC/Changfeng acquisition case (please refer to our “Introducing M&A framework; highest potential for M&A – FAW Car, Harmony, July 12, 2016” report for more details).


Ticker Company New Old Chg New Old New Old

Car makers (JV)

600104.SS SAIC Buy Neutral ↑ Absolute valuation (target 2017E PE=9.9) PB‐ROE 20% historical discount

2238.HK GAC (H) Buy Buy = PB‐ROE (excl. trucks) PB‐ROE 10% historical premium

0489.HK Dongfeng Neutral Neutral = SOTP SOTP 35% historical discount on Dongfeng excl. PSA 50% historical discount on Dongfeng excl. PSA

1114.HK Brilliance Neutral Neutral = PB‐ROE (excl. trucks) PB‐ROE 15% high growth premium 15% high growth premium

000625.SZ Changan (A) Neutral Neutral = Absolute valuation (target 2017E PE=6.3) PB‐ROE 10% historical discount

Car makers (Local)

0175.HK Geely Buy* Buy* =Weighted TP calculation: 75% base case value

+ 25% upside case value PB‐ROE 25% high growth premium + 10% 1st quartile CROCI premium

1211.HK BYD Neutral Neutral = SOTP SOTP

600418.SS JAC Neutral Neutral = Absolute valuation (target 2017E PE=15.8) PB‐ROE

000800.SZ FAW Car Sell Sell =Weighted TP calculation: 70% fundamental

value + 30% M&A valueWeighted TP calculation: 70% fundamental

value + 30% M&A value

601633.SS Great Wall (A) Sell Sell = Absolute valuation (target 2017E PE=7.9) PB‐ROE

2333.HK Great Wall (H) Sell Sell = PB‐ROE (excl. trucks) PB‐ROE 20% historical discount 20% historical discount

CV makers

3808.HK Sinotruk Neutral Neutral = PB‐ROE (global truck peers) PB‐ROE 10% 4th quartile ROE discount

000338.SZ Weichai (A) Neutral Neutral = SOTP SOTP 12% conglomerate discount 12% conglomerate discount

2338.HK Weichai (H) Neutral Neutral = SOTP SOTP 12% conglomerate discount 12% conglomerate discount + 20% historical premium

Parts1316.HK Nexteer Buy Buy = PB‐ROE (global parts peers) PB‐ROE (global parts peers) 10% 1st quartile ROE premium 10% 1st quartile ROE premium

000581.SZ Weifu (A) Buy Buy = SOTP SOTP Historical median‐1.1STD P/B Historical median‐1.1STD P/B0425.HK Minth Neutral Neutral = PB‐ROE (global parts peers) PB‐ROE (global parts peers)

600741.SS Huayu Neutral Neutral = PB‐ROE (global parts peers) PB‐ROE 20% historical discount

Dealers

3836.HK Harmony Buy Buy =Weighted TP calculation: 85% fundamental

value + 15% M&A valueWeighted TP calculation: 85% fundamental

value + 15% M&A value

0881.HK Zhongsheng Neutral Neutral = PB‐ROE PB‐ROE

1293.HK Baoxin Neutral Neutral = PB‐ROE PB‐ROE

1728.HK Zhengtong Neutral Neutral = PB‐ROE PB‐ROE

Rating TP methodology Premium/discount

2017 年 2 月 28 日中国：汽车


Exhibit 38: China auto coverage – valuation summary Summary of rating, 12m TP changes and valuation metrics

Note: *Denotes stock is on our Conviction List.

Source: Datastream, Gao Hua Securities Research.

Valuation Summary - China Auto Rating 2/27/2017 12-month 12-month TP Chg. Potential TP-Implied PB PB TP-Implied PE PETicker Company name Currency Rating (Old) Close TP TP (Old) up/downside 2017E 2017E 2017E 2017ECar makers (JV)2238.HK GAC (H) HKD Buy Buy 13.06 15.61 11.70 33.4% 19.5% 1.78 1.51 10.11 8.61 600104.SS SAIC CNY Buy Neutral 25.48 30.11 21.82 38.0% 18.2% 1.58 1.34 9.85 8.33 1114.HK Brilliance HKD Neutral Neutral 12.26 12.31 9.49 29.7% 0.4% 2.10 2.13 16.00 16.23 0489.HK Dongfeng HKD Neutral Neutral 9.09 8.92 8.18 9.1% -1.8% 0.63 0.65 5.20 5.39 000625.SZ Changan (A) CNY Neutral Neutral 16.19 14.74 14.78 -0.3% -9.0% 1.41 1.55 6.30 6.92 Avg. 1.50 1.44 9.49 9.10 Car makers (Local)0175.HK Geely HKD Buy* Buy* 10.58 13.21 10.35 27.6% 24.9% 3.39 2.76 13.96 11.38 1211.HK BYD HKD Neutral Neutral 46.30 44.52 44.52 0.0% -3.9% 1.94 2.05 18.20 19.27 600418.SS JAC CNY Neutral Neutral 12.15 10.92 10.09 8.2% -10.1% 1.61 1.80 15.81 17.59 000800.SZ FAW Car CNY Sell Sell 11.55 8.56 6.73 27.2% -25.9% 1.96 2.64 - 601633.SS Great Wall (A) CNY Sell Sell 13.00 8.36 8.06 3.7% -35.7% 1.46 2.27 7.86 12.22 2333.HK Great Wall (H) HKD Sell Sell 9.71 5.79 5.64 2.7% -40.4% 0.89 1.51 4.74 8.08 Avg. 1.87 2.17 10.09 13.71 CV makers3808.HK Sinotruk HKD Neutral Neutral 6.21 6.85 3.84 78.4% 10.3% 0.82 0.76 27.13 25.05 000338.SZ Weichai (A) CNY Neutral Neutral 11.19 10.62 10.63 -0.2% -5.1% 1.19 1.26 15.09 15.90 2338.HK Weichai (H) HKD Neutral Neutral 13.74 11.92 10.01 19.1% -13.2% 1.16 1.37 14.73 17.29 Avg. 1.06 1.13 18.98 19.41 Parts000581.SZ Weifu (A) CNY Buy Buy 23.63 28.79 28.79 0.0% 21.8% 2.04 1.67 15.22 12.49 1316.HK Nexteer HKD Buy Buy 10.14 11.50 10.77 6.8% 13.4% 2.89 2.58 12.62 11.24 600741.SS Huayu CNY Neutral Neutral 16.58 17.20 16.50 4.3% 3.7% 1.30 1.25 8.90 8.58 0425.HK Minth HKD Neutral Neutral 25.10 25.75 25.75 0.0% 2.6% 2.20 2.19 12.85 12.76 Avg. 2.11 1.92 12.40 11.27 Dealers3836.HK Harmony HKD Buy Buy 3.67 4.54 4.48 1.4% 23.8% 0.93 0.76 10.12 8.32 0881.HK Zhongsheng HKD Neutral Neutral 11.20 10.29 7.37 39.6% -8.2% 1.36 1.51 10.11 11.21 1728.HK Zhengtong HKD Neutral Neutral 2.99 2.69 2.41 11.7% -10.0% 0.55 0.62 7.82 8.85 1293.HK Baoxin HKD Neutral Neutral 3.54 3.07 2.13 44.3% -13.2% 1.14 1.34 9.81 11.50 Avg. 1.00 1.06 9.46 9.97

2017 年 2 月 28 日中国：汽车


Drivers of earnings estimate changes With this report, we revise 2016E-19E EPS for our China Auto coverage by between -248% and +45%. For those with substantial earnings estimate revisions (i.e., more than 5%) we discuss the key drivers in detail below:

SAIC: Stronger than expected SUV product cycle, especially for SVW (the JV with Volkswagen in China); potential better cost savings after introduction of management incentive. We raise 2018E/2019E earnings by 9%/30%4.

GAC: On January 25, 2017, the company announced guidance of 30%-55% yoy net income growth for FY2016, below our expectation. While we don’t have full financial details yet, we believe the miss might be mainly due to a one-off asset disposal loss and also potentially due to higher sales/R&D expenses. As such, we lower our 2017E-18E earnings by 5%/2%, and lower 2016E EPS by 17% reflecting company guidance.

FAW Car: On January 26, 2017, the company guided for a FY2016 net loss of between Rmb945mn and Rmb970mn vs. a FY2015 net profit of Rmb53mn, much lower than our expectations, mainly due to slower-than-expected restructuring process and sales volumes miss. We cut our 2016E-19E EPS estimates by 65%/248%/82%/76% to reflect company guidance and factor in our expectation of a bumpy restructuring.

JAC: We lower the company’s earnings mainly due to higher COGS and SG&A expense in light of intense competition as well as lower subsidy (booked under non-operating income/expenses) for NEV bus and car from 2017E. Compared to the industry average, JAC enjoyed a relatively higher volume mix in NEV car/bus and hence is more vulnerable to the subsidy cut. We reduce 2016E-19E EPS by 16%-24%.

Sinotruk: The total HDT market in 2016 reached 730k units, 6% higher than our previous estimate and we raise our 2017E-18E total truck market estimates accordingly (+4% to 803k for 2017E and +1% to 851k for 2018E). As Sinotruk is operating at a close to break-even level, and a small increase in revenue might lead to big increase in net profit, our increase in its 2016-18E EPS by 19%-32% is mainly due to operating leverage effect.

Weichai: We incorporate the aforementioned higher HDT market estimates for 2017-18E. In addition, we expect Weichai to turn around its engine market share (to a level >25% from the previous shrinkage trend) from 2016E given technology improvement and more aggressive commercial terms. Overall we increase our 2016-18E EPS by 7%-17%.

Huayu: We cut earnings mainly due to slowing car market growth and increasing pricing pressure. OEMs are likely to squeeze suppliers during a down cycle, and we see commodity parts suppliers as relatively more vulnerable vs. technology parts suppliers given lower pricing power. The bulk of Huayu’s business is commodity parts, thus we factor in higher price erosion/margin risk in our new forecast. We lower 2017E-19E EPS by 1%-7% but revise up 2016E EPS by 4% on slightly stronger volume and stable pricing.

Zhongsheng: We raise our 2016-19E EPS by 33%-42% given the following: 1) on January 16, 2017, it announced a not less than 250% yoy growth for the FY2016 result, higher than the GHe of 165%; 2) continuously strong luxury demand and especially Mercedes Benz (sales volume +30% yoy in 2016 vs. 2015 and January 2017 +39% yoy); 3) quicker than expected 4S store increase, with more than 30 stores by the end of 2016 vs. 2015 likely to fuel stronger after sales business growth in future.

4 For full details please see ‘SAIC: Steering towards positive earnings growth; up to Buy’, February 28, 2017

2017 年 2 月 28 日中国：汽车


Zhengtong: We raise our 2016-19E EPS by 3%-19% given the following: 1) BMW announced a 1% increase in dealer rebate for FY2017 in January 2017, which we believe will boost the new car sales GPM for BMW dealers; 2) stronger BMW product cycle in 2017 onwards, including the new 1 and 5 series in 2017E and X3 in 2018E.

Baoxin: We raise our 2016-19E EPS by 34%-45% given: 1) on January 17, 2017 the company announced a not less than 80% yoy growth for its FY2016 result, higher than the GHe of 28% yoy growth; 2) BMW announced a 1% increase in dealer rebate for FY2017 in January 2017, which we believe will boost the new car sales GPM for BMW dealers; 3) potential synergies with China Grand (the biggest car dealer group in China who acquired a 75% Baoxin stake in 2016) in terms of cost savings via integrating internal management systems, financing cost saving on a bigger scale, and commission income increase after introducing the China Grand financial leasing business in Baoxin stores; 4) a stronger BMW product cycle in 2017 onwards, including the new 1 and 5 series in 2017E and X3 in 2018E.

For the rest of our coverage (Dongfeng/Brilliance/Harmony) we tweak our earnings estimates by less than +/-5% for 2016E-2019E, to factor in increased competition, updated margin assumptions, and product cycle dynamics. Incorporating these estimate changes and the methodology changes discussed earlier in the report leads to an adjustment in the 12-month target prices by -39% to +41%.

2017 年 2 月 28 日中国：汽车


Exhibit 39: China auto coverage – summary of earnings estimate revisions

Note: Nexteer is denominated in USD.


EPS change summary (Rmb)New Old Diff. New Old Diff. New Old Diff. New Old Diff.

Car makers (JV)600104.SS SAIC 2.90 2.97 ‐2% 3.06 3.11 ‐2% 3.29 3.01 9% 3.58 2.74 30%2238.HK GAC (H) 1.01 1.21 ‐17% 1.34 1.41 ‐5% 1.47 1.50 ‐2% 1.43 1.42 0%0489.HK Dongfeng 1.48 1.46 1% 1.49 1.47 2% 1.59 1.53 4% 1.65 1.58 5%1114.HK Brilliance 0.64 0.66 ‐4% 0.67 0.67 0% 0.87 0.87 0% 1.07 1.05 2%000625.SZ Changan (A) 2.52 2.47 2% 2.34 2.31 1% 2.12 2.08 2% 2.08 2.13 ‐2%

Avg. -4% -1% 3% 7%Car makers (Local)0175.HK Geely 0.51 0.51 0% 0.82 0.82 0% 1.03 1.03 0% 1.16 1.16 0%1211.HK BYD 2.00 2.00 0% 2.13 2.13 0% 2.91 2.91 0% 3.50 3.50 0%600418.SS JAC 0.77 0.92 ‐16% 0.69 0.91 ‐24% 0.73 0.95 ‐23% 0.81 1.03 ‐22%000800.SZ FAW Car -0.57 -0.35 ‐65% -0.41 -0.12 ‐248% 0.07 0.39 ‐82% 0.10 0.43 ‐76%601633.SS Great Wall (A) 1.13 1.13 0% 1.06 1.06 0% 0.92 0.92 0% 0.80 0.80 0%2333.HK Great Wall (H) 1.13 1.13 0% 1.06 1.06 0% 0.92 0.92 0% 0.80 0.80 0%

Avg. (excl. FAW Car) -3% -5% -5% -4%CV makers3808.HK Sinotruk 0.19 0.14 32% 0.22 0.18 25% 0.25 0.21 19% 0.27 0.27 ‐2%000338.SZ Weichai (A) 0.60 0.52 14% 0.70 0.60 17% 0.71 0.66 7% 0.74 0.72 2%2338.HK Weichai (H) 0.60 0.52 14% 0.70 0.60 17% 0.71 0.66 7% 0.74 0.72 2%

Avg. 20% 20% 11% 1%Parts1316.HK Nexteer 0.10 0.10 0% 0.12 0.12 0% 0.14 0.14 0% 0.17 0.17 0%000581.SZ Weifu (A) 1.63 1.63 0% 1.89 1.89 0% 2.20 2.20 0% 2.52 2.52 0%0425.HK Minth 1.42 1.42 0% 1.74 1.74 0% 2.17 2.17 0% 2.64 2.64 0%600741.SS Huayu 1.94 1.86 4% 1.93 1.96 ‐1% 2.07 2.16 ‐4% 2.24 2.40 ‐7%

Avg. 1% 0% -1% -2%Dealers3836.HK Harmony 0.37 0.37 ‐1% 0.39 0.38 3% 0.42 0.40 4% 0.42 0.41 4%0881.HK Zhongsheng 0.75 0.57 33% 0.88 0.66 34% 1.01 0.74 37% 1.08 0.76 42%1293.HK Baoxin 0.16 0.11 41% 0.27 0.20 34% 0.34 0.24 40% 0.37 0.25 45%1728.HK Zhengtong 0.24 0.23 3% 0.30 0.29 4% 0.34 0.32 7% 0.37 0.31 19%

Avg. 19% 19% 22% 28%Avg. 7% 7% 6% 6%

2016E 2017E 2018E 2019E

2017 年 2 月 28 日中国：汽车


Exhibit 40: GH estimates vs. Bloomberg consensus; we are more positive on dealers but appear more cautious than the market on the rest GS estimates vs. Bloomberg consensus

Note: *Denotes stock is on Conviction List.

Source: Bloomberg, Gao Hua Securities Research.

EPS Varience with Consensus - Auto ChinaTicker Company name Reporting Rating 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

Currency

Car makers (JV)600104.SS SAIC Rmb Buy 2.90 3.06 3.29 2.74 3.08 3.35 6% -1% -2%2238.HK GAC (H) Rmb Buy 1.01 1.34 1.47 1.11 1.28 1.40 -9% 5% 5%0489.HK Dongfeng Rmb Neutral 1.48 1.49 1.59 1.42 1.42 1.47 4% 5% 8%1114.HK Brilliance Rmb Neutral 0.64 0.67 0.87 0.79 0.88 1.05 -19% -24% -17%000625.SZ Changan (A) Rmb Neutral 2.52 2.34 2.12 2.33 2.52 2.73 8% -7% -23%

Avg. -2% -4% -6%Car makers (Local)0175.HK Geely Rmb Buy* 0.51 0.82 1.03 0.51 0.74 0.91 1% 11% 13%1211.HK BYD Rmb Neutral 2.00 2.13 2.91 1.87 2.02 2.39 7% 5% 22%600418.SS JAC Rmb Neutral 0.77 0.69 0.73 0.59 0.74 0.97 31% -7% -24%000800.SZ FAW Car Rmb Sell -0.57 -0.41 0.07 -0.36 0.39 0.49 -59% -207% -86%601633.SS Great Wall (A) Rmb Sell 1.13 1.06 0.92 1.08 1.24 1.37 5% -14% -33%2333.HK Great Wall (H) Rmb Sell 1.13 1.06 0.92 1.08 1.09 1.11 4% -2% -17%

Avg. (excl. FAW Car) 10% -1% -8%CV makers3808.HK Sinotruk Rmb Neutral 0.19 0.22 0.25 0.18 0.26 0.31 8% -17% -17%000338.SZ Weichai (A) Rmb Neutral 0.60 0.70 0.71 0.52 0.63 0.70 16% 12% 1%2338.HK Weichai (H) Rmb Neutral 0.60 0.70 0.71 0.56 0.69 0.75 8% 2% -6%

Avg. 11% -1% -7%Parts1316.HK Nexteer HKD Buy 0.10 0.12 0.14 0.11 0.13 0.14 -7% -9% -3%000581.SZ Weifu (A) Rmb Buy 1.63 1.89 2.20 1.66 1.88 2.09 -2% 1% 5%0425.HK Minth Rmb Neutral 1.42 1.74 2.17 1.49 1.79 2.13 -4% -3% 2%600741.SS Huayu Rmb Neutral 1.94 1.93 2.07 1.72 1.88 2.08 13% 3% -1%

Avg. 0% -2% 1%Dealers3836.HK Harmony Rmb Buy 0.37 0.39 0.42 0.40 0.45 0.51 -9% -13% -17%0881.HK Zhongsheng Rmb Neutral 0.75 0.88 1.01 0.63 0.75 0.88 20% 17% 15%1293.HK Baoxin Rmb Neutral 0.16 0.27 0.34 0.15 0.23 0.28 5% 17% 21%1728.HK Zhengtong Rmb Neutral 0.24 0.30 0.34 0.26 0.32 0.37 -8% -5% -9%

Avg. 2% 4% 2%

GS EPS Consensus EPS Var.

2017 年 2 月 28 日中国：汽车


Exhibit 41: Geely, Changan A and Zhongsheng are consistently in the 1st quartile ROE from 2016E, while Sinotruk and FAW Car are consistently in the 4th quartile By sub-sector ROE quartile, 2014-2019E

Exhibit 42: Geely, Harmony and Changan A are consistently in the 1st quartile CROCI from 2016E, while Sinotruk and FAW Car are consistently in the 4th quartile By sub-sector CROCI quartile, 2014-2019E



ROE quartiling by sub-sectorTicker Company name 2014 2015 2016E 2017E 2018E 2019EOffshore2238.HK GAC 9.3% 11.4% 15.8% 18.7% 18.0% 15.6%1211.HK BYD 1.8% 9.8% 12.5% 11.1% 13.8% 15.0%0175.HK Geely 8.6% 12.3% 21.1% 27.2% 26.7% 24.2%0489.HK Dongfeng 18.8% 14.6% 14.2% 12.7% 12.2% 11.5%2333.HK Great Wall (H) 26.2% 22.5% 24.6% 19.9% 15.3% 12.2%1114.HK Brilliance 36.1% 19.0% 15.0% 13.9% 15.9% 17.0%3808.HK Sinotruk 2.1% 1.1% 2.7% 3.0% 3.5% 3.6%0425.HK Minth 14.2% 14.5% 16.4% 18.1% 20.1% 21.5%2338.HK Weichai (H) 16.7% 4.3% 7.4% 8.1% 7.7% 7.6%

Average 14.9% 12.2% 14.4% 14.8% 14.8% 14.2%

Offshore - dealer1293.HK Baoxin 14.5% 4.4% 7.8% 12.4% 13.5% 13.0%1728.HK Zhengtong 10.2% 7.4% 6.0% 7.2% 7.7% 8.0%0881.HK Zhongsheng 7.7% 4.1% 13.6% 14.2% 14.5% 13.8%3836.HK Harmony 22.0% 13.1% 9.5% 9.5% 9.5% 9.0%

Average 13.6% 7.3% 9.2% 10.8% 11.3% 10.9%

Onshore000581.SZ Weifu (A) 15.0% 13.4% 13.3% 14.0% 14.8% 15.1%600104.SS SAIC 18.9% 17.9% 17.5% 17.3% 16.7% 17.1%000625.SZ Changan (A) 34.0% 33.2% 30.8% 24.1% 19.2% 17.1%600741.SS Huayu 21.1% 18.8% 18.3% 15.1% 15.0% 15.1%600418.SS JAC 7.6% 11.1% 12.8% 10.6% 10.4% 10.7%601633.SS Great Wall (A) 26.2% 22.5% 24.6% 19.8% 15.1% 12.0%000800.SZ FAW Car 1.9% 0.6% -11.3% -9.0% 1.6% 2.3%000338.SZ Weichai (A) 16.7% 4.3% 7.4% 8.1% 7.7% 7.6%

Average 17.7% 15.2% 14.2% 12.5% 12.6% 12.1%

CROCI quartiling by sub-sectorTicker Company name 2014 2015 2016E 2017E 2018E 2019EOffshore2238.HK GAC 15.7% 17.8% 23.2% 24.9% 23.9% 21.6%0175.HK Geely 20.3% 25.6% 25.9% 31.1% 29.9% 27.1%0489.HK Dongfeng 18.8% 15.5% 16.6% 15.7% 16.6% 16.0%2333.HK Great Wall (H) 29.5% 25.2% 26.5% 20.8% 18.3% 15.3%1114.HK Brilliance 28.2% 18.9% 15.0% 16.8% 19.8% 20.1%3808.HK Sinotruk 4.4% 9.3% 6.8% 7.1% 7.4% 7.4%0425.HK Minth 14.5% 15.7% 18.4% 19.7% 21.5% 22.9%2338.HK Weichai (H) 31.6% 14.5% 13.7% 13.5% 12.4% 11.7%

Average 20.4% 17.8% 18.3% 18.7% 18.7% 17.8%

Offshore - dealer1293.HK Baoxin 24.9% 11.0% 9.9% 12.0% 12.7% 12.1%1728.HK Zhengtong 24.1% 22.4% 9.5% 10.6% 11.5% 12.0%0881.HK Zhongsheng 15.9% 11.0% 14.6% 12.0% 10.3% 12.5%3836.HK Harmony 46.8% 27.4% 15.8% 16.0% 15.7% 15.5%

Average 27.9% 18.0% 12.5% 12.6% 12.5% 13.0%

Onshore000581.SZ Weifu (A) 16.6% 14.2% 15.3% 16.0% 16.9% 17.5%600104.SS SAIC 11.1% 9.3% 8.6% 8.7% 9.7% 10.5%000625.SZ Changan (A) 23.9% 26.5% 24.8% 21.5% 19.9% 21.1%600741.SS Huayu 29.7% 18.9% 20.9% 18.0% 16.8% 16.2%600418.SS JAC 8.7% 12.1% 12.6% 10.9% 9.4% 8.5%601633.SS Great Wall (A) 29.5% 25.2% 26.5% 22.3% 18.4% 15.3%000800.SZ FAW Car 7.7% 6.8% -0.3% 1.1% 5.0% 4.8%000338.SZ Weichai (A) 19.4% 14.9% 13.7% 13.5% 12.4% 11.7%

Average 18.3% 16.0% 15.3% 14.0% 13.6% 13.2%

1st Quartile2nd Quartile3rd Quartile4th Quartile

1st Quartile2nd Quartile3rd Quartile4th Quartile

2017 年 2 月 28 日中国：汽车


Appendices

Appendices

2017 年 2 月 28 日中国：汽车


Appendix: Autos/Parts/Dealer – China and global peers comps

Exhibit 43: Valuation summary

* denotes stock is on our Regional Conviction List

Source: Datastream, Bloomberg, Company data, Goldman Sachs Global Investment Research, Gao Hua Securities Research.

Valuation Summary - Auto ChinaTicker Company name Currency Close Target Price Rating Market cap EPS

2/27/2017 USD'mn

%16E-19E CAGR 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

600104.SS SAIC CNY 25.48 30.11 Buy 31,575 7% 8.8X 8.3X 7.7X 1.5X 1.3X 1.3X 17% 17% 17% 6% 7% 8% 9% 9% 10%0489.HK Dongfeng HKD 9.09 8.92 Neutral 10,091 4% 5.3X 5.4X 5.1X 0.7X 0.7X 0.6X 14% 13% 12% 3% 3% 3% 17% 16% 17%2238.HK GAC HKD 13.06 15.61 Buy 5,889 12% 11.1X 8.6X 7.9X 1.7X 1.5X 1.3X 16% 19% 18% 3% 4% 4% 23% 25% 24%1114.HK Brilliance HKD 12.26 12.31 Neutral 7,939 19% 16.5X 16.3X 12.5X 2.4X 2.1X 1.9X 15% 14% 16% 1% 1% 1% 15% 17% 20%000625.SZ Changan (A) CNY 16.19 14.74 Neutral 9,897 -6% 6.4X 6.9X 7.7X 1.8X 1.6X 1.4X 31% 24% 19% 5% 6% 6% 25% 22% 20%2333.HK Great Wall (H) HKD 9.71 5.79 Sell 5,138 -11% 7.4X 8.1X 9.4X 1.7X 1.5X 1.4X 25% 20% 15% 4% 4% 4% 27% 21% 18%601633.SS Great Wall (A) CNY 13.00 8.36 Sell 15,971 -11% 11.5X 12.2X 14.2X 2.6X 2.3X 2.0X 25% 20% 15% 3% 2% 2% 26% 22% 18%0175.HK Geely HKD 10.58 13.21 Buy* 11,998 31% 17.6X 11.4X 9.1X 3.6X 2.8X 2.2X 21% 27% 27% 1% 1% 1% 26% 31% 30%1211.HK BYD HKD 46.30 44.52 Neutral 12,230 21% 19.8X 19.3X 14.1X 2.3X 2.0X 1.8X 13% 11% 14% 2% 1% 2% 13% 13% 13%600418.SS JAC CNY 12.15 10.92 Neutral 2,278 2% 15.8X 17.6X 16.6X 1.9X 1.8X 1.7X 13% 11% 10% 2% 2% 2% 13% 11% 9%000800.SZ FAW Car CNY 11.55 8.56 Sell 2,735 NA NA NA 165.1X 2.4X 2.6X 2.6X -11% -9% 2% 0% 0% 0% 0% 1% 5%2338.HK Weichai (H) HKD 13.74 11.92 Neutral 3,539 7% 19.6X 17.3X 17.2X 1.5X 1.4X 1.3X 7% 8% 8% 1% 1% 1% 14% 14% 12%000338.SZ Weichai (A) CNY 11.19 10.62 Neutral 3,255 7% 18.7X 15.9X 15.8X 1.3X 1.3X 1.2X 7% 8% 8% 1% 2% 2% 14% 14% 12%3808.HK Sinotruk HKD 6.21 6.85 Neutral 2,209 12% 27.9X 25.1X 21.7X 0.8X 0.8X 0.7X 3% 3% 3% 1% 1% 2% 7% 7% 7%

China Average 8% 13.9X 12.8X 23.8X 1.8X 1.7X 1.5X 14% 13% 13% 2% 3% 3% 16% 16% 16%China Average (excl. FAW Car) 8% 14.3X 13.3X 12.2X 1.8X 1.6X 1.4X 16% 15% 14% 2% 3% 3% 17% 17% 17%China A share Average (excl. FAW Car) 0% 12.2X 12.2X 12.4X 1.8X 1.6X 1.5X 19% 16% 14% 3% 4% 4% 17% 15% 14%China H average 12% 13.9X 12.4X 10.7X 2.0X 1.7X 1.5X 16% 16% 16% 2% 2% 2% 19% 19% 19%

Valuation Summary - Global PeersTicker Company name Currency Close Target Price Rating Market cap EPS

2/27/2017 USD'mn

%15-18E CAGR 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

MRTI.BO Maruti Suzuki INR 5,952 7,127 Buy* 26,902 33% 27.1X 23.9X 20.8X 4.6X 5.7X 5.3X 18% 26% 26% 1% 2% 3% 18% 17% 19%TAMO.BO Tata Motors INR 457 447 Neutral 21,000 -8% 10.7X 32.5X 14.0X 1.7X 1.8X 1.6X 18% 6% 12% 0% 0% 0% 18% 11% 13%

India Average 12% 18.9X 28.2X 17.4X 3.1X 3.8X 3.5X 18% 16% 19% 0% 1% 1% 18% 14% 16%005380.KS Hyundai Motor KRW 148,500 165,000 Buy 35,259 -6% 7.4X 7.3X 7.5X 0.6X 0.6X 0.5X 9% 8% 7% 3% 3% 3% 15% 12% 11%000270.KS Kia Motors KRW 38,250 35,000 Neutral 13,553 0% 5.6X 5.8X 5.9X 0.6X 0.5X 0.5X 11% 10% 9% 3% 3% 3% 7% 7% 7%

Korea Average -3% 6.5X 6.6X 6.7X 0.6X 0.6X 0.5X 10% 9% 8% 3% 3% 3% 11% 9% 9%PEUP.PA Peugeot EUR 17.93 19.60 Neutral 16,398 23% 8.0X 7.9X 6.9X 1.2X 1.1X 1.0X 18% 15% 15% 3% 3% 4% 10% 7% 7%VOLVb.ST Volvo SEK 117.70 118.00 Neutral 28,637 4% 14.1X 15.7X 14.0X 1.9X 2.3X 2.1X 15% 15% 16% 4% 3% 3% 12% 11% 11%RENA.PA Renault EUR 83.91 100.00 Neutral 26,226 12% 6.3X 5.7X 5.4X 0.7X 0.7X 0.6X 12% 13% 12% 4% 4% 4% 10% 8% 8%BMWG.DE BMW EUR 84.25 83.00 Neutral 57,654 1% 8.0X 8.7X 8.4X 1.1X 1.0X 0.9X 15% 12% 11% 4% 4% 4% 14% 12% 11%FCHA.MI FCA EUR 10.15 20.30 Buy* 16,374 51% 4.2X 4.3X 2.9X 0.6X 0.7X 0.6X 11% 19% 23% 0% 0% 0% 14% 13% 14%DAIGn.DE Daimler AG EUR 68.76 81.00 Neutral 77,745 1% 6.8X 8.1X 7.9X 1.1X 1.1X 1.1X 18% 15% 14% 5% 5% 5% 17% 15% 15%VOWG_p.DEVolkswagen EUR 141.25 193.00 Buy* 76,303 55% 11.4X 5.4X 4.7X 0.7X 0.6X 0.6X 13% 12% 12% 2% 2% 3% 6% 8% 8%

Europe Average 21% 8.4X 8.0X 7.2X 1.0X 1.1X 1.0X 14% 14% 15% 3% 3% 3% 12% 11% 11%7203.T Toyota Motor JPY 6,406 7,500 Neutral 180,578 0% 10.1X 11.1X 9.2X 1.4X 1.1X 1.0X 14% 10% 12% 3% 3% 3% 15% 12% 14%7269.T Suzuki Motor JPY 4,407 4,900 Buy* 21,859 28% 16.0X 12.0X 12.0X 2.0X 1.8X 1.6X 10% 16% 14% 1% 1% 1% 11% 14% 16%7201.T Nissan Motor JPY 1,105 1,200 Neutral 41,075 10% 9.5X 8.2X 7.6X 1.1X 1.0X 0.9X 11% 11% 12% 4% 4% 4% 5% 7% 8%7261.T Mazda Motor JPY 1,574 2,050 Buy 8,370 -3% 10.0X 9.8X 6.5X 1.4X 0.9X 0.8X 15% 10% 14% 1% 2% 3% 13% 10% 12%7202.T Isuzu Motors JPY 1,490 1,600 Buy 11,142 5% 10.2X 12.4X 9.3X 1.6X 1.5X 1.3X 15% 12% 15% 2% 2% 3% 9% 7% 9%7267.T Honda Motor JPY 3,498 4,200 Buy 56,117 8% 19.8X 11.1X 10.0X 1.0X 0.9X 0.8X 5% 8% 8% 2% 3% 3% 10% 7% 7%7205.T Hino Motors JPY 1,297 1,080 Neutral 6,589 -6% 12.5X 15.4X 12.1X 1.9X 1.6X 1.5X 15% 11% 13% 3% 2% 2% 8% 7% 8%7270.T Fuji Heavy JPY 4,229 5,100 Neutral 29,378 15% 7.9X 11.2X 8.3X 2.6X 2.1X 1.8X 37% 20% 23% 3% 3% 4% 38% 24% 27%

Japan Average 7% 12.0X 11.4X 9.4X 1.6X 1.4X 1.2X 15% 12% 14% 2% 3% 3% 13% 11% 13%F Ford USD 12.47 12.00 Neutral 49,543 -5% 7.2X 7.6X 7.4X 1.7X 1.5X 1.4X 24% 21% 19% 7% 5% 5% 28% 13% 13%GM GM USD 36.90 31.00 Neutral 57,195 -4% 5.1X 6.5X 8.3X 1.1X 1.2X 1.1X 23% 19% 13% 5% 4% 4% 35% 25% 18%TSLA Tesla Motors USD 257.00 185.00 Sell 39,841 NA NA NA NA 7.8X 7.3X 7.3X -14% -3% 8% 0% 0% 0% 10% 3% 8%

American Average -4% 6.1X 7.1X 7.9X 3.5X 3.3X 3.2X 11% 12% 14% 4% 3% 3% 25% 14% 13%American Average (excl. Tesla) -4% 6.1X 7.1X 7.9X 1.4X 1.4X 1.2X 24% 20% 16% 6% 5% 5% 32% 19% 16%

P/E P/B ROE Dividend yield CROCI

CROCIP/E P/B ROE Dividend yield

2017 年 2 月 28 日中国：汽车


Exhibit 43 cont'd: Valuation summary

* denotes stock is on our Regional Conviction List Note: BBG consensus used for NC stocks. NA=Not Applicable. Not Covered stocks include Xinchen


Valuation Summary - Global PartsTicker Company name Currency Close Rating Market cap EPS

2/27/2017 USD'mn

%15-18E CAGR 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

1316.HK Nexteer HKD 10.14 Buy 3,263 19% 12.6X 11.2X 9.3X 3.2X 2.6X 2.1X 28% 25% 25% 2% 2% 2% 25% 24% 25%1148.HK Xinchen HKD 1.40 Not covered 231 8% 6.2X 5.8X NA 0.5X 0.5X 0.5X 9% 9% NA NA 1% 1% NA NA NA0425.HK Minth HKD 25.10 Neutral 3,087 24% 15.1X 12.8X 10.2X 2.5X 2.2X 1.9X 16% 18% 20% 3% 3% 4% 19% 20% 22%600741.SS Huayu CNY 16.58 Neutral 6,232 4% 8.5X 8.6X 8.0X 1.3X 1.2X 1.2X 18% 15% 15% 6% 6% 7% 21% 18% 17%000581.SZ Weifu (A) CNY 23.63 Buy 3,507 14% 14.5X 12.5X 10.7X 1.8X 1.7X 1.5X 13% 14% 15% 2% 2% 3% 15% 16% 17%

China avg. 14% 11.4X 10.2X 9.6X 1.9X 1.6X 1.4X 17% 16% 19% 3% 3% 3% 20% 19% 20%012330.KS Hyundai Mobis KRW 259,000 Neutral 21,645 1% 8.0X 7.9X 7.8X 0.9X 0.8X 0.7X 11% 10% 10% 1% 1% 1% 7% 7% 7%161390.KS Hankook Tire KRW 59,800 Buy* 6,545 13% 7.6X 8.3X 7.9X 1.1X 1.1X 1.0X 16% 14% 13% 1% 1% 1% 12% 12% 12%

Korea avg. 7% 7.8X 8.1X 7.8X 1.0X 0.9X 0.8X 13% 12% 11% 1% 1% 1% 9% 10% 9%ALV Autoliv USD 104.61 Neutral 9,227 12% 17.1X 15.6X 14.2X 2.6X 2.3X 2.1X 16% 15% 15% 2% 2% 3% 13% 12% 12%CNHI CNH Industrial USD 9.17 Buy* 12,508 49% 32.8X 23.2X 14.8X 2.2X 2.6X 2.3X 6% 12% 16% 2% 2% 3% 9% 8% 9%CONG.DE Continental EUR 192.05 Buy 40,597 10% 14.2X 11.5X 10.6X 2.6X 2.2X 1.9X 20% 21% 19% 2% 3% 3% 11% 12% 12%EPED.PA Faurecia EUR 42.20 Neutral 6,119 16% 8.3X 9.5X 9.1X 1.7X 1.6X 1.4X 23% 18% 16% 3% 2% 2% 11% 11% 11%HLE.DE Hella KGaA Hueck EUR 37.25 Neutral 4,374 10% 15.6X 12.4X 10.4X 2.1X 2.0X 1.8X 14% 16% 18% 2% 2% 3% 10% 10% 11%MICP.PA Michelin EUR 106.55 Buy 20,484 20% 10.0X 11.1X 9.8X 1.6X 1.6X 1.5X 17% 16% 16% 4% 3% 4% 8% 9% 9%NRE1V.HE Nokian Renkaat EUR 37.39 Neutral 5,323 8% 17.2X 19.0X 16.6X 3.0X 3.4X 3.2X 19% 18% 20% 5% 4% 4% 22% 18% 19%VLOF.PA Valeo EUR 58.60 Sell 14,577 9% 10.9X 14.8X 13.5X 2.7X 2.9X 2.5X 26% 21% 20% 3% 2% 2% 12% 11% 11%

Europe avg. 17% 15.8X 14.6X 12.4X 2.3X 2.3X 2.1X 18% 17% 18% 3% 3% 3% 12% 11% 12%7259.T Aisin Seiki JPY 5,570 Neutral 13,971 18% 14.1X 14.9X 12.3X 1.2X 1.4X 1.2X 9% 9% 10% 2% 2% 3% 9% 9% 9%5108.T Bridgestone JPY 4,495 Neutral 31,315 7% 11.4X 11.0X 10.1X 1.3X 1.3X 1.2X 12% 12% 12% 4% 3% 4% 8% 10% 9%6902.T Denso JPY 5,008 Neutral 35,925 -5% 18.0X 17.5X 15.7X 1.3X 1.1X 1.1X 8% 7% 7% 2% 2% 2% 9% 9% 9%5110.T Sumitomo Rubber Industries JPY 1,842 Sell 4,301 -6% 10.1X 14.2X 10.4X 1.1X 1.2X 1.1X 10% 8% 10% 3% 3% 3% 5% 7% 7%3116.T Toyota Boshoku JPY 2,467 Neutral 4,069 103% NA 10.8X 10.6X 1.9X 2.0X 1.7X 2% 20% 17% 1% 2% 2% 12% 12% 12%

Japan avg. 23% 13.4X 13.7X 11.8X 1.4X 1.4X 1.3X 8% 11% 11% 3% 2% 3% 9% 9% 9%LEA Lear Corp. USD 141.36 Sell 10,365 14% 8.2X 9.1X 8.9X 2.7X 2.7X 2.3X 34% 32% 28% 1% 1% 2% 35% 31% 28%MGA Magna USD 43.05 Neutral 16,488 12% 7.6X 7.5X 6.8X 1.6X 1.8X 1.9X 22% 23% 27% 2% 3% 3% 19% 8% 8%BWA BorgWarner Inc. USD 41.53 Neutral 8,959 8% 10.6X 12.2X 10.9X 2.3X 2.5X 2.3X 21% 21% 21% 2% 1% 1% 14% 16% 16%DLPH Delphi USD 76.69 Buy 20,930 11% 10.9X 11.9X 10.6X 7.8X 7.3X 6.0X 74% 66% 61% 2% 2% 2% 19% 25% 24%GT Goodyear USD 35.36 Buy 9,264 18% 7.4X 8.6X 6.5X 1.7X 1.9X 1.6X 25% 22% 26% 1% 1% 1% 11% 13% 14%NEMAKA.MX Nemak MXN 20.14 Neutral 3,135 4% 12.3X 9.1X 8.9X 1.8X 1.5X 1.4X 17% 17% 16% 3% 3% 3% 17% 16% 14%

US avg. 11% 9.5X 9.7X 8.8X 3.0X 3.0X 2.6X 32% 30% 30% 2% 2% 2% 19% 18% 17%

CROCIP/E P/B ROE Dividend yield

2017 年 2 月 28 日中国：汽车


Exhibit 43 cont'd: Valuation summary

Notes: BBG consensus used for NC stocks. NA=Not Applicable. Not Covered stocks include Yongda, Pangda, Yaxia, Sinomach, China Grand, Inchcape, Pendragon, Lookers, Autobacs Seven and Lithia Motors.


Valuation Summary - Auto Dealer ChinaTicker Company name Currency Close Rating Market cap EPS

2/27/2017 USD'mn%

15-18E CAGR

2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

0881.HK Zhongsheng HKD 11.20 Neutral 3,097 68% 12.7X 11.2X 9.8X 1.7X 1.5X 1.3X 8.2X 7.2X 6.6X 14% 14% 14% 2% 2% 2% 15% 12% 10%1728.HK Zhengtong HKD 2.99 Neutral 851 7% 10.7X 8.9X 7.8X 0.7X 0.6X 0.6X 7.1X 6.3X 5.6X 6% 7% 8% 3% 3% 4% 10% 11% 12%1293.HK Baoxin HKD 3.54 Neutral 1,166 57% 19.4X 11.5X 9.3X 1.5X 1.3X 1.2X 9.9X 8.1X 6.7X 8% 12% 13% 0% 0% 1% 10% 12% 13%3836.HK Harmony HKD 3.67 Buy 745 2% 8.6X 8.3X 7.8X 0.8X 0.8X 0.7X 3.9X 3.9X 3.1X 10% 9% 9% 3% 3% 4% 16% 16% 16%3669.HK Yongda HKD 6.53 Not covered 1,247 15% 12.4X 10.1X 8.9X 1.8X 1.6X 1.4X 9.6X 9.8X 6.9X 17% 18% 19% 3% 3% 4% NA NA NA

Off Shore Average 30% 12.8X 10.0X 8.7X 1.3X 1.2X 1.0X 7.7X 7.1X 5.8X 11% 12% 13% 2% 2% 3% 13% 13% 13%601258.SS Pangda CNY 2.85 Not covered 2,770 NA 47.8X 33.8X 41.0X NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA002607.SZ Yaxia CNY 10.59 Not covered 703 29% 46.4X 36.8X 28.1X 4.2X 3.8X 3.3X 23.8X 21.2X 18.4X 9% 10% 12% NA NA NA NA NA NA600335.SS Sinomach CNY 12.75 Not covered 1,912 21% 10.6X 8.7X 7.2X NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA600297.SS China Grand CNY 9.35 Not covered 7,489 28% 18.9X 14.8X 11.8X 2.3X 2.0X 1.7X 17.5X 14.4X 12.7X 12% 14% 14% NA NA NA NA NA NA

On Shore Average 26% 31.0X 23.5X 22.0X 3.2X 2.9X 2.5X 20.7X 17.8X 15.6X 11% 12% 13% NA NA NA NA NA NA

Valuation Summary - Global PeersTicker Company name Currency Close Rating Market cap EPS

2/27/2017 USD'mn%

15-18E CAGR

2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

INCH.L Inchcape GBP 740.00 Not covered 3,882 8% 13.3X 11.8X 11.3X 2.4X 2.1X 1.9X 7.9X 7.1X 6.9X 18% 18% 17% 3% 3% 4% NA NA NAPDG.L Pendragon GBP 34.00 Not covered 608 0% 8.9X 8.9X 8.3X NA NA NA 4.3X 4.2X 4.1X 11% 11% NA 4% 4% 5% NA NA NALOOK.L Lookers GBP 128.50 Not covered 635 5% 8.3X 8.2X 7.9X 1.0X 0.9X 0.8X 5.3X 5.3X 5.2X 18% 14% 14% 3% 3% 3% NA NA NA

Europe Average 4% 10.2X 9.6X 9.2X 1.7X 1.5X 1.4X 5.8X 5.5X 5.4X 16% 14% 16% 3% 4% 4% NA NA NA9832.T Autobacs Seven JPY 1,770.00 Not covered 1,300 2% 31.2X 41.6X 31.9X NA NA NA NA NA NA NA NA NA 3% 3% 3% NA NA NA

Japan Average 2% 31.2X 41.6X 31.9X NA NA NA NA NA NA NA NA NA 3% 3% 3% NA NA NAGPI Group 1 USD 79.52 Sell 1,925 1% 8.2X 10.3X 11.4X 1.4X 1.6X 1.4X 9.5X 10.0X 10.4X 18% 17% 14% 2% 1% 1% 12% 6% 6%AN AutoNation USD 46.83 Neutral 5,590 1% 12.0X 10.6X 11.4X 2.2X 1.8X 1.6X 11.4X 9.7X 10.6X 18% 18% 15% 0% 0% 0% 7% -3% 14%LAD Lithia Motors USD 101.80 Not covered 2,563 9% 13.2X 11.9X 11.1X 2.8X 2.3X 2.0X 12.2X 11.1X 10.5X 27% 25% 23% 1% 1% 1% NA NA NA

US Average 3% 11.1X 10.9X 11.3X 2.1X 1.9X 1.7X 11.0X 10.2X 10.5X 21% 20% 17% 1% 1% 1% 9% 1% 10%

P/E P/B ROE Dividend yield CROCIEV/EBITDA

P/E P/B ROE Dividend yield CROCIEV/EBITDA

2017 年 2 月 28 日中国：汽车


信息披露附录申明我们，杨一朋、丁妤倩，在此申明，本报告所表述的所有观点准确反映了我们对上述公司或其证券的个人看法。此外，我们的薪金的任何部分不曾与，不与，也将不会与本报告中的具体推荐意见或观点直接或间

接相关。

投资摘要投资摘要部分通过将一只股票的主要指标与其行业和市场相比较来评价该股的投资环境。所描述的四个主要指标包括增长、回报、估值倍数和波动性。增长、回报和估值倍数都是运用数种方法综合计算而成，以确

定该股在地区研究行业内所处的百分位排名。

每项指标的准确计算方式可能随着财务年度、行业和所属地区的不同而有所变化，但标准方法如下：

增长是下一年预测与当前年度预测的综合比较，如每股盈利、EBITDA 和收入等。回报是各项资本回报指标一年预测的加总，如 CROCI、平均运用资本回报率和净资产回报率。估值倍数根据一年预期估值比率综

合计算，如市盈率、股息收益率、EV/FCF、EV/EBITDA、EV/DACF、市净率。波动性根据 12个月的历史波动性计算并经股息调整。

Quantum Quantum 是提供具体财务报表数据历史、预测和比率的高盛专有数据库，它可以用于对单一公司的深入分析，或在不同行业和市场的公司之间进行比较。

GS SUSTAIN GS SUSTAIN是侧重于长期做多建议的相对稳定的全球投资策略。GS SUSTAIN关注名单涵盖了我们认为相对于全球同业具有持续竞争优势和出色的资本回报、因而有望在长期内表现出色的行业领军企业。我们

对领军企业的筛选基于对以下三方面的量化分析：现金投资的现金回报、行业地位和管理水平（公司管理层对行业面临的环境、社会和企业治理方面管理的有效性）。

信息披露

相关的股票研究范围杨一朋：A股汽车、中国汽车。丁妤倩：A股汽车、中国汽车。

A股汽车：江淮汽车、长安汽车 A、一汽轿车、福耀玻璃(A)、长城汽车(A)、华域汽车、上汽集团、潍柴动力(A)、威孚高科 A。

中国汽车：宝信、华晨汽车、比亚迪、和谐汽车、东风集团、福耀玻璃(H)、吉利汽车、长城汽车(H)、广汽集团、敏实集团、耐世特、中国重汽、潍柴动力(H)、正通汽车、中升集团。

与公司有关的法定披露以下信息披露了高盛高华证券有限责任公司（“高盛高华”）与北京高华证券有限责任公司（“高华证券”）投资研究部所研究的并在本研究报告中提及的公司之间的关系。

高盛高华在过去 12个月中曾从下述公司获得投资银行服务报酬：比亚迪 (HK$45.80)、和谐汽车 (HK$3.95)、广汽集团 (HK$12.94)、潍柴动力(A) (Rmb11.49)、潍柴动力(H) (HK$13.76)、中升集团 (HK$11.98)

高盛高华在今后 3个月中预计将从下述公司获得或寻求获得投资银行服务报酬：比亚迪 (HK$45.80)、和谐汽车 (HK$3.95)、东风集团 (HK$9.19)、吉利汽车 (HK$10.80)、长城汽车(H) (HK$9.58)、长城汽车(A) (Rmb12.98)、广汽集团 (HK$12.94)、华域汽车 (Rmb16.97)、敏实集团 (HK$24.55)、耐世特 (HK$10.36)、上汽集团 (Rmb25.80)、潍柴动力(A) (Rmb11.49)、潍柴动力(H) (HK$13.76)、威孚高科 A (Rmb23.90)、中

升集团 (HK$11.98)

高盛高华在过去 12个月中与下述公司存在投资银行客户关系：比亚迪 (HK$45.80)、和谐汽车 (HK$3.95)、吉利汽车 (HK$10.80)、长城汽车(H) (HK$9.58)、长城汽车(A) (Rmb12.98)、广汽集团 (HK$12.94)、上汽

集团 (Rmb25.80)、潍柴动力(A) (Rmb11.49)、潍柴动力(H) (HK$13.76)、中升集团 (HK$11.98)

没有对下述公司的具体信息披露：江淮汽车 (Rmb12.17)、宝信 (HK$3.61)、华晨汽车 (HK$12.36)、长安汽车 A (Rmb16.27)、一汽轿车 (Rmb12.08)、中国重汽 (HK$6.58)、正通汽车 (HK$3.47)

公司评级、研究行业及评级和相关定义买入、中性、卖出：分析师建议将评为买入或卖出的股票纳入地区投资名单。一只股票在投资名单中评为买入或卖出由其相对于所属研究行业的潜在回报决定。任何未获得买入或卖出评级的股票均被视为中性评

级。每个地区投资评估委员会根据 25-35%的股票评级为买入、10-15%的股票评级为卖出的全球指导原则来管理该地区的投资名单；但是，在某一特定行业买入和卖出评级的分布可能根据地区投资评估委员会的决

定而有所不同。地区强力买入或卖出名单是以潜在回报规模或实现回报的可能性为主要依据的投资建议。

潜在回报：代表当前股价与一定时间范围内预测目标价格之差。分析师被要求对研究范围内的所有股票给出目标价格。潜在回报、目标价格及相关时间范围在每份加入投资名单或重申维持在投资名单的研究报告中

都有注明。

研究行业及评级：分析师给出下列评级中的其中一项代表其根据行业历史基本面及／或估值对研究对象的投资前景的看法。具吸引力(A)：未来 12个月内投资前景优于研究范围的历史基本面及／或估值。中性(N)：未来 12个月内投资前景相对研究范围的历史基本面及／或估值持平。谨慎(C)：未来 12个月内投资前景劣于研究范围的历史基本面及／或估值。

2017 年 2 月 28 日中国：汽车


暂无评级(NR)：在高盛高华于涉及该公司的一项合并交易或战略性交易中担任咨询顾问时并在某些其他情况下，投资评级和目标价格已经根据高华证券的政策予以除去。暂停评级(RS)：由于缺乏足够的基础去确定

投资评级或价格目标，或在发表报告方面存在法律、监管或政策的限制，我们已经暂停对这种股票给予投资评级和价格目标。此前对这种股票作出的投资评级和价格目标(如有的话)将不再有效，因此投资者不应依

赖该等资料。暂停研究(CS)：我们已经暂停对该公司的研究。没有研究(NC)：我们没有对该公司进行研究。不存在或不适用(NA)：此资料不存在或不适用。无意义(NM)：此资料无意义，因此不包括在报告内。

一般披露本报告在中国由高华证券分发。高华证券具备证券投资咨询业务资格。

本研究报告仅供我们的客户使用。除了与高盛相关的披露，本研究报告是基于我们认为可靠的目前已公开的信息，但我们不保证该信息的准确性和完整性，客户也不应该依赖该信息是准确和完整的。报告中的信

息、观点、估算和预测均截至报告的发表日，且可能在不事先通知的情况下进行调整。我们会适时地更新我们的研究，但各种规定可能会阻止我们这样做。除了一些定期出版的行业报告之外，绝大多数报告是在分

析师认为适当的时候不定期地出版。

高盛高华为高华证券的关联机构，从事投资银行业务。高华证券、高盛高华及它们的关联机构与本报告中涉及的大部分公司保持着投资银行业务和其它业务关系。

我们的销售人员、交易员和其它专业人员可能会向我们的客户及自营交易部提供与本研究报告中的观点截然相反的口头或书面市场评论或交易策略。我们的资产管理部门、自营交易部和投资业务部可能会做出与本

报告的建议或表达的意见不一致的投资决策。

本报告中署名的分析师可能已经与包括高华证券销售人员和交易员在内的我们的客户讨论，或在本报告中讨论交易策略，其中提及可能会对本报告讨论的证券市场价格产生短期影响的推动因素或事件，该影响在方

向上可能与分析师发布的股票目标价格相反。任何此类交易策略都区别于且不影响分析师对于该股的基本评级，此类评级反映了某只股票相对于报告中描述的研究范围内股票的回报潜力。

高华证券及其关联机构、高级职员、董事和雇员，不包括股票分析师和信贷分析师，将不时地对本研究报告所涉及的证券或衍生工具持有多头或空头头寸，担任上述证券或衍生工具的交易对手，或买卖上述证券或

衍生工具。

在高盛组织的会议上的第三方演讲嘉宾（包括高华证券或高盛其它部门人员）的观点不一定反映全球投资研究部的观点，也并非高华证券或高盛的正式观点。

在任何要约出售股票或征求购买股票要约的行为为非法的地区，本报告不构成该等出售要约或征求购买要约。本报告不构成个人投资建议，也没有考虑到个别客户特殊的投资目标、财务状况或需求。客户应考虑本

报告中的任何意见或建议是否符合其特定状况，以及(若有必要)寻求专家的意见，包括税务意见。本报告中提及的投资价格和价值以及这些投资带来的收入可能会波动。过去的表现并不代表未来的表现，未来的回

报也无法保证，投资者可能会损失本金。

某些交易，包括牵涉期货、期权和其它衍生工具的交易，有很大的风险，因此并不适合所有投资者。外汇汇率波动有可能对某些投资的价值或价格或来自这一投资的收入产生不良影响。

投资者可以向高华销售代表取得或通过 http://www.theocc.com/about/publications/character-risks.jsp取得当前的期权披露文件。对于包含多重期权买卖的期权策略结构产品，例如，期权差价结构产品，其交易成本

可能较高。与交易相关的文件将根据要求提供。

所有研究报告均以电子出版物的形式刊登在高华客户网上并向所有客户同步提供。高华未授权任何第三方整合者转发其研究报告。有关某特定证券的研究报告、模型或其它数据，请联络您的销售代表。

北京高华证券有限责任公司版权所有 © 2017 年

未经北京高华证券有限责任公司事先书面同意，本材料的任何部分均不得(i)以任何方式制作任何形式的拷贝、复印件或复制品，或(ii)再次分发。

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