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CN Auto sector – April passenger car sales HK Wasion (03393.HK, HK$4.28, OP): Prices & shipments to rise for key products in
up 2.8% YoY 2H11
CN Real estate sector – Sales down 20% Impressive results for first two rounds of bid solicitation in 2011; sales to grow markedly in
WoW last week 2H11. Gross margin to rebound significantly on policy changes. 12M target price of HK$5.5;
reiterate Outperform rating.
Conclusion
According to the China Association of Automobile Manufacturers, China’s passenger car unit
sales were 1.14mn in April, down 15.2% MoM but up 2.8% YoY. Sports utility vehicle unit
sales grew fastest among passenger cars, up 18.1% YoY to 124.1k units, followed by sedan
and multi-purpose vehicle (MPV), which rose 4.2% YoY and 3.9% YoY, respectively, to
791.4k units and 40k units. Crossover sales declined most sharply, down 10.5% YoY, to
186.8k units. Car inventories grew 3.4% YoY in April to 428.5k at the automaker level,
estimated based on passenger car output and sales. Crossover saw inventory grow most, by
around 21k units, among all types of passenger cars. MPV inventory increased 600 units, while
sedan and SUV inventories decreased 4.2k units and 3.3k units, respectively.
We think the auto market is slowing on several factors. Car sales growth was only 7.5% in
January-April, which is slower than expected. This could herald lower-than-forecast growth in
2011. Sales performance by vehicle type was a mixed bag. While SUV sales grew a strong 38.4%
YoY in the period, crossover sales fell 6.7% YoY. Although Great Wall Motor’s (02333.HK) SUV
sales growth slowed, overall passenger car sales growth hit a hefty 46.7% in January-April.
Given the nine new models slated for debut in 2011, we will keep a close eye on the company.
Affected by the recent Japan earthquake, the market share of Japanese brands declined from
21% in March to 15% in April. The figure could hit a yearly low in May. The share prices of
Guangzhou Automobile (02238.HK) and Dongfeng Motor (00489.HK) are cheap at present, in
our opinion. If component supply recovers, sales could rebound and earnings grow.
400
0
2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001
2006 2007 2008 2009 2010 2011
Conclusion
Commodity housing sales in the 24 cities tracked by us dropped 18.6% WoW last week (May
1-7). However, they grew 33.7% YoY, up from 28.4% in the previous week, due to a rapid
sales decline last May, caused by housing market reign-in measures announced by the state in
April 2010. Only four of the 24 cities saw home unit sales rise WoW, while all tier-one cities
experienced unit declines of 20-40% WoW. Among tier-two cities, Kunming, Chongqing and
Fuzhou fell most WoW, by 72.6%, 47.6% and 48.6%, respectively. Unit sales in cities in the
Yangtze River Delta and the Pearl River Delta jumped 75% YoY and 64% YoY, respectively,
due to a policy-led lower comparison base. Seven cities registered higher home inventories
WoW, rising by a higher rate of 3.3% on average. Home inventories of fifteen cities grew
31% YoY. Sales prices were relatively stable.
In April, unit sales in the 24 cities declined 20% YoY. Vanke (000002.SZ), the real estate
leader in China, and Poly Real Estate (600048.SS) performed poorly in April in terms of unit
sales, reflecting continued effect of the cooling policy. Given the WoW unit sales decline in the
first week of May, we anticipate growing pressure in the real estate market over the next few
months. For this reason and likely more rein-in measures, we remain neutral on China’s real
estate sector.
Last week 24 cities saw home sales Beijing 2,912 (13.0) (45.2) 51,596 (22.1) 62,783 (28.0) 0.1 22
Tianjin 1,387 5.7 31.6 30,073 (8.4) - - - 0
fall and home inventories continue Jinan 495 6.5 (8.8) 18,494 202.9 - - - 0
B ohai Bay
growing R im
Dalian 403 (47.0) 19.2 7,813 (31.0) 55,673 205.8 3.6 138
Qingdao 1,419 - (25.4) 26,826 - 62,871 35.4 (0.1) 44
Shijiazhuang 683 19.4 (9.4) 14,781 - - - - -
Sub-average (5.7) (6.3) 35.3 (28.0) 1.2
Shanghai 2,589 42.0 (29.8) 59,579 7.0 50,656 33.9 (0.7) 20
Nanjing 471 111.2 (25.6) 14,203 (9.4) 33,441 41.9 (0.5) 71
Yangtze River Suzhou 602 83.6 (24.6) 13,615 (10.4) 21,878 40.3 0.1 36
Delta Wuxi 411 31.7 (20.0) 8,973 (39.8) 50,615 11.4 0.1 123
Ningbo 332 107.4 (8.2) 15,968 70.2 94,799 35.4 0.4 286
Sub-average 75.2 (21.7) 3.5 38.7 (0.1)
Shenzhen 448 59.4 (18.1) 11,437 1.1 30,404 (1.8) (2.3) 68
Guangzhou 1,350 3.0 (19.9) 23,159 22.4 39,218 23.0 (2.1) 29
Dongguan 942 - (31.3) 17,266 - - - - -
Fuzhou 141 (46.2) (47.6) 5,448 (26.4) - - - -
Pearl River
Xiamen 299 28.9 (13.3) 5,267 (39.5) - - - -
Delta
Foshan 504 13.3 (5.4) 18,355 92.1 343,792 7.8 0.4 682
Huizhou 486 42.9 (36.2) 8,050 7.6 11,202 23.8 (4.1) 23
Shantou 166 348.6 0.1 4,723 213.0 - - - -
Sub-average 64.3 (20.3) 38.6 13.2 (2.1)
Chongqing 2,127 (31.8) (48.6) 52,954 (33.7) 106,150 5.7 57.3 50
Chengdu 803 (62.6) (13.9) 27,853 8.0 - - - -
Kunm ing 1,268 - (72.6) 29,815 - - - - -
Inland China
Changsha 964 (30.0) (20.6) 17,815 (45.0) - - - -
Nanchang 699 - 17.5 8,949 - 6,740 - (6.1) 10
Sub-average (41.4) (27.6) (23.6) 5.7 25.6
Average 0 33.7 (18.6) 0 18.9 0 31.0 3.3 94
Source: Wind
on expectations of stent price cuts. This would decelerate Source: KGI Asia Limited
MicroPort’s sales growth in 1H11 and undermine interim results.
Top 10 gainers
Companies Gain
Quick Bullets
Shanghai Ningbo Fuda (600724) 10.0
A-share Eastern Communications (600776) 10.0
Qiangshan Paper (600103) 10.0 㞕 China released April macro data on Wednesday. New loans hit Rmb739.6bn in April,
Veken Elite (600152) 10.0 higher than Bloomberg consensus, while CPI sustained at 5.3%. Interest rate hike
Guannong Fruit & Antler (600251) 10.0 speculation seems to have cooled given a sign of slowdown found in April's economic
Shenzhen Sun Phar,(300216) 15.4
indicators. (China Securities Journal)
A-share Tond Chemical (002360) 10.0
Norinco International (000065) 10.0 㞕 NDRC mulls “window guidance" for the country's industry associations in order to
GuanFu Modern Household (002102) 10.0 contain runaway prices. (Shanghai Securities News)
Guangzheng Steel Structure (002524) 10.0
㞕 The Shanghai branch of the PBoC has vowed to strengthen its monitoring of abnormal
Top 10 active cross-border capital flows to fight hot money. (Yicai)
Companies Turnover
(Rmb mn)
Shanghai Rare-Earth Hi-Tech (600111) 3,524
A-share HaiTong Securities (600837) 1,647
3F New Materials (600636) 1,480
Baotou Steel Union (600010) 1,395
Shanxi Coking (600740) 1,339
Shenzhen TCL Corporation (000100) 1,752
A-share China Nonferrous Construction (000758) 1,340
Advanced Tech & materials (000969) 968
Salt Lake Potash (000792) 794
Tibet Development (000752) 632
SSEA performance
Daily trading volume, Rmb bn (LHS); SSEA (RHS)
350 4,000
300
3,500
250
200 3,000
150 2,500
100
2,000
50
0 1,500
Apr-10 May-10 Jun-10 Aug-10 Sep-10 Nov-10 Dec-10 Jan-11 Mar-11 May-11
Trading volume SSEA
Source: Wise
SZSA performance
Daily trading volume, Rmb bn (LHS); SZSA (RHS)
240 1,600
210
1,400
180
1,200
150
120 1,000
90
800
60
30 600
0 400
Apr-10 May-10 Jun-10 Aug-10 Sep-10 Nov-10 Dec-10 Jan-11 Mar-11 May-11
Trading volume SZSA
Source: Wise
Shanghai Taipei
Room 2502-2504 No.317 Xian Xia Road, 700 Mingshui Road,
Shanghai,PRC200051, Taipei, Taiwan
Telephone 886.2.2181.8888
Shenzhen Facsimile 886.2.8501.1691
Room 24D1, 24/F, A Unit, Zhen Ye Building, 2014
Bao’annan Road, Shenzhen
PRC 518008
Note When an analyst publishes a new report on a covered stock, we rank the stock's
excess return with those of other stocks in KGI's coverage universe in the related
market. We will assign a rating based on its ranking. If an analyst does not publish a
new report on a covered stock, its rating will not be changed automatically.
Disclaimer
This information has been compiled from sources we believe to be reliable, but we do not hold ourselves
responsible for its completeness or accuracy. It is not an offer to sell or solicitation of an offer to buy any securities.
KGI Asia Limited and its affiliates and their officers and employees may or may not have a position in or with
respect to the securities mentioned herein. KGI Asia Limited (or one of its affiliates) may from time to time
perform investment banking or other services or solicit investment banking or other business for any company
mentioned in this report. All opinions and estimates included in this report constitute our judgment as of this date
and are subject to change without notice.