[ET Net News Agency, 1 August 2019] HSBC Global Research has a non-consensus view that
China's auto sales will not recover in 2H 2019. The research house said its proprietary
survey and electrification analysis led it to believe that margins on Chinese OEMs will be
pressured further.
It said the Street appears to be confused over the China autos sector with no consensus
about when or what the road to recovery could look like. On the one hand, 2018 was
exceptionally rough as car sales fell for the first time in 28 years and 2019 is set for
another year of falling sales. Meanwhile, full-year guidance has at best stayed flat this
year, with some auto companies even revising down forecasts.
HSBC believes that dealers can stand out as they are the beneficiaries of strong sales
in the luxury segment and the relaxation of car plate restrictions. From the start of the
year to May, retail sales for luxury brands grew 7% while overall industry saw negative
growth of 5%.
For OEMs, HSBC forecast an overall 38% decline in 1H earnings driven by lower prices and
a decline in sales volume. It revised its target prices and ratings for the automakers and
dealers it covers as follows:

Name Target Price Rating
--------------------------------------------------------
BAIC (01958) HK$6.10 to HK$3.60 Hold to Reduce
Brilliance (01114) HK$8.60 to HK$8.40 Hold
Dongfeng (00489) HK$8.90 to HK$7.00 Buy to Hold
GAC Group (02238) HK$9.10 to HK$5.40 Hold to Reduce
Geely (00175) HK$11.30 to HK$10 Reduce
Great Wall (02333) HK$6.20 to HK$4.00 Hold to Reduce
Yongda (03669) HK$6.80 to HK$7.10 Hold
Zhengtong (01728) HK$5.50 to HK$3.20 Buy to Hold
Zhongsheng (00881) HK$21.00 to HK$20 Hold

(KL)