[ET Net News Agency, 7 August 2019] Citi Research maintained its target price for
Dongfeng Motor (DFM)(00489) unchanged at HK$6.2 but upgraded its rating to "neutral" from
"sell" as the stock price approached its target price.
The research house said the 5x 2019 P/E target was set near the bottom end of the cycle
range of 4-8x for the China autos sector given Citi's expectation that PV retail sales in
China will be under pressure.
It reiterated that its valuation is justified because: (1) historical PB bottomed at
0.4x while Citi's FY2019 -25% earnings forecast is non-consensus; (2) historical PE
bottomed at 4x - Citi expects 2019 ROIC to further fall to 6.4%; and (3) Citi expects DFM
to deliver negative FCF at Rmb2.1/1.2/1.3bn over the next three years. (KL)