GWM announced its FY19 results. Revenue achieved RMB96.2bn (vs CMBIS estimate of RMB94.8bn/ vs consensus estimate of RMB96.6bn), a decrease of 3% YoY. NP was RM4.5bn (vs CMBIS estimate RMB3.9bn / vs consensus estimate of RMB4.3bn), a decrease of 14%. EPS declined by 14% to RMB0.49. DPS will be determined after the audit process completes. We lowered TP to HK$4.7 (from HK$5.9), based on same 11x 2020E P/E.
- To reflect the impact of COVID-19, GWM adjusted down its sales target for 2020E to 1.02 mn units from 1.11 mn units. The Company will launch two new models in 2H20E including the new generation of Haval H6. Among the Haval product family, H6 accounted for 50% of the total sales volume in 2019. We believe the new generation of H6, which builds on the new platform, will support the sales performance. Given favorable policy for the pickup trucks, the sales volume of the pickup trucks segment has steadily increased. In 2019, the sales volume of pickup trucks reached 165K, an increase of 13% YoY, offsetting the decline in the PV segment. A new generation of WEY will also be rolled out at the end of 2020E/early 2021E, leading the brand upgrade of GWM. We forecast the total sales volume of GWM will be 1.01mn units in 2020E.
- GWM’s R&D investment focuses on NEV and connected-vehicle field. Specifically, its affiliated companies under the parent company have the technical advantage of power battery while GWM plays to launch L3 self-driving product in 2021E. We believe GWM has a long-term vision and has growth potential in the long run. However, we believe that the short-term performance inflection point will appear in 2H20E given its product pipeline.
- The Company sticks to its globalization strategy. In 2019, GWM has exported 65K units, an increase of 45% YoY. In addition, the Tula factory in Russia was put into production in mid 2019 with an initial production capacity of 80K units. In early 2020, GWM acquired two factories located in India/Thailand from GM. We believe GWM will further expand its footprint in the oversea market.
- We cut our top-line forecast in 2020E by 5% to RMB92.7bn to reflect the COVID-19 impact. Furthermore, we cut our bottom-line forecast by 18% to RMB3.5bn in 2020E to reflect higher expense ratio. Therefore, we cut our TP to HK$4.7 (based on initial 11.0x 2020E P/E) with a downside of 0.3% from initial TP HK$5.9. Reiterate HOLD.
