SAIC Motor announced its FY19 results. Revenue achieved RMB843.3bn (vs CMBIS estimate of RMB886.3bn/ consensus estimate of RMB818.6bn), a decrease of 7% YoY. NP was RMB25.6bn (vs CMBIS estimate RMB30.0bn / consensus estimate of RMB26.8bn), a decrease of 29% YoY. EPS declined 29% to RMB2.19 while DPS was RMB0.88 in 2019. The divd yield was 4.6%.
- The Company sold 6.24 mn units in 2019, a decline of 11.5%YoY (SAIC PV of 0.7mn/-4.1%YoY, SAIC Volkswagen of 2.0mn/-3.1%YoY, SAIC-GM of 1.6mn/-18.8%, SAIC-GM-Wuling of 1.7mn/-19.4%YoY.) GPM from new car sales fell to 9.3% in 2019 from 11.5% in 2018, dragging down the bottom-line. The main factors that contribute to the GPM decline include the emission standard switch, the decline of NEV subsidy, etc. We expect its 2020E sales volume to be 5.79mn units (vs Company’s target of 6.0mn).
- The inflection point of short-term performance depends on the performance of two GMs. In 2019, SAIC-GM sales volume fell 18.8%YoY, of which Cadillac fell 17.3%/Buick fell 13.7%/Chevrolet fell 51.8%. One of the reasons is that SAIC-GM chose to use the three-cylinder engine in Buick Excelle and Chevrolet Cruze in 2019. Since Feb 2020, SAIC-GM plans to roll out the four-cylinder engine version on key models. We expect the sales performance of SAIC-GM will start to improve in 2H20E. In addition, SAIC-GM-Wuling sales volume fell 19.9%YoY in 2019. We expect SAIC-GM-Wuling will also improve marginally as New Baojun brand has a great product pipeline in 2020E.
- In the medium-run, SAIC-Volkswagen will support the performance. The SAIC-Volkswagen MEB plant is expected to be put into production in 4Q20E with a production capacity of 300K. It will produce a variety of EV models for Volkswagen, Škoda and, Audi. In addition, SAIC-Audi is expected to roll out its first model A7L in 2021E. We believe that Audi, as one of the three famous luxurious brands, will become a new growth engine for SAIC Motor.
- We adjust down the top-line forecast in 2020E by 12% to RMB787bn to reflect the negative impact of COVID-19. Furthermore, we cut our bottom-line forecast by 34% to RMB21.5bn in 2020E given 1) lower GPM forecast; 2) operating deleverage; 3) lower PL from JVs. Therefore, we cut our TP to RMB21.1 (based on new 11.5x 20E P/E) with an upside of 11.6% from initial TP RMB25.6 (based on initial 9.2x 20E P/E). Reiterate HOLD.
