In 1H20, GWM’s sales volume was 395.1K units, a decrease of 20%YoY (Haval -26% YoY/ WEY -43% YoY/ pickup truck +45% YoY/ ORA -65% YoY. Total sales performance continued its MoM recovery path (-42% YoY in Mar/ -4% YoY in Apr/ +31% YoY in May/ +30% YoY in Jun). We upgrade our rating to BUY from Hold given 1) new product cycle in 2H20E and 2) optimistic pickup truck sales forecast.
- The new generation (3rd new generation) Haval H6, which is based on the new B30 platform, will roll out in Aug 2020. As the flagship model of Haval series, H6 has been ranked Chinese No.1 SUV for 85 consecutive months in terms of sales and accounted for 50% of the Haval sales in 2019. We believe the rollout of brand new H6 will mark the milestone for the new product cycle. Other recent new models such as Haval Dagou/ORA Baimao will also enrich its product portfolio.
- Benefiting from the favorable local policy on pickup trucks (Chongqing, Shanghai, etc), the sales volume of GWM pickup trucks in 1H20 beat CMBI expectation. Particularly, P-Series recorded over 15K units while Wingle also achieved 12K units in Jun 2020. From the industry perspective, the penetration rate of pickup trucks was only 1.8% in 2019. We believe the penetration rate will further rise given the policy support and new application scenario (PV). As the dominant player in the pickup trucks sector, GWM has continued to gain market share to 38% in 2019 from 33% in 2018. Given its product recognition, we expect the sales of its pickup truck will be 240K in 2020E, an increase of 61%YoY.
- We slightly raised our sales volume forecast from 1.01mn to 1.02mn in 2020E (+11%YoY in 2H20E), reflecting excellent pickup truck performance and new product cycle. In addition, we expect that the increase in the proportion of pickup sales will lift overall ASP by 1%YoY in 2020E. As a result, we raise our top-line forecast in 2020E by 2% to RMB95.0bn. Furthermore, we raise our bottom-line forecast by 5% to RMB3.7bn in 2020E to reflect the higher GPM forecast.
- Re-rating opportunity surges prompted by the excellent pickups truck performance and the new product cycle. Therefore, we raise our TP to HK$7.5 (based on new 13.5x average 2020E/21E P/E) with an upside of 16.8% from initial TP HK$4.7 (based on initial 11.0x 2020E P/E). Upgrade to BUY from Hold.
