The China Passenger Car Association reported that July year on year sales increased by 23%. Ytd increases were 11% over 2015. Three Hong Kong car stocks with a combined market cap of 205 Billion hkd, (23 Billion usd equivalent), beat that rise. Geely 175 hk, Great Wall 2333 hk, and BAIC 1958 hk, all reported year on year monthly and year to date sales increases. Geely and Great Wall managed to drive up over 4% from June, but BAIC dove 27%.
BAIC sells its own brand, Beijing Benz, but relies on Hyundai and Mercedes Benz for the bulk of its sales and profits.
The drop was striking and defied continued increases by home-grown competitors Geely and Great Wall.
Much has been made over the Chinese voracious appetite for SUV’S. Geely and Great Wall are polar opposites in their reliance on SUV’S, with Great Wall relying heavily on SUV’S, particularly its Haval H6, which is considered a close clone of the 4th generation Honda CRV. Other types have had little growth, including the Wingle pickup, with pickups banned in major cities although some restrictions are easing along with a hope for more acceptance. BAIC only breaks down the sales by type for its own brand, with SUV’s ramping up to 50% of 2016 unit sales from only 7% in 2015.
Based on 2015 unit sales for Geely and Great Wall, there do appear to be seasonal sales variances with the highest sales occurring in the last quarter. (BAIC was excluded since it didn’t provide monthly sales data for the full year of 2015).
China sales growth is critical for these companies, with Geely and Great Wall exports shriveling, (BAIC doesn’t report any exports).
Note: All charts and data were prepared from HK Filings with the exception of the stock data, which was from Bloomberg. March was primarily used as the starting point since January and February are extremely variable due to Chinese New Year.
Despite the year on year overall increases, the stocks in Hong Kong are showing a moderate trailing p/e ratio; with Geely outperforming the Hang Seng on a year to date and 12 month return basis. Geely has recently completed the acquisition of two subsidiaries, Shanxi & Baoji, with combined capacity of 300,000 vehicles, construction completion expected in 3Q 2016.
None of these companies provide sales dollars in their monthly updates. Interim results have not yet been presented. BAIC’s Q1 showed an increase in revenue of 30% but a drop in net profit of 25% due to lower JV numbers with Hyundai and increasing operating losses for its own brand. The increase in profit was mainly due to Beijing Benz, which is owned 49% by Daimler. Greatwall’s Q1 showed an 8% increase in revenues but a 4.5% decrease in profit, thanks to a lower gm and operating margin. Geely doesn’t provide quarterly statements.