Tag Archives: Geely Automotive hk 175

Great Wall Hits A Pothole

Great Wall April Units

Data source: HK filing

Great Wall Motors, 2333 hk, disappointed with April sales down 8.1% year on year bringing its year to date sales growth to 4%. Sequentially the picture was much worse, with a decline of 14.3% from March.  As can be seen above, April is typically lighter than March but the drop from 2016 same month sales could be a signal for more pain to come.

 

Great Wall April ytd monthly sequential

Data Source: Hk Filing

Great Wall is not alone in this decline, with the China Passenger Car Association (CPCA) reporting that in April China’s broad-sense passenger vehicles sales were 1.6934 million units, showing 1.7% yearly decrease and 13.7% monthly decline.   A 5% growth for the full year has been projected, despite the rise in tax from 5% to 7.5% on small liter engines. Home grown Geely, however, managed a 94.5% increase in April year on year which translated to a 94.4% year to date increase over 2016 and a minor -.3% drop from March.

Geely April ytd yoy

Additionally, Guangzhou Auto, a China brand produced by GAC AUTO, managed to increase its April units by 55.8% for April, bringing year to date sales up 64.2%.  It even managed a sequential increase of 27.1% thanks to its popular Trumpchi GS4 compact crossover.

Guangzhou April

Data Source: Hk Filing

A major portion of the decline for Great Wall was due to the drop in sales of its aging SUV Haval H6.  While some analysts have said it’s due to competition from the Trumpchi as well as Geely’s Boyue, (although the Boyue only just 21,693 in April, up from 20,461 in March – wasn’t selling in April, 2016); Great Wall’s H6 sales were 36,367.  Great Wall partly made up for the decline in the H6 with the H2’s 36% April increase but it’s still less than half the sales of the H6, even at April’s lower units.Great Wall detail April.PNG Data Source: Hk filing

Great Wall’s descent warranted a downgrade in the stock price by Credit Suisse from hk$ 8.5 to 8.00 and kept at neutral.  The bank noted that the decline came despite major price concessions by Great Wall such as the RMB1 billion “red packet” cash incentive program and RMB 9,000-15,000 per unit discounts on selected models.  Finally, it noted that sales for the first week of May had fallen by 24%.  Thanks to the drop, Credit Suisse expected Great Wall to aggressively discount and therefore revised its earnings down by 2-3% for the year.  As shown here, Great Wall’s first quarter net profit showed a decline of 18% despite a unit increase of 8.9%.

Since Great Wall is heading into the slower sales period in China, it will be some time before there is clarity on its direction or profits.  Caution signals are flashing.

Great Wall Stock.PNG

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GAC Stays in the Fast Lane in April

gac overall units

While April US auto sales have disappointed across the board, with declines in all major automakers, China has yet to release numbers for April, with the exception of GAC, 2238 HK.  If March offers a clue as to performance, it will be a mixed bag.  For those with declines in the first quarter, the increase in the sales tax on the majority 1.6 liter or less vehicles was blamed; Ford and GM. Despite the change in tax, some auto makers saw sales growth in China.  Hyundai, however, saw a dramatic decline as a result of stoppages related to discontent over the US THAAD missile in South Korea.  VW Audi, took a dive at least partly due to dealer discontent over its planned 2nd jv with SAIC.  Thanks to company specific issues, the outlook for overall China growth, projected at 5%, is cloudy. (The data is primarily from Reuters except for Chinese makers Geely, GAC, Ford and Daimler which were based on SEC and HKEX filings).

Major Autos China March

Skies are sunny for GAC, however, which just reported 36% growth ytd in April over 2016.  If revenues and costs stay on track from the first quarter as reported here, it bodes well for the GAC’s stock.

GAC April

Honda and Toyota have shown significant growth, but the proprietary Guangzhou has been an out sized contributor to growth as has Fiat Chrysler.

Guangzhou units

FCA April

While recent performance is no indicator of the future, at least in the short term GAC is conservatively valued with a trailing p/e of 9.

GAC stock

China Auto Stocks Drop on Uncertainty

traffic-light-876046_640

Hong Kong Listed Chinese auto stocks were mixed yesterday, 4/11/17, despite a minuscule drop in the Hang Seng.

Auto Stocks upd

 

Data Source: Bloomberg

All of the above stocks, with the exception of BAIC 1958 hk, had previously reported sales for March.

Update: China March Overall Auto Sales

Depending on which source you read, and what they interpreted, monthly and year to date auto sales were up.  How much is apparently subject to interpretation from a meeting with the China Association of Automobile Manufacturers, (CAAM).  However, nothing has been published on the CAAM website regarding the update.  Unlike other international auto manufacturers, sales are not presented as seasonally adjusted.

January and February are poor monthly indicators due to the China Lunar New Year, aka Spring Festival.  For 2017 it fell on January 28, 2017: 2016; in 2016 it fell on February 8, 2016. Technically it lasts approximately one week, when all of China is on vacation – but the impact can be felt as workers leave or change jobs two weeks in advance. This even makes January to February sequential sales and year on year data unpredictable.

Reuters:

First Quarter Auto Sales China up 7%; March up 4% to 2.5 million units

Wall Street Journal:
First Quarter Vehicle Sales China up .59% to 2.84 million units; Passenger Sales March up 1.7% to 2.1 million units.

Both agreed that CAAM held to its earlier projection of 5% auto sales growth in China for 2017.

China March 2017 Auto Sales Picture – Proceed With Caution

The downward slide yesterday occurred as two reports threw tacks on the road of this fragile, critical barometer of China’s economy.  Now the biggest single car market in the world, the closely watched auto sector is under scrutiny.  2016 managed overall increases thanks partly on the sales tax reduction from 10% to 5% for the year on smaller liter engines, (1.6 liters – the majority of autos sold in China in 2015).  Under pressure to continue growth, instead of resuming the 10%, the tax was partially raised to 7.5% starting in January 2017 through the end of the year.

First Report: High-flying Geely 175hk, was flagged by Credit Suisse, its report, said

..this is the first monthly decline in March in over ten years. Continuing the falling trend for four days, it once fell to $10.44 at most, hitting over 1-month low; it last printed at $10.52, down 4.7%, on surging volume of 117 million shares.

It went on to project Geely’s gross profit margin would be under pressure and kept it at neutral with a target price of $11.4 hkd.

Geely had actually released its numbers on April 7th, with strong year on year growth so the blame for the drop on that report is most likely misplaced.

Geely March

Production Cut

While Geely’s drop is of concern, a report by CICC, 3908 hk, (Per Bloomberg, the Goldman Sachs of China), was more alarming, with an output cut of 16.7% by Great Wall Motors 2333hk.  Although other companies weren’t cited, the report implied other auto makers had done the same.

Slow Lane Data Releases

Auto sales data, unlike elsewhere in the world, is slow to be officially released in China.  The China Association of Automobile Manufacturers, CAAM, releases data for the prior month around the 22nd of the following month.  Specific company data is sporadic and lacks conformity either in presentation and or release dates. This creates the perfect situation for the market’s most hated state: uncertainty.

Mixed Picture

Adding to the uncertainty, March numbers in China reported to date from domestic and international players have been inconsistent.

In China, Nissan reported year to date sales in March up 5.3%; GM saw a ytd decline of 5.2% with Toyota up just 1.7%.

Domestically, auto sales were seemingly resilient, with the exception of Great Wall 2333   hk and Dongfeng 489 hk. Great Wall is a home grown auto company while Dongfeng sells autos produced by joint ventures with Nissan, Honda, PSA and Renault.

Great Wall March

Dongfeng

GAC 2238 hk, showed impressive growth, buoyed by increases in its proprietary brand Guangzhou as well as its JVs with Honda, Toyota and Chrysler.  A breakdown of those brands was shown here.

GAC Mar

 

BAIC 1958 hk, hasn’t yet reported sales.  However, as noted previously, China’s unhappiness with South Korea has prompted reports of Hyundai reducing production hours in China.  Hyundai units made up 60% of BAIC’s unit sales in 2016.

As sales data for March trickles in, these stocks look poised for more negative surprises.

(Sales data and graphs compiled from HK filings.)

China September Auto Sales Should Hold the Fast Lane

auto-world-august-2016

Source: VDA, Verband der Automobilindustrie

*USA, Brazil and Russia include light vehicles (trucks).

While the US was disappointed in Monday’s reports auto sales for September, numbers for the market leader in terms of number and growth, China, will be revealed later in the week. Thanks in part to a government stimulus in the form of a 50% tax cut on cars with an engine size 1.5 liters and less, September should follow the upward trend.

Here are the actual numbers, in units:

world-auto-sales-2016-august

Source: VDA data, Verband der Automobilindustrie

With the tax cut holding through the end of December and the last few years showing heavier purchasing in the final quarter, the next few months should also show growth, sequentially as well as year on year.  Three major Hong Kong listed Chinese auto companies demonstrate that historical seasonality as well as year this year’s  super-charged numbers.  Although the week-long vacation celebrating the Chinese New Year depresses auto sales at the beginning of the year, next week’s National Day, aka Golden Week, is more of a shopping holiday.  The three companies are :Geely 175 hk, Great Wall 2333 hk and GAC 2238 hk.

geely-sales-aug-2016

great-wall-august-2016

gac-auto-sales-august-2016

Source: all 3 charts from Company Hong Kong Exchange Filings

BAIC hk 1958, another company which reports monthly sales volumes has been excluded from the seasonal comparison since it was newly-listed in 2014. It had also just started to develop its relationship with Daimler Benz, DAI gr, referred to as Beijing Benz, a 51%-owned subsidiary. BAIC is a big player in China, selling 1.6 million passenger vehicles in 2015 which included its own brand as well as Hyundai and Daimler.  It was formed as an IPO in 2014 and has also shown increases in units sold 2016, thanks to Daimler and an aggressive push on its own brands, under the names of Senova, Weiwang and BJ.

baic-monthly-august-2016

Source: Hkex filings, January & February excluded since they were grouped together.

In numbers, sales of these four companies combined represent close to 22% of the year to date light vehicle sales in China for the first 8 months of 2016.  China passenger vehicle sales for China were reported at 14.4 million in 2016 vs. 12.7 million in 2015 which was a 12.8% increase. (Reported by CAAM, not seasonally adjusted.) Their reported numbers from filings are as follows:

china-4-autos-aug-2016

Although these four Chinese companies have all seen unit sales increases year to date, their stock prices have diverged.

autos-4-stocks-sept-2016

 

Source: Bloomberg, values as of 10/3/2016

Geely, which sells only its own brand under the names of Emgrand, Vision and Boyue, has been the best performer year to date and over the last 12 months.  This occurred in spite of the fact that the sales have been dominated by sedans versus the much more popular SUV’S.  The company has, however, been gradually moving into more SUV’S and crossovers to offset the declining interest and sales in sedans.

geely-types-august-2016

Geely’s stock performance is due partly to its first half performance, where it was able to transform an 11.3% unit sales increase into a 35.8% net to shareholders increase.  In its filing, it stated that the profit increase was due to both volume and an ex factory average sales price increase of 17% compared to the prior year.

geely-fs

Sales have continued strong following the first half, with August year to date showing an annual increase of 22%.  Geely has been targeting ramping up production, taking over two plants as of 7/20/16  with additional capacity of 300,000 units by the third quarter of 2016.  Baoji, is projected for production of 200,000 high end SUV’S while the other, Shanxi, is projected to produce 100,000 high end sedans and mid and high end new energy vehicles.  Both were purchased by the company’s wholly-owned subsidary Jirun subsidiary from Baoji Geely and Shanxi New Energy for a combined 1.4billion rmb.  (Both were held by Zhejiang Haoqing, the wholly-owned subsidiary of Geely Holdings.) Geely sales are primarily domestic, with exports on a downtrend over the last couple of years at only 12,871 year to date.   Despite Geely’s pledge to become a major new energy vehicle producer, the company has given little details on sales with a brief mention of average sales of about 1,500 per month.

Geely’s plan to sell its subsidiaries Ninghai Zhidou, producers of low end energy vehicles and supplies, to a third party failed.  They were sold instead to parent Geely Holdings, which is owned by Geely founder and Chairmen, Li Shufu. The breakdown is as follows:

geely-sale-subs

Geely’s quoted rational for the disposal:

As part of the Group’s on-going strategy to enhance value for the Shareholders, the Group plans to consolidate and enhance its product portfolio and thus brand image by focusing on relatively higher-end automobiles going forward. In addition, recent policies issued in the PRC in relation to the eligibility for subsidies and tax exemptions have also been unfavourable to the product portfolios of the Kandi JV and the Zhidou JV and have a negative effect on their financial performance in 2016.

Geely reports unit sales monthly but doesn’t give quarterly statements. Geely has had a strong run but its trailing p/e is still moderate.  Nomura raised its price in September to 8.33 hkd thanks partly to projected margin improvement, capacity utilization and product mix.

Guangzhou Auto, or GAC  the second best performer, sells its own brand under Guangzhou auto with names such as Trumpchi, but also sells Toyotas, Hondas and Fiat Chrysler vehicles as joint ventures.  Those JV’s powered its net profits in the first half to a 133% increase.

gac-1st-half-2016

 

While Honda & Toyota have shown growth and dominance in unit sales, the company has had major growth with the Fiat Chrysler JV thanks to success of the Jeep Cherokee brand. It’s also been aggressively pushing its own brand, despite the potential losses as shown in the income statement, to increase market share.

gac auto sales first half.PNG

August year to date sales were just as robust, with Chrysler taking up some of Toyota’s slack.

gac-aug-auto

 

Per Auto News, Jeep’s sales in China rebounded from 2015 thanks to the addition of Cherokee at a factory in Changsha in October, of 2015.  In April, Jeep began producing the Regenade subcompact crossover at a new plant in Guangzhou. It plans to add a new C-segment crossover to China in production by year end with another to follow, specifically designed for the Chinese market.

GAC’S unit sales and interim and its low p/e gives strong support to the stock continuing upward.  In September, 2016 CICC put GAC on a conviction buy list with a target price of 13.2.

Despite relatively strong auto sales growth, BAIC has actually lagged the Hang Seng index. Much of this is due to its structure.  It’s best profit driver has been with its subsidiary, BAIC Benz.  Otherwise it sells its own brand, under the names of Weiwang, Senova and BJ, generally at a loss and has seen weakened demand for its JV with Hyundai, which has historically made up its biggest portion of unit sales. While revenues have increased along with sales, net to shareholders has grown only 11% reflecting Daimler’s outsized contribution to profits and BAIC’S brand losses and Hyundais’ flagging sales.baic-1st-half-2016

baic-types-june

Source: hk filings

As shown below – Home Brand Beijing Motor is far behind Beijing Benz in profits.

BAIC beijing motor.PNG

BAIC bejing benz.PNG

Add to that the decline in JV earnings, which is mainly Hyundai, and GAC is struggling to increase profits despite sales increases. August sales have been even stronger than June, with Hyundai showing an upturn but Benz lower ytd than June and Beijing Brand climbing. BAIC doesn’t report quarterly earnings, however, so how those numbers translate into profits will be unclear until well after year end. On 9/27 Macquarie gave it a target price of 12 hkd based on strong Benz sales. (It also called the relationship a JV, which is incorrect.) Its current price of 8.14 is supported by its p/e which is close to the 6 month net profit to shareholder’s growth.  Sales numbers for September will most likely be strong and buoy the price.  However, profit growth for shareholders hasn’t kept up with unit growth.

baic-august-2016

BAIC has been rumored to be considering a JV with Chrysler Fiat.  This isn’t surprising given GAC’S recent success with Jeep.  BAIC has recently expanded a relationship with Daimler with Fujian Benz, which would reportedly produce high end mini-buses under the name of Viano, Sprinter and Vito but details have been light and sales to date have been minimal.

Home Brand Great Wall is the most disappointing of these four. For the first half, it lagged the others both in terms of sales and profits despite its concentration on SUV’s and its relatively popular Haval H6.

gw-fs-1st-half

 

Since June, Great Wall has had better unit sales growth. Unfortunately, its razor thin profit margins have been declining further, resulting in net profit changes about 1/2 of unit changes. On 9/27/16 Citi rated it a buy at a price of 10 hkd. on 9/21, Credit Suisse rated it neutral at a price target of 8.8 hkd.  Great Wall does report quarterly with a report due about the 23rd of October.

great-wall-sales-aug

In conclusion, despite strong auto sales stimulated by the tax break, Chinese auto manufacturers have divergent sales and profit paths. All, however, are at risk for a bumpy ride in 2017 when the tax cut is set to expire.

Geely Stock Hits the Brakes on 1st Half Earnings

geely first half

Despite a first half where sales prices and units drove upwards,  Geely 175, HK, halted its continued rise. It lost steam after far surpassing the Hang Seng year to date and on a 12-month basis.

GEELY 175

Geely Stock up

Here are a few of the reasons for the rise.

First half gross revenue up 31% on sales volume increase of 11%.

First half sales volume increased by 41% in June over 2015; ytd. up 11.2% over 2015.

First half ex-factory average sales price up 17% year on year.

First half net profits up 34.8% on higher volume, better pricing mix, stable gross margins and lower operating costs as a percent of revenue.

So why the drop?  One analyst at Gutai securities blamed it on the overall auto market in China falling faster than projected in the last half.

Geely’s warning – to investors and regulators:

Despite the improved performance by the indigenous brands in China recently, the implementation of more stringent regulatory requirements in fuel efficiency, product warranty, product recall and emissions standards in China could put tremendous cost pressure on motor vehicle manufacturers in China. The impact could be even bigger for China’s indigenous brands given their relatively weak pricing power, and thus their difficulties to pass on the additional costs to their customers.

Further, the planned expiration of sales and purchase tax reduction policy by the end of 2016 could potentially shift some demand forwards from early 2017 to 2016, thus affecting demand for small and mid-size vehicles in early part of 2017.

Road Bumps

Export Declines

Exports remain challenging.  As I reported back in May,  hometown Geely and Great Wall have struggled with declining exports.  This has continued into July of 2016 and with political and economic turmoil in its targets in the Mid-East, South America and Africa is expected to continue throughout 2016.

Geely Greatwall Exports From HK filings 

Fortunately for Geely, year to date unit exports were 12,871 or only 4.5% of the total sold. This is not great for Geely’s international plans but does show what a minimal effect it has on current and projected sales.  (In 2015  Geely exported 24,342 units or about 9.6% of units sold).

Electric Vehicle Fraud and Subsidy Pains

After an initial surge toward electric vehicles, China has been coming to grips with subsidy fraud and lagging infrastructure support.  Geely admitted to a change in subsidy stance as a reason for selling two electric car related jv’s: Kandi and Ninghai Zhidou, which had combined 1st quarter losses of 137.5 million rmb.  A proposed agreement to a 3rd, independent party fell through with the company now proposing a sale of its interests to its parent, Geely Holding.  The breakdown is as follows:

Geely jv

The circular for the proposal had been delayed so is still not resolved.  Although losses are of concern, jv income has been a tiny proportion of net income.

SUV Reliance As Sedans Slip

As mentioned above, Geely has been helped by increased sale prices which has been due in part by SUV’S.  Geely has continued to move toward greater emphasis on SUV’S, while its sedans sales continue to slide.  Geely Monthly Type

Geely appears to have had success with this move.  It introduced 2 new vehicles in the first half, a new SUV crossover, the Emgrand GS and the Boyue SUV which replaced the NL3. The Boyue sold 10,128 in July, its first month while the Emgrand GS has sold 14,128 since its introduction – beating company expectations.  For the second half, a new compact SUV, the Vision will be launched as well as a Emgrand GL sedan and an Emgrand sedan hybrid. All of these cars have at least one version that would be under the 1.6 liter engine maximum to qualify for the 50% tax reduction effective in China until the end of December.

Great Expectations for the Last Stretch

While June was good, July was even better in terms of unit sales.  Geely reported that July sales were up over 64% from 2015 and up 16.75% year to date from 2015.  With Geely raising its annual projections from 600,000 to 660,000 units, it appears to be expecting this run to continue.  This will mean a shift of its sales at year end from 2015.

Geely august through dec.PNG

Geely’s sales definitely have been picking up steam.  If they continue as the company projected, they will be on track for the projected unit increase of 29%.  Momentum and the looming tax incentive deadline could push them there. Geely beat 1st half forecasts easily with eps up 36% vs. 18.9% and 30% vs. 23% projected on revenues.

geely first half forec

Forecasts from the Financial Times

Annual Projections

Currently, projections are for a bit over 46% increase in annual revenues and eps.  If this is an achievable target, it would leave room for the stock to climb with its moderate p/e even after its dramatic climb over the last 12 months.

Geely annual

Forecast from the Financial Times

Correction: Geely July Sales up 60% over 2015, Maybe

Eraser

Geely Auto, 175 HK, fixed a typo today – stating that the sales of its King Kong sedan were 2,258 for July, not 3,757 as earlier reported.  The 3,757 just happened to be exactly the number they reported for June.  While it’s a small amount, it still would impact the monthly sales change – previously shown at 64% based on July 2015, and 16.3% year to date versus earlier calculated 16.75% and a sequential change of 1.6% vs. previously calculated 4.18%. (I’m assuming the change to the total, the correction didn’t).

Geely ytd and seq corr

Based on data from HK filings

While it’s admittedly a small change, it does make you wonder whether the other numbers are correct.  Truthfully, Geely could do with a spreadsheet presentation rather than the primitive basis they currently use. Of course if they did, it would be easier to see the steady decline in all sedans, including the King Kong.

Geely Sedans

Source: HK filings – started at March since Jan and Feb were combined.

While they made up the decline with the better sales of SUV’S and the new crossover, sedans were still 64% of their units sold in July.  As shown above, every category of sedan is declining, even the relatively successful Emgrand. A new release of the Emgrand, the Emgrand GL, is scheduled for a September release, which may help reverse the slide. It reportedly will come with a 1.3 turbo and a 1.8.  The 1.3 would be eligible for the  50% tax cut good through December while the 1.8 would exceed the maximum 1.6 level for the cut.

Geely Monthly Type

Source: HK filings 

The correction hasn’t hurt the stock.

Geely Stock up

 

China May Auto Sales Jump; Hold the Champagne

3 China Auto companies reported a surprising jump in May auto sales.  Year to date unit sales, however, were less than stunning although on track for an annual increase. This increase would be much lower than  the China Passenger Car Association predicted growth of 10%.

AUTO JUNE 2016

Sequentially, the rise was less dramatic, actually decreasing for Great Wall.

June Auto Sequential

The stocks in these 3 companies has reacted relatively positively to the May sales figures released on June 6, 2016.

3 car stocks

Source: Bloomberg

Great Wall has had the biggest price change and also has the lowest p/e.  However, year to date sales have been in line with the others.

Great Wall has continued to rely on its best-selling SUV, the Haval H6 for sales growth and a percentage of sales.  Its sedan sales have been minimal and have continued to decline.  Besides the popularity of the Haval H6, featuring either a 1.6 or 2.0 liter engine and favorable comparison to the Honda CRV, it has most likely also benefited from the tax break on the engines less than 1.6 liters started in October of 2015 and running through December 2016.  It’s most recent arrival, the Haval H7 introduced at the end of April has a 2.0 Liter engine and sold only 4,465 units in May compared to the H6’s 37,435 units.

greatwall may types

Finally, while Great Wall sales are up it’s doubtful that profits will follow.  In its quarterly statement, Great Wall unit sales were up 5.7%.  This translated to an 8% sales revenue increase but an increase in gross profit of only 2.8% as the gross profit declined from 26.6% to 25.3%.  Operating Expenses also increased as a percent of revenue resulting in a profit before tax decline of 4.6%.  The biggest increase in costs was in “other expenses” which doubtless contained incentives. Net profit after tax declined by 5.4%.  Based on the first quarter’s performance, Great Wall will have a decline in net profit for the year despite a potential 5% unit increase which would continue to support the case for a lower p/e ratio.Great Wall Q1

The sales increase, thanks to its heavy reliance on the Haval H6, is in jeopardy as the trend for the H6 is slopes downward.

Greatwall h6 chart

Great Wall’s sedans have been declining and its exports have been plummeting, so these will not help bolster profit.  Great Wall had tried to enter the electric car segment with a planned non-public A-share issue but it cancelled the issue due to volatile market conditions.

Geely, the owner of Volvo, had a good month in May compared to 2015 with a 19.4%  year on year rise in units sold.  Geely offers limited sales information per type but has had its biggest growth in sedans: Emgrand unit sales rising 21% and Vision up 31% year on year for the month of May.  The Geely gc9 sedan, released in April, 2015. has had disappointing sales – just 4,024 in May 2016 versus the Emgrand and Vision at 16,101 and 10,885, respectively.

Geely doesn’t provide quarterly statements.  In 2015 it had a 22% increase in unit sales to 509,863 which translated to an annual revenue increase of 38.6%.  Gross profits were the same but, thanks to lower expenses as a percent of sales along with higher jv income, it had a net profit after tax increase of 58%.  However, included in the net profit of 2.28 Billion rmb was 847 Million rmb in government grants or about 37% of net profits.

Both Geely and Great Wall are considered home-grown, Chinese manufacturers and produce and sell primarily their own brands.  They are not majority-owned by the government but both founders, Geely’s Li Shufu and Greatwall’s Sei Jianjun have been reported to have government ties. Both benefit from government subsidies.  Geely’s annual at 847 Million rmb and Greatwall’s reported 341 Million rmb in 2015. Both have tried and failed to grow exports, an annual trend which is continuing.

greatwall geely exports

Greatwall Geely May Exp.PNG

The other company to report monthly unit sales, BAIC, is a majority government-owned entity which sells its own brands, including the Senova and Wevan as well as Hyundai as a 50%joint venture and Mercedes Benz as a 51%-owned subsidiary.  BAIC listed on the Hong Kong Exchange in 2014, raising 8.9 Billion Hong Kong Dollars, (equiv of 1.4 Billion $US), with 10 cornerstone investors buying 55% of the shares offered and closed at 8.9 HKD.   The Beijing brand, thanks to price drops and concessions has shown improvement in terms of numbers, Hyundai has been faltering while Mercedes has had impressive growth and is the primary driver of profits.

BAIC may sales

Despite the major growth of Benz and even Beijing Brand, Hyundai’s larger proportion of sales resulted in a year on year growth of just 5.3%, lower than both Greatwall and Geely.

Sequentially, however, it performed better than Geely and Great Wall.BAIC May Sequential

For the first quarter, BAIC showed a drop in year to date unit sales of 4.3%, brought down mainly by disappointing Hyundai unit sales.

baic 1st quarter

The Beijing Brand and Benz sales helped push revenue up by 30%.  However, since BAIC gets only 51% of Benz profits, Hyundai’s sales were lower and Beijing brand has been historically unprofitable, the net to shareholders actually decreased by 46.5%.

baic 1st quarter

As far as growth prospects, in March, 2016 BAIC entered into a further investment with Daimler via a 35% investment in Fujian Benz.  Details from both Daimler and BAIC have been extremely limited but last reported annual sales were only 11,208 in 2013. of mini van type vehicle. In conclusion, while May year on year unit sales showed a distinct uptick in sales for these 3 companies, it is too soon to tell if this is a blip or an upturn.  Year to date, sales are up only over 5%, far short of annual projections.  Finally, with the possible exception of Geely, unit sales increases have not led to profit increases.  The next semi-annual reports, based on historical reporting, will not come in until mid to late August. +

Disclosure: All data is from Hong Kong Filings.  Charts and spreadsheets were self-prepared.  I have no interests in any of the stocks presents.