Auto WIN
Regional auto industry highlights
Regional Autos Team
Frank LiAC
(852) 2800-8511
frank.m.li@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Wenwen Wang
(852) 2800-8501
wenwen.x.wang@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Bharat Iyer
(91-22) 6639-3005
bharat.x.iyer@jpmorgan.com
J.P. Morgan India Private Limited
Nick Lai
(886-2) 2725-9864
nick.yc.lai@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited.
Aditya Srinath, CFA
(62-21) 5291-8573
aditya.s.srinath@jpmorgan.com
PT J.P. Morgan Securities Indonesia
Wan Sun Park
(82-2) 758-5722
wansun.c.park@jpmorgan.com
J.P. Morgan Securities (Far East) Limited
See page 38 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Aggregate SAAR sales volume in Asia
Million units
0
5
10
15
20
25
CY01
CY02
CY03
CY04
CY05
CY06
CY07
CY08
CY09
Japan ex . Japan
Source: JAMA, KAMA, CAAM, SIAM, China Motor,
Hotai Motor, Taiwan Economic Journal.
Key items this month
• What is changing? We analyze: (1) China’s earlier-than-expected
recovery of passenger vehicle sales due to the government’s proactive
policies to stimulate car consumption and the positive wealth effect from
rising stock and property markets; we expect China’s passenger vehicle
sales to grow at a stronger pace (24% Y/Y) in FY09 than our previous
forecast of 10% Y/Y; (2) the stabilizing auto sales in Korea benefiting
from tax cuts by the government; (3) the emergence of the premium
hatchback segment in India, led by Maruti and Hyundai’s new offerings;
(4) the pick-up in Taiwan auto sales; and (5) the trend towards global
OEMs establishing Indonesia as a regional production and supply base.
• Information: We discuss: (1) (a) the auto industry consolidation
gathering pace in China with Guangzhou Automotive taking over Hunan
Changfeng Motors, merging synergies and expanding economies of
scale; (b) DongFeng Motor’s acquisition of the own-brand auto business
from its parent; (2) Hyundai Motor bagging the 2009 Rising Star award
in Korea—a testimony to its increasing brand image and vehicle quality,
in our view; (3) the strong initial response to Tata Nano, which garnered
US$500 million in pre-bookings in India; and (4) the increasing market
share of imported cars in Taiwan since 2004.
• Non-consensus calls: (1) On May 25, 2009, we raised our price targets
for DongFeng Motor to HK$8.5, Denway Motors to HK$3.85, and Great
Wall Motor to HK$8.3, factoring in an increase in estimated passenger
vehicle sales volume, in line with our latest view of China autos staging
a stronger-than-expected recovery. (2) We initiated coverage on Hyundai
Mobis in South Korea with an Underweight rating and a PT of W92,000
with key concerns about its rising operating leverage and low earnings
visibility. We expect an ROE of 11% versus a cost of equity of 10.3%.