Yutong Bus:Rapid growth in sales
The release date：2014-09-12 09:49 source：http://www.amlifecn.com Click on the：
Event:In Mar 2014, Yutong Bus sold 4,1999 units (+32.1% YoY, +89.9% MoM), including 2,320 units of large passenger vehicles (+45.1% YoY, +245% MoM), 1,318 units of medium passenger vehicles (+7.3%YoY, +11.5% MoM), and 561 units of light passenger vehicles (+59.4% YoY, +57.1% MoM).
Comments:
Yutong Bus recorded sales of 4,199 units (+32.1% YoY, +89.9% MoM) in Mar 2014, representing a noticeable pickup in sales volume growth. Delivery of alternative energy vehicles pushed up growth of the Company’s sales volume. Among others, the Company sold 2320 units of large passenger vehicles (+45.1% YoY, +245% MoM). Along with rollout and implementation of the local detailed policies and launch of the alternative energy vehicle tendering projects, sales volume of the Company is expected to sustain rapid growth in 2Q14.
1Q14 positive growth is expected. Yutong Bus sold accumulatively 10,668 units of autos, up slightly by 3.4% YoY. It delivered 900 units of alternative energy vehicles in 1Q14, including 600 units delivered to Venezuela. Given increase in the high-price products as a percentage of total sales volume, we forecast the Company will sustain high average selling prices and profitability and realize single-digit positive growth in its 1Q14 results.
Increase in the ratio of alternative energy vehicles will help upgrade the Company’s product mix and enhance its profitability. Yutong Bus has remarkable comprehensive advantage in the alternative energy passenger vehicle market. It sold 3,897 units (+118% YoY) of alternative energy passenger vehicles in 2013 with a market share of nearly 40%. Given its ample capacity and rich in-pipeline products in the field of plug-in hybrid electric vehicles, battery electric bus and ordinary hybrid electric vehicles, it is expected to sustain a leading position in the market. We forecast Yutong Bus to sell 8000 units and 16,000 units of alternative energy vehicles in 2014/15E, respectively, and the alternative energy vehicles as a percentage of its total sales are forecast to rise from ~7% to ~20%, which will raise the Company’s average selling price and profitability.
Injection of auto parts assets helps improve profitability. Yutong Group, the Company’s controlling shareholder, promised to inject auto parts assets to the Company prior to end-2014. The dashboard, luggage rack, sponge and plastic parts, wire harness, bus air-con, and other auto parts businesses of the Group boast much higher gross margin (~20%) than that of whole vehicle manufacturing. Injection of these parts assets is projected to slightly boost the Company’s EPS.
Potential risks: Macro downturn causes demand for medium- and large coaches to come in less than expected; efforts to implement alternative energy coach policies fall short of expectations and slow delivery of alternative energy coaches causes the Company to report worse than expected 1Q14E EPS.
Earnings forecast and valuation. We reiterate the Company’s 2014/15/16E EPS at Rmb1.71/2.07 /2.49 (2013A EPS at Rmb1.43). Its last price of Rmb15.91 is equivalent to 2014/15/16E PE of 9/8/6x. As the leading player in the medium and large coaches segment, the Company commands solid position and benefits from faster phase-out of heavily-polluting vehicles, accelerated extension of alternative energy bus and other environment protection policies. Given valuation of auto sector, we believe that 15x 2014E PE fair for the Company and reiterate BUY with its target price at Rmb25 per share.
Comments:
Yutong Bus recorded sales of 4,199 units (+32.1% YoY, +89.9% MoM) in Mar 2014, representing a noticeable pickup in sales volume growth. Delivery of alternative energy vehicles pushed up growth of the Company’s sales volume. Among others, the Company sold 2320 units of large passenger vehicles (+45.1% YoY, +245% MoM). Along with rollout and implementation of the local detailed policies and launch of the alternative energy vehicle tendering projects, sales volume of the Company is expected to sustain rapid growth in 2Q14.
1Q14 positive growth is expected. Yutong Bus sold accumulatively 10,668 units of autos, up slightly by 3.4% YoY. It delivered 900 units of alternative energy vehicles in 1Q14, including 600 units delivered to Venezuela. Given increase in the high-price products as a percentage of total sales volume, we forecast the Company will sustain high average selling prices and profitability and realize single-digit positive growth in its 1Q14 results.
Increase in the ratio of alternative energy vehicles will help upgrade the Company’s product mix and enhance its profitability. Yutong Bus has remarkable comprehensive advantage in the alternative energy passenger vehicle market. It sold 3,897 units (+118% YoY) of alternative energy passenger vehicles in 2013 with a market share of nearly 40%. Given its ample capacity and rich in-pipeline products in the field of plug-in hybrid electric vehicles, battery electric bus and ordinary hybrid electric vehicles, it is expected to sustain a leading position in the market. We forecast Yutong Bus to sell 8000 units and 16,000 units of alternative energy vehicles in 2014/15E, respectively, and the alternative energy vehicles as a percentage of its total sales are forecast to rise from ~7% to ~20%, which will raise the Company’s average selling price and profitability.
Injection of auto parts assets helps improve profitability. Yutong Group, the Company’s controlling shareholder, promised to inject auto parts assets to the Company prior to end-2014. The dashboard, luggage rack, sponge and plastic parts, wire harness, bus air-con, and other auto parts businesses of the Group boast much higher gross margin (~20%) than that of whole vehicle manufacturing. Injection of these parts assets is projected to slightly boost the Company’s EPS.
Potential risks: Macro downturn causes demand for medium- and large coaches to come in less than expected; efforts to implement alternative energy coach policies fall short of expectations and slow delivery of alternative energy coaches causes the Company to report worse than expected 1Q14E EPS.
Earnings forecast and valuation. We reiterate the Company’s 2014/15/16E EPS at Rmb1.71/2.07 /2.49 (2013A EPS at Rmb1.43). Its last price of Rmb15.91 is equivalent to 2014/15/16E PE of 9/8/6x. As the leading player in the medium and large coaches segment, the Company commands solid position and benefits from faster phase-out of heavily-polluting vehicles, accelerated extension of alternative energy bus and other environment protection policies. Given valuation of auto sector, we believe that 15x 2014E PE fair for the Company and reiterate BUY with its target price at Rmb25 per share.
