20150206-大华继显-Regional_Morning_Notes_26页_1mb

Regional Morning Notes Summary

Core Content

This document is a financial update report dated Friday, 06 February 2015, covering Geely Auto (175 HK) and Sunac China Holdings (1918 HK), along with market indices and corporate events in various Asian regions. It provides an overview of the companies' recent performance, valuation, financial forecasts, and market outlook.

Main Points

Geely Auto (175 HK)

• Sales Performance:
  • January 2015 sales rebounded to 58,900 units, up 76% yoy, exceeding expectations.
  • Strong sales growth for the new Vision sedan, which sold 11,700 units in January 2015, up 693% yoy.
  • Other models like the New Emgrand and GX7 also showed significant yoy growth, though some models (e.g., EC8, GX9) underperformed.
• Margin Pressures:
  • Margins remain under pressure due to increased competition and lower margins on new models.
  • The new Vision sedan, despite strong sales, is priced higher than the previous models, leading to a lower margin.
• Financial Forecasts:
  • Raised 2015-2016 net profit forecasts by 13% to Rmb2.09b and Rmb2.32b respectively.
  • Net margin is expected to decline from 9.3% in 2013 to 7.6% in 2015 and 7.5% in 2016.
• Valuation:
  • Current share price: HK$3.35.
  • Target price raised to HK$3.00, with an upside of -10.4%.
  • Valuation is at 11x 2015F PE, above the historical mean of 10x.
• Recommendation:
  • Upgraded to HOLD from SELL.
  • Entry price: HK$2.50.

Sunac China Holdings (1918 HK)

• Acquisition Update:
  • Signed an agreement to acquire a 49.25% stake in Kaisa for HK$4.55b.
  • Official general offer not yet announced; stock trading is suspended.
• Valuation Uncertainty:
  • Despite the acquisition, the valuation remains uncertain due to potential risks.
• Financial Performance:
  • Net turnover is projected to increase significantly from 2014 to 2016.
  • EBITDA and operating profit are expected to grow, with net profit forecasted to reach Rmb5,520m in 2015 and Rmb6,828m in 2016.
• Key Risks:
  • Uncertainty about the Shenzhen government's stance on the acquisition and the blocking of pre-sales.
  • Potential hidden liabilities of Kaisa could impact Sunac's liquidity.
• Valuation:
  • Current share price: HK$6.94.
  • Target price remains at HK$9.29, with an upside of 33.9%.
  • Recommendation: BUY.

Key Indices

Corporate Events

Key Financial Metrics (Geely Auto)

Key Financial Metrics (Sunac China Holdings)

Summary of Key Recommendations

• Geely Auto (175 HK):
  • Recommendation: HOLD
  • Target Price: HK$3.00
  • Upside: -10.4%
  • Entry Price: HK$2.50
• Sunac China Holdings (1918 HK):
  • Recommendation: BUY
  • Target Price: HK$9.29
  • Upside: 33.9%
  • Current Share Price: HK$6.94

Summary of Key Assumptions

Summary of Key Risks

• Geely Auto:
  • Margin pressures from increased competition and lower margins on new models.
  • Sales rebound may already be priced in, limiting upside potential.
• Sunac China Holdings:
  • Uncertainty around the Shenzhen government's stance on the acquisition.
  • Risk of hidden liabilities from Kaisa.
  • Possible liquidity concerns from large capital expenditures.

Summary of Earnings Revisions

• Geely Auto:
  • Raised 2015-16 net profit forecasts by 13%.
  • Net profit growth expected at 19% and 11% for 2015 and 2016 respectively.
  • Net profit forecasts 17-20% below consensus due to lower margin assumptions.
• Sunac China Holdings:
  • Earnings estimates remain unchanged until official announcement.
  • Possible impact from hidden liabilities and ongoing pre-sale blockages.

Summary of Catalysts

• Geely Auto:
  • 2014 final results expected by March 15.
• Sunac China Holdings:
  • Improving mortgage environment.
  • Higher-than-expected sales target in early 2015.
  • Strong margin recovery in 1H15.
  • Clarification on Shanghai JV projects with Greentown.