FY17E net profit to increase by 7% YoY

On 18 January after market closed, SAIC Motor announced preliminary profitguidance that its unaudited FY17 reported net profit is expected to increase byc.7% YoY to around RMB34.2bn. The company attributed the earnings growth tothe 6.8% YoY vehicle sales volume improvement. To elaborate on major JVs’ salesperformance, SAIC-Volkswagen recorded 3.1% YoY growth, SAIC-GM recorded6.0% YoY growth, and SAIC-GM Wuling recorded 0.9% YoY growth in FY17.Meanwhile, sales of SAIC Passenger Vehicle Company surged 62.3% YoY due tothe popularity of own brand SUV models. On a quarterly basis, since SAIC Motorreported a 9M17 net profit of RMB24.6bn, the profit guidance implies that thecompany’s 4Q17E net profit would be about RMB9.6bn, up by more than 10%QoQ and 7% YoY.

DB view C stable earnings growth with attractive yield; Hold

Since SAIC Motor’s FY17 earnings growth is broadly in line with its volumegrowth, we do not see much surprises. Going forward, we envision a stablegrowth trajectory for the company, with steady growth in JVs mitigating thestrong local brand sales. As we do not expect much sales outperformance vs.the industry given the already-high total sales base, we have a Hold rating onSAIC Motor. We value the stock at 9.5x FY18E P/E and believe this is justified,as we expect SAIC to achieve a three-year net profit CAGR of 7% in FY16-19.Key company downside risks include: 1) weak reception for its new modelsfrom various SAIC brands; 2) pricing pressure amid industry competition; and 3)worse-than-expected local brand profitability. Key upside risks include: 1) betterthan-expected sales volume and pricing; and 2) better-than-expected local brandprofitability.

更多精彩大盘资讯敬请期待！