Predicted 1Q earnings of listed companies in the automotive and parts industry

Investment Highlights: From the perspective of performance, this report prompts investors to focus on the investment opportunities in the vicinity of the quarterly report of the highly profitable growth of the component companies.

Parts : Seek for the cost reduction and beneficiaries of export growth. Under the impact of rising costs and slowing demand, the pre-tax profit margin of the parts and components industry in 2011 dropped by 1.0 percentage points year-on-year to 7.4%, which has been adjusted back to the industry average, and further downside risks are limited. The drop in raw material prices in the first quarter will ease the cost pressure on parts and components companies, while exporting North American companies that account for relatively high prices will benefit from the recovery in demand, and their earnings performance will be relatively good. Zhongding shares as the main beneficiaries of cost reduction and export recovery, the first quarter performance is expected to increase significantly (+20%). Although Fuyao Glass is still constrained by rising labor costs and high oil prices, the increase in cost control and the increase in self-control ratio are expected to reverse the downward trend of the previous year. It is expected that the first-quarter results will increase by 5% (+5%).

Passenger car: The demand is relatively stable and the differentiation pattern continues. Due to the high base of 2011 caused by supplemental inventory, the industry's 1Q sales may be flat or slightly lower, which will drag down the industry's 1Q11 performance. It is expected that SAIC (+5%) and Huayu Automotive (+4%) will see slight increase in earnings from stable sales of Shanghai Volkswagen and Shanghai GM in 1Q11; Great Wall Motor (+13%) will also slightly increase earnings with H6 new products. . The remaining company earnings are expected to decline significantly. Although FAW-Fuwei (-30%) will also show a decline in its first-quarter results, the launch of the Volkswagen Chengdu plant and the listing of Audi's new A6L will improve the company's operating conditions and make clear its positive trend.

Trucks : The industry is generally under pressure at high bases, and sluggish investment demand has dragged down the industry. Despite the drop in raw material costs, weak terminal demand will continue to drag down truck company earnings for the first quarter. It is expected that Weichai Power (-37%), China National Heavy Duty Truck (-40%) and Jianghuai Automobile (-50%) will make a profit in the first quarter. A significant decline occurred; Foton Motor's performance in the first quarter increased by 210% to 260% year-on-year, driven by higher market share, increased cost control and Daimler's assessment of value-added.

Passenger Cars: Leading companies are driven by the demand for school buses, and their profits have increased steadily. The sales volume of large and medium-sized passengers in the first quarter is expected to remain basically the same as that of the same period of last year. Yutong Bus (+29%), the leading company, is expected to steadily increase revenue and profit from school bus orders. Under the background of deteriorating operating conditions of small and medium-sized enterprises, light passenger sales of Jiangling Motors, the high-end light passenger vehicle manufacturer, are expected to decline by approximately 10% year-on-year in the first quarter. We expect the company's net profit for the first quarter to decline slightly by 15%.

Valuation and recommendation: The first decisive trend is to clarify the parts company, the vehicle type configuration SAIC and Jiangling Motors. There are two ideas for parts selection. The first idea is to look for market leader in cost reduction and export revenue growth, recommend Zhongding shares and Fuyao Glass; the second is to match strong car prices, sales are stable and good Trending varieties such as Huayu Automotive and FAW Fuwei. For passenger vehicle companies, we are still optimistic about the leading car companies in Europe and the United States, SAIC Group's valuation is relatively undervalued; commercial vehicle companies we prefer Jiangling Motors, which has upward flexibility in sales and profitability.

Risks: The macro tightening time exceeds expectations; weaker demand leads to higher than expected industry price pressures; and increased barriers to trade in export markets.