It is expected that the sales growth of passenger cars will pick up in the second quarter

Due to the high base of car sales in the first quarter of 2011, terminal demand has been stable since the start of the 12th year, and total car sales in the first quarter of this year are expected to decline slightly year-on-year; due to the impact of the earthquake in Japan in the second quarter of last year, the sales base is low, and it is expected to be used in the second quarter of this year. The year-on-year growth rate of the vehicle picked up; in addition, due to the release of capacity of major vehicle manufacturers this year, we maintain the sales growth of passenger cars by 8-9% for the full year; however, if the market continues to be dull, manufacturers’ competition will become more intense and may result in terminal prices. Going low will affect corporate profits.

In the commercial vehicle segment, although sales in the first half of the year are unlikely to increase positively, the fall in raw material prices will help increase gross profit margins and promote profitability. We maintain the auto sector neutral rating, continue to recommend leading automakers with solid earnings and low valuations, and listed companies that benefit from the concepts of school bus and new energy.

Key points Total auto sales in January-February declined by 6% year-on-year, with passenger cars and commercial vehicles falling 4.4% and 11.9% respectively. Affected by the Spring Festival holiday, sales in February rose 24.5% year-on-year to 1.57 million units, an increase slightly lower than market expectations, with passenger cars and commercial growth of 26.5% and 11.8% respectively.

In January-February, sales of passenger cars with 1.6 liters or less decreased by 6.9% year-on-year, accounting for a 1.7 percentage point drop in the sales of cars to 70.6%; the share of self-owned cars declined by 4.2 percentage points year-on-year to 27.9%, with a declining share.

In January-February, the total automobile exports increased by 23.5% year-on-year; the top five exporters were Chery, Great Wall, Geely, Dongfeng and SAIC, with accumulative growth rates of 33.1%, 7.4%, 3.4 times, and 50.4% respectively. 1.3 times.

In 2011, 17 key auto companies in China achieved operating revenue of RMB 2,344.8 billion, an increase of 10.2% year-on-year; total profit was RMB 322.1 billion, a year-on-year increase of 13.2%. The growth rate of business efficiency indicators has slowed down, but the overall profit rate has remained at a relatively high level.

The price index for passenger cars in February 2012 was 64.1, down slightly by 0.6% from January. Among them, the prices of mid-size cars, premium cars, luxury cars, and mini-cars fell by 1.0%, 0.6%, 0.2%, and 0.2% respectively, and the prices of small cars increased by 0.8%.

Estimates and valuations We expect the industry to start positive growth in the second quarter, and it is expected to achieve 8-9% year-on-year growth for the whole year, but the profit growth of the passenger vehicle industry may be lower than the sales growth. For commercial vehicles, it is expected that SLC will benefit from the promotion of school buses and maintain a forecast of 10-15% growth in the passenger car segment throughout the year. Optimistic expects the truck segment to recover year-on-year with the economic recovery or credit relaxation in the second half of the year. 10% increase.

After the recent adjustments, the overall valuation of automobile stocks has declined, and some of the quality of passenger car stocks have a PE of less than 10 times in 2012, which is attractive. Commercial vehicle valuations are slightly higher. Pay attention to the April quarter reporting period, and some companies' earnings may not be expected to put pressure on the valuation of the sector.

Preferred Buying We recommend to focus on listed companies with sound earnings and relatively good performance. The passenger car segment recommends Shanghai Automotive and Huayu Automobile. It is recommended to focus on Great Wall Motor; on commercial vehicles, Futian Automobile, which has a higher certainty of profitability in the first quarter, is recommended. Benefit from the growth of the school bus market, such as Yutong passenger coaches.