FAW Car:Below expectations;Activities muted before restructuring;Sell发布时间：2015-11-02 研究机构：高盛高华证券
What surprised us
On Oct 30, FAW Car reported 3Q15 revenue/earnings at Rmb5.4bn/-142mn,-36%/-104% yoy, -14%/-246% vs. GH estimates. The lower than expectedearnings were due to: 1) weaker 3Q volume (-33% yoy); 2) higher SG&A ofRmb1.0bn vs. GHe’s Rmb0.94bn; 3) higher COGS which is 84.9% ofrevenue vs. GHe’s 84.2% as a result of low volume and weak fixedmanufacturing cost absorption. The company reported weak numbers in3Q15 with low sales and marketing activates before the potential grouprestructuring in 2016E (as per company guidance).
What to do with the stock
We cut our 2015E-18E EPS by 30.8%/4.8%/5.0%/4.2% to factor in weaksales and product cycle. Accordingly, we revise our 12m 2016E P/B- avg.
2016-18E ROE based TP to Rmb8.24 (prior Rmb8.64) with valuationpremium unchanged at 34% to factor in potential group restricting in2016E. We maintain our Sell rating on weak volume and uninspiringproduct cycle. Key risks: higher-than-expected volume/price/margin;higher-than- expected valuation given by the holding company in potentialgroup restructuring (stock swap).