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Changan Automobile (000625) Commentary on Major Issues: New Energy Will Show More Focus on Core Core Business

03/04/2020

Changan Automobile (000625) Commentary on Major Issues: New Energy Will Show More Focus on Core Core Business
Matters: The company issued an announcement that Changan New Energy, a wholly-owned subsidiary, plans to increase its capital and shareholding through public listing, and the company receives financial subsidies.  Comment: Changan New Energy is on the table and is expected to affect net profit22.9.1 billion.In October 2018, the company listed a 100% -owned Chang’an New Energy Value-Added Project project and planned to date the war investment; suspension and modification of the plan in June 2019; re-listing in September; the company issued an announcement on December 3 to determine the plan and planDating 4 investors, total planned investment 28.4 billion (of which about 1.03 trillion subscribed for registered capital, and the remaining part is included in the capital reserve), Changan waived its right of first subscription. The distribution structure after the capital increase is completed is as follows: Changan Automobile accounts for 48.9546%, Nanjing Runke 17.9737%, Changxin Fund 17.9737%, Liangjiang Fund 13.3006%, Southern Industrial Fund 1.7974%.Changan New Energy will be changed from a 100% -controlled consolidated company of Changan Automobile to an associate company.When the transaction is completed, the company’s equity in Chang’an New Energy will be revalued at fair value, and the company is expected to generate 22 in the consolidated statement.91 million net profit impact.The transaction became effective after approval by the shareholders’ meeting.  Expose non-core business, reduce losses + focus more on the main business.The company’s three main core businesses in the future will be Changan Passenger Cars, Changan Ford, and Changan Mazda.Since the Changan New Energy project was listed last year, the company has begun to continue to try to make non-core business adjustments and other adjustments, including the continued division of JMC Holdings in the first half of 2019 (net profit after removing JMC Motors in 2017 -4.600 million US dollars in the second half of the new energy date war investment (October 2019 net profit -5.800 million), sold 50% equity of Changan PSA (net profit in the first three quarters of 2019 -2.100 million) and so on.The company’s other non-core businesses also include Auchan Division and Kai Cheng Division.The adjustment and adjustment of non-core business dating in the correct state will help the company reduce losses and focus more on its core business.  The independent product cycle goes ahead. It is expected that the three models of CS75 Plus, Auchan X7, and CS55 Plus will form a strong support for autonomous 4Q19.The CS75P has become the most prominent model in this round of autonomous A-class SUV replacement. Its production and sales have continued to climb, achieving 1 in October.70,000 sales, the 50南宁桑拿,000th vehicle production line on November 29, and sales are expected to exceed 2 in December.50,000 vehicles.The Auchan X7 and CS55 Plus are also available today.The Auchan X7 is priced as an A-Class SUV7.770,000 yuan -11.770,000 yuan, over 20,000 orders since pre-sale.The CS55P and CS75P share the same design language and are priced as a slightly smaller A-Class SUV9.19-11.490,000 yuan, is expected to drive CS55 series sales rebound.The company’s 3Q19 is close to non-profit deduction. We expect the hot sales of CS75P and the listing of Auchan X7 and CS55P will strongly support the company’s 4Q19 non-profit deduction.The company announced on December 3 that it has received government subsidies2.10,000 yuan will be directly included in 4Q19 profit.  2020 will focus on Changan Ford’s medium and large SUVs.Medium and large SUVs are Ford’s most competitive product segment. In 2020, Changan Ford plans to launch two domestic Lincoln models (one A-class and one B-class) and Explorer (B-class SUV).Zhenchangfu sales and profitability.  Investment advice: Changan Automobile’s investment logic remains unchanged, focusing on grasping the industry cycle, as well as the company’s own cycle change brought by Changan’s independence and Changfu.Changan is expected to perform particularly strongly on its fundamentals from November to December.We maintain the company’s net profit attributable to mothers for 19-20 years1.Expectations of 0 billion and 4.5 billion correspond to current PE 397 and 9.2 times, corresponding to PB 0.9, 0.8 times, maintaining the company’s 2019 target of PB 1.2 times and 11.47 yuan target price, maintain “strong push” rating.  Risk warning: The macro economy is lower than expected, the industry sales are lower than expected, and Changfu new car sales are lower than expected.