China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production for a few days early December 2020, according to local media' reports on 8th Dec. CAAM (China Association of Automobile Manufacturers) estimate, based on survey over more than 60 OEMs, is that MCU short supply - which mainly lead to production issue of ESP(（Electronic Stability Program) and ECU(Electronic Control Unit) and hence mid-high end cars - might cause short term interruption on some OEMs in 1Q2021 before getting released afterwards. According to latest media reports, Honda JVs and VW JVs in JV brands are both impacted so far. Geely (175.HK) and Changan (000625.CH) are under pressure. However, as the short supply is led by short term reasons and actions have been taken in the whole supply chain, it would not change our positive view on China's auto sector 2021E. Instead, if any share performance weakness happens due to related components shortage, that would be buying opportunities for investors.

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production for a few days early December 2020, according to local media' reports on 8th Dec. CAAM (China Association of Automobile Manufacturers) estimate, based on survey over more than 60 OEMs, is that MCU short supply - which mainly lead to production issue of ESP(（Electronic Stability Program) and ECU(Electronic Control Unit) and hence mid-high end cars - might cause short term interruption on some OEMs in 1Q2021 before getting released afterwards. According to latest media reports, Honda JVs and VW JVs in JV brands are both impacted so far. Geely (175.HK) and Changan (000625.CH) are under pressure. However, as the short supply is led by short term reasons and actions have been taken in the whole supply chain, it would not change our positive view on China's auto sector 2021E. Instead, if any share performance weakness happens due to related components shortage, that would be buying opportunities for investors.  

China Auto: Short-Term Interruptions from Auto Chips Shortage

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric vehicle) sales double will in 2021E.SUV's market share would continue growing and might reach 50% soon in China due to customers' preference, while premium car market (above Rmb130k) would continue gain market shares with consumption upgrading. B/C segment EV SUVs, as long as there's qualified models available, would be the hottest segment in 2021E.Among EV brands, Tesla (TSLA.US) Shanghai might be the biggest winner next year, thanks to its coming Model Y (SUV). Xpeng(EPEV.US) is our favourite in local brand. It would  launch a new sedan EV (P5) in 2021E.  Xpeng's new SUV model might come in 2022E.  NIO's (NIO.US) sales would under pressure due to direct competition from Model Y.Among traditional OEMs, Geely (175.HK) remains our favourite due to high expected growth of earnings driven by ramping up Lynk&amp;Co, new models and coming brand new designed EV models.

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric vehicle) sales double will in 2021E.SUV's market share would continue growing and might reach 50% soon in China due to customers' preference, while premium car market (above Rmb130k) would continue gain market shares with consumption upgrading. B/C segment EV SUVs, as long as there's qualified models available, would be the hottest segment in 2021E.Among EV brands, Tesla (TSLA.US) Shanghai might be the biggest winner next year, thanks to its coming Model Y (SUV). Xpeng(EPEV.US) is our favourite in local brand. It would  launch a new sedan EV (P5) in 2021E.  Xpeng's new SUV model might come in 2022E.  NIO's (NIO.US) sales would under pressure due to direct competition from Model Y.Among traditional OEMs, Geely (175.HK) remains our favourite due to high expected growth of earnings driven by ramping up Lynk&amp;Co, new models and coming brand new designed EV models.

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

Equity Bottom-Up

Geely might become the first traditional OEM who join smart EV boom in China.  We believe smart EV would be the key beneficiaries of China's EV market demand growth. Geely would start benefiting from it when it's Lynk&amp;Co Zero Concept, which would be manufactured on Geely's brand new EV  platform-SEA(which is designed for Full Autonomous Driving of future) launches in the market. In addition, full year contribution from its 6 new models launched this year and 3 new models coming next year would drive Geely's earnings grow by 66% yoy in 2021E. Valuation re-rating opportunity is expected with Geely's STAR boarding listing in the short term, and the company's transforming to smart EV maker in the long term.

Geely might become the first traditional OEM who join smart EV boom in China.  We believe smart EV would be the key beneficiaries of China's EV market demand growth. Geely would start benefiting from it when it's Lynk&amp;Co Zero Concept, which would be manufactured on Geely's brand new EV  platform-SEA(which is designed for Full Autonomous Driving of future) launches in the market. In addition, full year contribution from its 6 new models launched this year and 3 new models coming next year would drive Geely's earnings grow by 66% yoy in 2021E. Valuation re-rating opportunity is expected with Geely's STAR boarding listing in the short term, and the company's transforming to smart EV maker in the long term.

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - November 2020 - Lucror Analytics

Hong Kong

Geely Automobile Holdings Limited operates as a passenger vehicles manufacturing company. The Company provides passenger vehicles development, manufacturing, sales, and other services. Geely Automobile Holdings also exports passenger vehicles.

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Geely Auto (175 HK)

China Auto: Short-Term Interruptions from Auto Chips Shortage

Impact of wafer shortage extended to auto chips recently, and forced several factories of VW JVs in China to suspend production early December...

Victoria Li

China Auto 2021E Outlook: Winter Is Over

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric...

Victoria Li

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer...

Lucror Analytics

Geely (175.HK)-Joining the EV Party

Geely might become the first traditional OEM who join smart EV boom in China. We believe smart EV would be the key beneficiaries of China's EV...

Victoria Li

Asia HY Trade Book - November 2020 - Lucror Analytics

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

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