Yutong Bus Company's October passenger car sales increased by 6.1% year-on-year, basically in line with market expectations. In October, the total number of passenger cars sold by Yutong Motor Co., Ltd. was 3,321, an increase of 6.1% year-on-year. The seasonal pattern formed by the eleven long vacation days resulted in a 12.6% drop in sales volume in October. The sales volume was in line with market expectations. In October, the production volume was 3,785 units. Super-selling 464 vehicles was the order vehicle, which is expected to be reflected in sales in November and December. At the end of the sales season at the end of the year, the probability of a significant rebound in sales in November was greater.
In October, sales volume resumed steady growth, and the sales growth of large passengers continued to exceed the overall growth rate. The Yan'an incident affected the impact of the passengers on the market. In September, the sales volume showed a significant year-on-year decline year-on-year, but it is expected that the company's passenger car sales in the fourth quarter could still achieve year-on-year growth. The bus structure continued to improve in October. Among them, the sales volume of large passengers was 1,006 units, which was a year-on-year increase of 11.9%, which was higher than the overall growth rate. The product structure continued to move upwards. In the January-October period, the cumulative sales volume of large passengers totaled 17,776 units, a year-on-year increase of 18.6%. The increase in product mix will result in higher revenue and earnings growth than sales growth.
At historically low valuations, sales in November are expected to be better than market expectations. Due to lower-than-expected sales in September, the stock price has recently been adjusted and is in a low position in the last half year, and the valuation level is below the historical valuation range, which corresponds to a 9-fold valuation in 2013. According to the seasonality of passenger car sales, the postponement of the number of invoices in October, and the gradual release of orders due to the Yan’an incident, it is expected that the sales volume will increase significantly in November. With the optimization of product structure and the arrival of the sales season at the end of the year, it is expected that the gross profit margin and profitability in the fourth quarter will both increase year-on-year.
The company is the preferred investment target for the automotive industry. School bus safety will continue to be valued by the market. As a new demand in the passenger car sector, there is a huge market potential for school buses. With its absolute leading position in the large and middle industry, the company will further increase its market share in school bus segmentation and its leading position in the passenger car industry. After the production capacity reaches capacity in 2013, it is expected that the company's performance will remain higher than the growth rate of the industry and competitors, and the trend of market share concentration towards the industry leaders will become more apparent.
Finance and Valuation: Maintain the 2012-2013 EPS forecasts of RMB 2.1 and RMB 2.42 respectively. According to the valuation of comparable vehicle companies, we believe that we will give PE 12.5x valuation in 2013 with a target price of RMB 30 and maintain the BUY rating.
Risk Warning: The economic downturn affects the demand of the passenger car industry; the implementation of school buses by local governments affects demand; and the increase in raw material costs affects profitability.
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