Nearly 20% Increase in Total Sales in the First Three Quarters

In the first nine months of this year, the total number of vehicles sold by BAIC Motor recorded 1,315,362 units, representing a year-on-year increase of approximately 19%, better than the industry average. To be specific, the sales of Beijing Benz witnessed a substantial year-on-year increase of 29% to 226,795 units. Besides, the sales of independent brands skyrocketed by 51% to 309,567 units compared with that of the last year. And the sales of Beijing Hyundai grew by 7.5% over last year to 779,000 units. The strong rise of Beijing Benz was primarily because it was in the strong product cycle and its new products were well received by the market upon launch. The growth of proprietary brand was because it unveiled a number of new SUVs based on the booming domestic SUV market and the SUV sales soared by eight times to 156,160 units. Currently, the only less ideal Beijing Hyundai seems to show a gradually stable trend.

Sales of Blade Electric Vehicles Remained Number One

It is worth mentioning that the performance of new energy vehicles, the market focus, was the highlight. The sales of new energy vehicles under BAIC Motor brands amounted to about 30,274 units in the first nine months of 2016, up by 169% over the previous year and remained number one in the sales of pure electric vehicles nationwide. When it comes to the future planning for new energy vehicle models, according to the management of BAIC BJEV, A00-class sedan coded `C10` and B-class sedan coded `C80` would be launched around this October, and ARCFOX-1 would be released at the end of this year and officially listed on the market in the first half of next year. Also, EX300L displayed in the Beijing International Automotive Exhibition would also be unveiled next year. A vast range of new vehicles and addition of the first product of ARCFOX are expected to consolidate and continue improving the competitive edge of BAIC BJEV, and facilitate the sales of its new energy vehicle parts.

Investment Thesis

In respect of share price catalysts, the company may benefit from two favorable news: 1) It is rumored that BAIC Motor is expected to establish a JV with Fiat Chrysler Automobiles NV (FCA). Apart from the Jeep brand, FCA owns a variety of classic SUV models including Chrysler and Dodge. If the rumor is true, we believe this will further diversify SUV model reserve of BAIC Motor, and allow BAIC Motor to more fully share benefits of the Chinese SUV consumption boom. 2) The Chinese government issued the Exposure Draft of Online Car-hailing Service Management, imposed very strict requirements on the parameters of new energy vehicles and eliminated most competitive models on the market. Yet, two types of BAIC Motor electric vehicles were short-listed and are projected to profit from the car-hailing service management. We lift the target price to HKD9.8 and maintain the rating to "Buy". (Closing price as at 17 October 2016)

Financials

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