Sales volume of Chang’an Automobile rose 24.5% YoY and 3.2% MoMto around 220,000 units in November. Its sales volume totaled1.803mn units in 11M20, up 15.3% YoY.

Comments

November sales hit new high; various models of domestic brandsbooked MoM growth. The firm’s sales volume saw positive YoYgrowth for the 8th consecutive month in November, hitting a newhigh since April 2018. Domestic brands were the main growth driver.

Their sales volume rose around 30,000 units YoY with ChongqingChang’an up 49.2% YoY to around 83,000 units and Hefei Chang’an up10.6% YoY to around 28,000 units. CS75 PLUS booked sharp YoYgrowth in November despite a high base, driven by multiple models’

continued MoM growth in sales volume. November sales came toabout 33,000 units for CS75, around 21,000 units for EADO, around14,000 units for CS55, over 10,000 units for CS35, and about 10,000units for UNI-T. We attribute the slight MoM decline in UNI-T tolimited auto parts supply as its end-market demand was stronger. Webelieve the MoM growth demonstrates improvement in domesticbrands’ product and brand influence.

Sales of JV brands solid. As the firm’s main growth driver, Chang’anFord’s November sales rose 54.8% or about 10,000 units YoY to about29,000 units, with Escape, Explorer and Lincoln’s November sales at3,954 units, 3,504 units, and 6,577 units. The sales volume of oldermodels such as Focus and Escort grew MoM but fell YoY. Full-size andmid-size vehicle’ sales volume contribution stayed high at around60%. Chang’an Mazda’s November sales grew 7.5% YoY to about13,000 units. Mazda 3’s sales volume came to 8,484 units, andCX-30’s monthly sales volume has stayed at around 2,000 units sinceit was unveiled.

Business expansion in high-end intelligent alternative fuel vehicle(AFV) accelerating.

Valuation and recommendation

A-shares are trading at 19.0x 2021e P/E and B-shares at 5.7x 2021eP/E. Maintain OUTPERFORM. As we expect the firm’s businessexpansion in high-end AFV to boost its valuation, we raise our targetprice 25.0% for A-shares to Rmb25.0 (20x 2021e P/E) and 30.8% forB-shares to HK$8.50 (6x 2021e P/E), offering 4.9% and 6.3% upside.

Risks

Cooperation with Huawei and sales volume disappoints.