Dongfeng Motor enters a healthy growth track
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Dongfeng Motor, the largest light commercial vehicle production base in China, entered a healthy growth track
Dongfeng Motor (600006) is principally engaged in the manufacture and sale of Dongfeng light commercial vehicles, Dongfeng Cummins engines and related parts, NISSAN pickups and modified cars, and PALADIN multi-function vehicles. Dongfeng Light Commercial Vehicle has formed thousands of varieties of Dongfeng Xiao Bawang, Dongfeng Jinba, Dongfeng Duolika, Dongfeng Star, Dongfeng King Kong, Dongfeng pickup, Orient Express, NISSAN pickup and its modified vehicles, and PALADIN multi-function vehicles. The product structure covers light trucks, light passenger cars, passenger car chassis, pickup trucks, and SUVs, and is the largest light commercial vehicle production base in China.
The company has two branch companies: automobile and foundry, pickup trucks, engineering vehicles, and overseas divisions. Dongfeng Cummins Engine Co., Ltd., Zhengzhou Nissan Motor Co., Ltd., Dongfeng Yulon Automobile Sales Co., Ltd., Dongfeng Xiangfan Wagons Co., Ltd. and other holding companies. composition. From the perspective of revenue and profit contribution, the company's headquarters (light trucks), Dongfeng Cummins Engine Co., Ltd. and Zhengzhou Nissan Motor Co., Ltd. are the focus of our attention.
Dongfeng light truck
Comprehensive advantages accumulate
The company's light truck products are produced in the headquarters and Dongfeng, Changzhou, with a total capacity of approximately 160,000 vehicles. The company has advanced technology and equipment to ensure the high quality of Dongfeng series light commercial vehicles assembled. Dongfeng light truck products cover a wide range of products from the ordinary Dongfeng bully extended to the high-end Dongfeng Star. The rich product line satisfies the needs of various customers. We expect that Dongfeng Light Truck will continue to introduce new products in the future with the Group's strong technology development capabilities, and its market share is expected to continue to increase.
With the support of multiple favorable factors such as a good brand image, high technology and quality, and professional sales model, Dongfeng Light Trucks achieved an average speed of development above the industry average. Sales in 2006 increased by 19.40%; in the first half of 2007, 62,325 light trucks were sold, a year-on-year increase of 20.92%, which was higher than the industry growth rate of 6.18 percentage points, which was faster than the main competitors Futian and JAC. We noticed that while the profit contribution of Dongfeng Cummins and Zhengzhou Nissan was declining, the company's light truck business was booming, and production and sales volume grew rapidly, making an important contribution to maintaining the overall performance of Dongfeng Motor.
Dongfeng Cummins
Leading engine manufacturer
Dongfeng Cummins Engine Co., Ltd. is a diesel engine manufacturing company jointly established by Dongfeng Motor and Cummins Inc., each with a 50% stake. Cummins is the only company in the world that operates well as an independent engine manufacturer. It has a rich product line, a high technical level and a good brand image. Dongfeng Cummins is mainly produced by Cummins technology in the United States. It is a national high-tech enterprise and is currently China's largest medium-heavy power production base. The company's products meet the requirements of the National 2 and National 3 emission regulations, and can be widely used in light, medium and heavy duty trucks, medium and high-level intercity buses, large and medium-sized bus passenger vehicles, construction machinery, marine main auxiliary engines, and generator sets. As of May 2007, Dongfeng Cummins has produced a total of 1 million engine products.
The pre-Dongfeng Cummins product is basically used in the Dongfeng Group's internal heavy-duty trucks. Now it has begun to increase the development and support of the Group's external markets. At present, Dongfeng Cummins Engine has reduced the proportion of its trucks to approximately 45%, and its external sales ratio has increased to approximately 55%. This has successfully achieved a strategic restructuring of the product sales market. It is worth noting that the Dongfeng Cummins engine is not supported by other heavy truck manufacturers.
We expect that Dongfeng Cummins is expected to continue to increase its external supporting scale and corporate profitability with high technical performance and a good brand image. In addition, in the face of the business opportunities brought about by the national environmental protection policy, various domestic diesel engine manufacturers have increased the development of electronically controlled engines that meet the national 3 or even Euro IV emission standards. The data shows that Cummins electronic control engines accounted for approximately 80% of the domestic electronically controlled engine inventory market in 2006. The company not only has a complete and mature technical reserve, but also has channel resources for new technologies to enter the market. As a result, Dongfeng Cummins will have a first-mover advantage in this explosive electronic war.
Zhengzhou Nissan
New listing to expand market space
Zhengzhou Nissan is currently China's largest high-end pickup production base and currently has an annual production capacity of 60,000 vehicles. The leading products include more than 60 varieties such as NISSAN pickup trucks and modified cars, PALADIN sport utility vehicles, and so on. The company promoted the improvement of profitability through adjustment of product structure and improvement of management level. The gross profit rate in 2006 was 21.39%, which was 3.23 percentage points higher than the previous year.
Zhengzhou Nissan plans to launch two new products, the Yumyun MPV and the Odin SUV, in the second half of 2007 to open up the market. Yu Xuan is located in the mid-range public business market. The launch of this product will enrich Zhengzhou's Nissan product line and give full play to the production capacity of the existing production line, thus forming a new profit growth point for the company. Odin SUV main off-road vehicle market, more urban SUV features, double swords help to expand a more comprehensive market space.
We expect that with the strong technical strength and mature sales network of Zhengzhou Nissan, the two new models mentioned above are expected to be accepted by the market in a relatively short period of time. In addition, the two new vehicles mentioned above can be co-produced with Zhengzhou Nissan's existing products, and the capital expenditure is relatively small. The related depreciation and amortization expenses have little effect on the level of gross profit, but the market promotion cost of the new products in the initial stage of listing is relatively large.
Earnings forecast and rating
According to the statistical report of Dongfeng Automobile Business Planning Department, the company completed 55% of its annual sales target in the first half of the year. Among them, 802.3 light commercial vehicles were sold, an increase of 27% year-on-year; engines sold 67,121 units, an increase of 40% year-on-year; casting production was 17,000 tons, an increase of 20% year-on-year. The growth rate of the two main businesses of automobiles and engines is higher than the industry level.
Dongfeng Light Commercial Vehicles witnessed a steady growth in the first half of the year and the business segments were thriving. The sales of light trucks reached 32,000 units and reached the established target; the sales of construction vehicles, passenger cars and passenger cars exceeded 10,000; the number of overseas exports was 3,005, an increase from the same period last year. 40%; Zhengzhou Nissan sold 19,000 vehicles, an increase of 57% year-on-year, and its own-brand diesel pickup sold 7,487 vehicles, an increase of 132% year-on-year.
Judging from the stock holdings reported in the mid-term, the improvement of the company's fundamentals has been recognized by institutional investors, and the top ten shareholders of unlimited sales conditions are all funds and insurance funds.
The company plans to challenge the production and sales of young commercial vehicles in 2007 to 150,000 vehicles; in 2009, the company's 10th anniversary, production and sales will challenge 200,000 vehicles, sales revenue will exceed 16 billion yuan; in 2011, 300,000 vehicles will be produced and sold, and sales revenue will reach 250 From 100 million to 300 million yuan, the company will eventually be built into a professional, large-scale, internationalized light commercial vehicle company.
We use price-earnings ratio and PEG indicators to determine the reasonable pricing of Dongfeng Motor. According to the statistical analysis of the current pricing level of commercial vehicle companies, the company's dynamic price-earnings ratio is about 30 times, and PEG is about 1. Considering that Dongfeng Motor's various businesses are getting better and its performance is expected to grow steadily, we believe that its stock price can be positioned at about 30 times PE level in 2008, taking into account possible trading investment opportunities, and the reasonable price of its stock is around RMB 12.25. There is about 30% upside relative to the current price.