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Dongfeng Motor:Tie-up with Volvo truck

发布时间:2013-01-28    研究机构:美林证券

Event – Global strategic alliance between Dongfeng & VolvoDongfeng (DFG) announced to enter a global strategic alliance with Volvo truck -the world 3rd largest heavy truck maker. The partnership follows the agreementbetween DFG and Nissan on transferring the medium and heavy truck operationfrom their joint venture - Dongfeng Limited (DFL) to Dongfeng (DFG) at Rmb11.7bn (or 1.35x 2011 P/B). The major part of the re-purchased HDT&HDT operationwill be included in a new company, Dongfeng Commercial Vehicles (DFCV), ofwhich Volvo will spend Rmb5.6 bn to acquire 45% stake, with rest operation -Dongfeng Motor Finance and Dongfeng Liuzhou Motor (passenger vehicle, MDT&HDT) will be owned by DFG directly with a double stake holding. Volvo JV detail:- Name: Dongfeng Commercial Vehicles (DFCV),- Product: “Dongfeng” brand HDT, MDT, bus, chassis, engines, transmission, etc- Stake structure: Dongfeng :Volvo= 55%:45% with Rmb9.2 bn registered capital- 2012 sales volume: 148,000 unit truck (102,000 / 46,000 unit HDT / MTD)- 1-3Q2012 financial – Rmb 22/2.8/0.3/0.4 bn revenue/gross profit/Ebit /EarningsPositive read on this tie-up; benefit both HDT&MDT and PVWe view DFG’s HDT& MDT operation’s restructure as a positive, which could notonly revive its HDT & MDT operation but also boost its PV segment consolidationwith very tiny capex - Rmb0.25 bn (Rmb5.86 bn outflow and in Rmb5.6 bn inflow).

HDT & MDT business revival. Tie-up with Volvo should offer DFG excellent growthpotential, via access to Volvo’s worldwide presence and technological expertise.

Better control over Dongfeng Liuqi PV. DFG said it will raise its stake in DF LiuqiPV operation from 35% to 70%, a solid step in consolidating own brand PV business.

Considering the 5% higher stake in MDT&HDT as well as 35% higher stake in DFLiuqi, we revise up 2013/14E earnings by 5.2/3.3% to Rmb8.45 bn / 11.7 bn andraise our DCF-based PO by 7.4% from HK$13.5 to HK$14.5. Reiterate BUY.

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