BAIC (1958.HK) More Challenge than opportunity in H2 September 9, 2019 44

PSR Recommendation: NEUTRAL Status: Downgraded
Target Price: HKDHKD4.73

Investment Summary
Net Profit Fell by 26% in the Middle of 2019
According to the interim results of BAIC, in 2019H1, the Company recorded a revenue of
RMB87,764 million, an increase of 14.1% yoy, a net profit attributable of RMB2.09 billion, a
decrease of 25.9% yoy; and an EPS of RMB0.25, while that of 2018H1 was RMB0.36.
Gross Margin Declined due to the Down-regulation of the Product Mix of Beijing Benz
The comprehensive gross margin of BAIC recorded 23.48%, a decrease of 3 ppts yoy. Though
the revenue increased, the gross profit was basically flat, with a slight increase of 0.84%. This
is mainly because Beijing Benz`s low-priced Class-A models accounted for a larger share of
sales, causing the product mix to be down-regulated. In H1, Beijing Benz recorded a sales
volume, revenue and gross profit of 282,000 vehicles, RMB77.81 billion, and RMB22.02
billion, respectively, an increase of 11.9%, 10.8% and 0.16% yoy, with the average gross
profit of single vehicle declined by 10%, approx. In H2, Beijing Benz will launch new models
including the interim modified long-wheelbase GLC SUV, brand-new GLB SUV, EQC EV SUV,
and A35-LAMG. With the increased demand for premium cars, we are confident that Beijing
Benz will continue to maintain its sound growth momentum.

About the author

Profile photo of Zhang Jing

Zhang Jing
Phillip Securities (HK)

Bachelor Degree in Tongji University of Engineering; Master Degree in East China Normal University of finance. Currently covering the automobile and air sectors. She has years of experience in investment research and is good at combining analysis for the companies with industry prospects.

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