The company is one of the leading domestic passenger and commercial vehicle enterprises with strong comprehensive strength. According to the China Automobile Association, the company's car market share in the first 10 months of 20 years was 11.3%, of which passengers and businessmen were 11.4% and 10.9% respectively. The commercial vehicle market share has increased over the past 18 years. Sales in the heavy truck industry are expected to remain stable in 21, with a year-on-year growth rate of-10% to 5%, and the company's commercial vehicle revenue will remain stable.

The recovery of demand in the passenger car industry and the strong sales trend of Japanese brands are expected to bring profit growth. In our 21-year strategy report "actively embracing α in change and upgrading", we judged: "it is estimated that the growth rate of passenger car terminal sales in 21 years is expected to be 10-15%, and the profitability of the industry is expected to reach or exceed 19 years."

Dongfeng Honda sales growth has long been better than the overall Japanese cars, Dongfeng Nissan Xuanyi sales growth is stable, Dongfeng Group passenger car business revenue profit is expected to continue to grow in the next two years.

Planning for the listing of the gem, new energy high-end brand Lantu injected new vitality into the group. In the announcement issued on November 10, 2020, the group promised that the cash dividend ratio of the A-share offering would not be less than 40% of the parent company's annual distributable profits within three years after the A-share offering. The Group plans to raise 21 billion yuan in this IPO, of which 7 billion yuan plus its own capital of 4 billion yuan, a total of 11 billion yuan will be invested in the new high-end new energy vehicle brand Lantu project. Lantu project has the dual task of boosting Dongfeng's own brand and entering the high-end pure electricity market, and is expected to become a new driving force for the company's business development.

Japanese joint ventures are expected to continue to support the company's profit growth, and independent brands will benefit from the implementation of new energy projects, giving a "buy" rating for the first time. Regardless of the impact of A-share listing, the company's net return profit for 20-22 is expected to be 105.0 pound 12.72 billion yuan, an increase of-18.4%, 21.2% and 10.3% over the same period last year. The EPS is RMB 1.22 per share, which gives the company a 20-year valuation of 8 times PE, corresponding to a fair value of HK $11.06 per share (exchange rate calculation: RMB: HKD: HKD = 0.881), with a "buy" rating for the first time.

Risk hint: the epidemic affects the demand for passenger cars, and the company's NEV project falls short of expectations.