MG India announced the introduction of local strategic investors through equity transfers and capital increases. The holding subsidiary MG India (MGI) introduced local Indian investors through equity transfers and capital increases to further open up a solid foundation for MG in the Indian market. According to the announcement, based on estimates of the fair value of MGI's shares, the announcement is expected to increase the Group's net profit by 5 to 70 billion yuan. Since the company's current delivery has not yet been fully completed, we maintain the company's net profit forecast of 161.2/187.9/20.50 billion yuan for 24-26. Comparatively, iFind's 24-year average PE was expected to be 17.7 times. Considering the pressure on the company's joint venture brand operation, the company was given a 15% valuation discount compared to the industry. The target PE for 24 was 15.01 times, corresponding to a target price of 20.90 yuan, maintaining a “buy” rating.
When MGI was established, SAIC Motor's paid-up capital was 29.25 billion rupees. The transaction recovered 26.51 billion MGI was established in February '17, 100% owned by SAIC Motor, with a registered capital of 32.75 billion rupees and paid-in capital of 29.25 billion rupees. The deal involved JSW Singapore subscribing for 1,012 billion shares of MGI for 26.51 billion Indian rupees (about 2,256 billion yuan) and subscribing for an additional 354 million shares of MGI for 9.26 billion rupees, with a total shareholding ratio of 35% after the transaction was completed. IIF (IndoEdgeIndia Fund, a local financial institution), dealer trusts, and employee holdings each subscribed to MGI's additional 312 million/117 million/195 million shares at 8.18 billion/ 3.07 billion rupees. After the transaction was completed, they held 8%/3%/5% of the shares respectively. SAIC Motor has already recovered about 91% of the paid-up capital of 29.25 billion rupees in the equity transfer process during the transaction, basically recovering most of the investment to ensure the safety of early investments.
Although SAIC Motor's shareholding fell to 49%, it still has 53.3% voting power. It is expected that SAIC Motor Group, JSW Group, local financial institutions, dealers, and employees will hold 49%, 35%, 8%, 3%, and 5% of the shares in the new joint venture, respectively. In the future, SAIC Motor will account for MGI using the equity method. JSW Group is a well-known steel company in India. They lack experience in the automotive industry, but they are very optimistic about India's future market. 5% of employees' shares and 3% of dealers' shares do not have voting rights. The remaining 92% of equity owners enjoy 100% of the voting rights, and SAIC Motor still has 53.3% of the voting rights, which is expected to maintain its brand and technology dominance in India.
Referring to the history of SAIC Motor's joint venture brand, SAIC Motor is expected to launch the first MGI model in India in June 19. The company's sales volume grew from 16,528 units in 19 to 62010, and passenger car sales in India were +8% year-on-year to 4.102 million units. MGI ranked 8th in the Indian market, with new energy vehicles ranking second in the market. SAIC Motor's introduction of local investment in India also makes it easier to enjoy India's better policies, which is beneficial to SAIC Motor's long-term development in India. This step is similar to Volkswagen and GM entering China in the 80s and 90s of the last century to establish joint ventures with SAIC Motor, and is expected to create a new paradigm for Chinese car companies to go overseas. As for SAIC Motor, SAIC International's profits are improving year by year. Exports and overseas localization plants are progressing steadily. The company's overseas sales target for 24 years is +12% to 1.35 million vehicles. We are optimistic that going overseas in the next 2 to 3 years will contribute to the company's profit.
Risk warning: Consumer demand falls short of expectations, overseas trips fall short of expectations, and the company's intelligent progress falls short of expectations.