Core views
Sales of SUVs continued to rise month-on-month in October. Traditional passenger car sales were 30,600 units in October. After a month-on-month decline on working days in October, sales in October still achieved a 0.3% month-on-month increase, and monthly sales continued to grow for 6 consecutive months. Among them, sales of SUVs reached 27,700 units in October, an increase of 2.27% over the previous month, and achieved positive month-on-month growth for 6 consecutive months, reaching a high since this year. Continued growth in SUV sales is the main contributor to the growth of the company's traditional vehicle sales. The T700 and T600 are the main contributors to SUV sales. In October, T700 sales reached 10006 units, and T600 sales reached 8071 units, and the monthly increase continued. Entering the fourth quarter peak season, it is expected that the company's SUV sales will continue to grow month-on-month in November and December.
Sales of new energy vehicles increased month-on-month in October. In October, the company sold 3,051 new energy vehicles, an increase of 21.85% over the previous month, mainly driven by rising demand from the NEV industry. In January-October, the company's cumulative sales volume of new energy vehicles reached 22,500 units, an increase of 14.23% over the previous year. As demand for new energy passenger vehicles continues to improve, it is expected that the company's pure electric passenger vehicle sales will maintain a high growth rate in the fourth quarter.
Earnings are expected to continue to rise month-on-month in the fourth quarter. With the recovery in the company's demand for traditional SUVs, it is expected that SUV sales will continue to rise sequentially in the fourth quarter, and sales of new energy passenger vehicles will continue to grow at a high rate. The company's 3rd quarterly report announced that it expects net profit of 1,259-1,362 billion yuan in 2017, an increase of 1350.7%-1469.4% over the previous year. Among them, Yongkang Zotye expects to achieve net profit growth of 14.3-1.51 billion yuan in the fourth quarter.
With the introduction of the fuel consumption credit management policy, fuel consumption points are positive and car companies that have many new energy credits have benefited.
The introduction of the fuel consumption credit policy is expected to benefit car companies with negative fuel consumption points that need to buy credits from other car companies that have many NEV credits.
Financial forecasting and investment advice
We forecast EPS of 0.64, 1.04, and 1.32 yuan in 2017-2019. Referring to the comparable company, the company gave the company 19 times the average PE valuation in 18 years, with a target price of 19.76 yuan, maintaining the purchase rating.
Risk warning: Sales of SUVs and other models and new energy vehicles fell short of expectations.