Foton Motor (600166) First Coverage Report: Focus on Commercial Vehicle Performance

Foton Motor (600166) First Coverage Report: Focus on Commercial Vehicle Performance
This report reads: After the management changes, the company ‘s governance and operating margins have improved significantly. It is expected that the light truck business will remain strong. At the same time, the allocation will make the consolidated statements and the operating pressure of Beijing Bao Wo, and the company’s performance will gradually improve. Investment Highlights: Target Price 2.40 yuan, the first coverage given to “overweight” rating.After the change of leadership, the company’s governance and operating margins have improved significantly.The development strategy has shifted from “commercial passenger vehicle simultaneous development” to “focusing on commercial vehicles”, and shares have been repurchased since April 2019 for executives’ distribution incentives and employee stock ownership plans.Taking into account the transfer of equity, the scale of the consolidated statement reaches the operating pressure of Beijing Bao Wo, we predict that the company’s EPS for 2019-2021 will be 0.08/0.10/0.10 yuan, with reference to comparable companies (commercial vehicle industry), considering the significant improvement in corporate governance after the reorganization, giving a certain premium, giving the company 24 times PE in 2020, corresponding to a target price of 2.40 yuan. After the company strategically focuses on the commercial vehicle sector, it is expected that the light truck business (contributing 45% of the 天津夜网 company’s gross profit in 2018) will remain strong to ensure the company’s performance improves.In November 2017, the company’s chairman, general manager and other senior executives adjusted and implemented the “focus on commercial vehicle” strategy in H2 in 2018.From January to June 2019, the company’s light truck sales amounted to 180,000 units (at least + 14%), accounting for 19% of the total market (17% in 2018). Benefiting from the policy of auto going to the countryside, it achieved internal resource focus brought by strategic transformationIt is expected that the company’s light truck business will remain strong. The company’s consolidated statement divested Beijing Bao Wo’s operations (and there is an expectation of further sale of its equity), which is expected to bring improvements to the company’s performance.The 20杭州桑拿18 Beijing Bao Wo sustainable 25.400 million, net profit to the company (total income of 35.700 million) drag the fracture.In January 2019, the company transferred 67% of Beijing Bao Wo’s equity (transfer price 39.700 million), which does not include consolidated statements since Q1 2019.In Q1 2019, the company’s non-net profit can be reduced to 6.3 trillion, a decrease of 0 from Q1 2018.3.5 billion.In addition, the company’s period expenses have been optimized, and the expenses in Q1 2019 decreased by 13.4%, a decline of 7 per year.9%. Catalyst: Equity incentives have progressed, and Beijing Baowo’s equity has been further sold. Risk warning: Commercial vehicle market is weaker than expected, strategic transformation is worse than expected