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1、12 December 2019/卜 HSBCGlobal ResearchEquitiesAutosGlobalGlobal AutosMarket nonchalant about 2020-22 risks at 9.5x PE?Henning Cosman*European Head of Automotive Equity ResearchHSBC Bank plchenning.cosmanhsbc +44 20 7991 0369Giulio Pescatore*, CFAAnalyst, Global AutosHSBC Bank plcgiulio.pescatorehsbc
2、 +44 20 7991 9560Pushkar Tendolkar*Analyst, Global AutosHSBC Securities and Capital Markets (India) Private Limitedpushkarnarendratendolkarhsbc.co.in+91 80 4555 2752 As focus shifts to 2020-22, companies warn of lower for longer5 global volumes - IHS 2022e volumes 4% too high in our viewEU Auto 12M-
3、fwd EPS still imply a high 8.7% 2019-21 eCAGR -and so the market appears sanguine at 9.5x PE in our view. .given CO2-driven EU costs (for OEMs), LVP disruption risks (for suppliers), and macro uncertainty in2020e* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qu
4、alified pursuant to FINRA regulations* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulationsNovember volumes solid, but as focus shifts to 2020-22, were wary of revision risks (again): November light vehicle sales (LVS) were solid
5、 (based on initial data), with China -3.0%, Western Europe +4.3% and US +1.9%. However, as the focus shifts to 2020-22, we are increasingly wary of downside risks. Current EU Auto valuations dont allow much room for error at a rather high 9.5x 12M-forward sector PE. This level is comparable to 2016
6、- but at that time China was still growing at 10%, SUV penetration was much lower, and the EU 2020/21 CO2 deadlines were five years away. Add to this the general uncertainty from global trade and decelerating economic growth in developed markets, and we think the market appears surprisingly sanguine
7、 in its assessment and valuation of the EU Auto sector into 2020.Faurecia expects market at 87m units in 2022 - 7.5% less than IHS forecast of 94m units: Current sell side consensus implies a 2019-21 EU Auto sector EPS CAGR of 8.7% (see pg 6). That appears high, even if Faurecia and Continental are
8、too conservative with their no-growth volume outlooks (HSBC c4% below IHS for 2022e). And besides the absence of volume leverage, CO2-driven EU content costs (for OEMs) and LVP (light vehicle production) disruption risks from short-notice adaptions to production schedules (for suppliers) represent t
9、angible earnings risks in our view.Sector up 32% vs August lows - resilience surprising at 9.5x PE as 2020-22 outlooks increasingly sobering: Risks to 2020-22 volumes and associated forecast sector earnings are arguably increasing, but the 9.5x 12M-forward sector PE doesnt appear to reflect that. Th
10、is view is also reflected in several recent rating downgrades, while our upgrades and/or reiteration of Buy ratings were motivated by special situations - rather than structural reasons (see links to recent reports on pg 2) - and it is also reflected in our conservative view of the Chinese market (s
11、ee China Autos: Chinas car market shifts to a low gear, 11 December).CompanyTicker Currency Current priceTPRating Upside/downside Market cap (EURm)Fiat Chrysler (FCA)FCA IMPeugeot (PSA)UG FPDaimlerDAI GRVolkswagenV0W3 GRMichelinML FPSchaefflerSHAGRSource: Bloomberg, HSBC estimates13.0818.20Buy39.1%2
12、0,49520.9328.00Buy33.8%18,93848.7645.00Reduce-7.8%52,160175.70205.00Buy16.7%87,871108.65125.00Hold15.0%19,4059.8810.50Hold6.1%6,547Issuer of report: HSBC Bank plcView HSBC Global Research at:h tips :/ research, hsbc. comDisclosures & DisclaimerThis report must be read with the disclosures and the an
13、alyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.We expect slower growth of demand for BEVs in China to impact the global penetration of electric vehicles. We now expect global penetration of LEVs to reach 13% (from 15% previously). ICE Hybrid-Mild Hyb
14、rid-FullPHEVBEVSource: IHS Automotive, HSBC estimatesRollback of subsidies in China continues to impact demand for NEV and overall growthAnother issue is the rollback of NEV (new energy vehicles) subsidies in China that came into effect in June. Subsidies for NE Vs with less than 250km electric rang
15、e were completely rolled back and for EVs with higher ranges they were halved with plans to end all subsidies by end of 2020. NEVs account for close to 5% of China LV market and post the cut in subsidies their sales have declined 16% in August, 33% in September and 45% in October. Given the absence
16、of subsidies, we dont expect a quick recovery in NEV sales in the short term, despite Chinas Ministry of Industry and IT targets (draft proposal) to increase NEV penetration to 25% by 2025 (raised from 20% by 2025).Government stimulus possible, but its effectiveness is uncertainFinally we do not exp
17、ect much government stimuli to support demand. IHSs stable market expectation for 2020 is based on “help from government stimulus measures and renewed policy support”. In November Reuters reported that Chinas government officials are considering policies to expand the second-hand car market in rural
18、 areas and to improve vehicle retirement policies.n However, there has been no further news on a stimulus package. Moreover, after a significant period of purchase tax incentives resulting in significant pull forward of demand the question is about the magnitude of recovery that such stimulus could
19、drive.The base effect will help be favourable for 2020. In November 2019, retail and wholesale growth was -3%/-5% on a very weak base of c-20%. Also destocking seen in 2019 (production: -13% y-t-d, wholesales: -11% y-t-d and retail: -9% y-t-d) should have run its course helping to slow the decline i
20、n production. For 2020, we forecast a 1.1% decline in LVP in China compared to a stable market forecast by IHS.Robust macro outlook not sufficient to compensate trade issues and an already peaked marketUS - high base after 17m p.a. growth for past 5 years: The macro environment for 2020 looks robust
21、. HSBC economists (see: Global Economics Quarterly、published 26 September 2019), expect US GDP to grow 1.7% in 2020 after 2.3% in 2019 supported by low unemployment, strong wage growth and lower interest rates which should help support consumer purchases of large durable goods such as automobiles. H
22、owever, the biggest concern is the outcome of USs trade negotiation with China and (potentially even the EU) which would weigh over the demand in 2020. Finally, the US market, even after the decline this year, is above the 17m unit levels and a further cooling off of the market is a more likely outc
23、ome in 2020, especially if the OEMs look to rationalise the incentives which are at very high levels currently. We forecast a decline in US demand in 2020 of around 2.6% y-o-y. Note that this not due to any major market disruption but after five years on +17m annual unit sales a cooling down is more
24、 likely. We expect production in North America to decline 0.4% in 2020 after a close to 4% decline in 2019e as GM compensated for the lost volumes this year due to almost month-long strikes at its plants.US incentives per vehicle at their peak, posing downside risks in case OEMs rationalise discount
25、sContinental and Faurecia have taken an extremely cautious view on the market, de-risking their mid-term targets6工n 1672 -6VUC 8 二。8vn 87dv 8VUC zvm zyda 9VO。 9工 97d 9VU2 gvo。 gvm gydv I gvue ss 寸工n -wue 1ss 二二n 1CO72 covuc ss Lv_n NEW CXITueIncentives per vehicle in USDSource: Autodata, HSBC Resear
26、chUpdated mid-term targets of some OEMs / suppliers look de-risked at least from a demand perspectiveMost suppliers have missed their mid-term targets due to the sharp decline in demand in 2018 (led by WLTP issues in Europe) and in 2019 (led by the China market decline). OEMs, like BMW and Mercedes
27、too, are below their 8-10% margin target corridors. Suppliers which have revised their mid-term targets so far (mainly CMDs) have preferred to remain conservative on the mid-term market development. Consider the following examples:Continental with its Q3 prelim results on 22 October 2019 said that i
28、t does not anticipate any material improvement in the global LVP over the next five years (compares to a+1.4% growth for 2019-24 on HSBC estimates and IHS even higher at +2.3%).Faurecia under its new mid-term plan announced at its CMD on 26 November 2019 that it expects worldwide auto production to
29、be 87m units in 2022, which implies a 0.7%decline p.a. (versus HSBC forecast of 90m units by 2022 or +0.5% p.a. and IHS at +2.0% p.a.).Autoliv was an outlier of sorts as it expects a 1-2% growth in the global LVP under its midterm plan (compares to a +1.4% growth for 2019-24 on HSBC estimates and IH
30、S even higher at +2.3%).2022 global auto production outlook of suppliers: We are at the mid-point of the range (87-94 million units) implied by supplier market outlook96.095.0 -94.0 -93.092.0 -91.0 -90.089.0 -88.0 -87.0 -86.0 -Q IHS Valeo (base).HSBC, AutolivValeo (pessimistic) e Continental Faureci
31、a201420152016201720182019e 2020e2021e 2022 outlookIHSHSBCeSource: company data, IHS Markit, HSBC estimatesValeo has aligned its mid-term expectations announced on 10 December 2019 in-line with IHS (i.e. a 2019-22 CAGR of +2%) but also indicated a pessimistic scenario of 1% CAGR (2019-22).Once bitten
32、, twice shyIt is very difficult to forecast the medium-term demand considering numerous unknowns such as: (i) acceptability of BEVs / PHEVs amongst consumers, (ii) challenges to transition in EU to the 2025 CO2 targets, (iii) future path for emission regulations in the US, and (iv) most importantly,
33、 the future of trade deals and tariffs.However, while forecasting is difficult, a declining or even a flat market over the next few years looks too cautious. We believe the companies do that to de-risk their new mid-term financial targets from the global LVP assumptions.CPCA commentary published wit
34、h weekly updates on China weekly retail and wholesale salesRetailWeekRetailWholesaleInventoryCPCA comment.Nov 25-30Week: +20% YoYMTD: -3% YoYWeek: +7% YoY MTD: -5% YoYPositivei) Pick up in retail sale in the last week was better than CPCAs expectation. This is driven by month end sales campaigns fro
35、m dealersii) Wholesales also saw some improvement though pick up in last week number was relative mildNov 18-24Week: -19% YoYMTD: -15% YoYWeek: -9% YoY MTD:-10%YoYPositivei) The growth rate of retail sales is weaker than CPCAs expectation because number of in-store customers was adversely affected b
36、y cold weather.ii) CPCA still expect that the growth rate of retail sales will recover by the end of Nov.Nov 11-17Week: -6% YoYMTD:-13% YoYWeek: -6% YoY MTD:-11%YoYPositivei) Retail numbers improved during 11 Nov sales promotionii) CPCA upgraded their estimate of retail sale growth for Nov to -4% fr
37、om -5%Nov 1-10MTD: -20% YoYMTD:-16% YoYPositivei) retail sales weaker than previous month as customers wait for further discount on 11 Nov ii) CPCA expect retail numbers will decrease by 5% for full month of Nov 2019Oct 28-31Week: +32% YoYMTD: -3% YoYWeek:+19% YoYMTD: -6% YoYNegativei) retail recove
38、ry was strongii) wholesale growth was weaker than expected, and dealers held cautious attitude in Oct.Oct 21-27Week: -19% YoYMTD:-15% YoYWeek: -22% YoYMTD:-15% YoYPositivei) retail decline was larger than of previous weeks in Oct ii) expects wholesale slower than CPCA expected iii) Oct number presen
39、ts slow recoveryOct 14-20Week:-12% YoYMTD: -13% YoYWeek: -10% YoY MTD:-10%YoYPositivei) retail decline was stabilizedii) expects wholesale number to improve in OctoberOct01-13MTD:-13% YoYMTD:-10% YoYPositivei) weak start but better than that of Sepii) expects wholesale number to pick up in 4Q19Sep 2
40、3-30Week: +7% YoYMTD: +6% YoYWeek:+14% YoYMTD: -7% YoYPositivei) this is a turning point for retail salesii) wholesalers pushing up the sales volume at the end of 3Q19Sep 16-22Week: -20% YoYMTD:-17% YoYWeek: -19% YoYMTD: -19% YoYPositivei) retail numbers to improve gradually - but this has not (yet)
41、 materialised ii) final week of September to pick-up salesSep 09-15Week:-11 % YoY MTD:-16%YoYWeek: -21% YoYMTD: -19% YoYPositivei) Declined wholesale numbers because of mid-autumn holidaySep 01-08Week:-21 % YoYWeek: -17% YoYPositivei) Slowdown retail number due to weak consumption willingnessii) Who
42、lesale numbers was not strongly improved by Chengdu Auto Show yetAug 01-11MTD:-31%YoYMTD: -32% YoYIncreasei) Consumers are not willing to sell owned cars at current prices to make a new purchase.ii) recovery in Retail sales was expected from August once the disruption from China Emissions Standards
43、changeover had passed, but as yet this hasnt materialisedJuly 29-31Week:+ 41% YoYMTD: -6% YoYWeek: + 86% YoYMTD: -6% YoYDeclinei) Strong retail sales because dealers record extra June sales in July to meet July sales target for Bonus.ii) Dealers were increasing their inventory of China 6 models fast
44、erJuly 22-28Week: - 25% YoY MTD:-16%YoYWeek: - 33% YoYDeclinei) Strong retail sales in late June has consumed July demand ii) expects Retail sales to pick up in AugustJuly 15-21Week:-18% YoYMTD: -11 % YoYWeek: -14% YoYIncreasei) Strong retail sales in late June has consumed July demandii) expects Re
45、tail sales to pick up in Augustiii) wholesales to be better than retail in last week to balance retail and wholesale growthJuly 1-14Week: - 7% YoYWeek: - 6% YoYIncreasei) wholesale numbers picked up slightly after a decline of 24%; following climbing up trend in first two weeksJuly 1-7Week: - 7% YoY
46、Week: - 24% YoYDeclinei) single-digit decline of retail number is not a signal of market recovery.ii) Retailers may have confirmed income in July to balance the H2 performanceJune 24-30Week: +8% YoYMTD: +5% YoYWeek:-1 %MTD: -23%Declinei) strong sales because of destocking of National 5 emission vehi
47、clesJune 17-23Week: +9% YoYMTD: +3% YoYWeek: -1%YoYMTD: -22%DeclineJune 10-16Week: +25% YoYWeek: -16% YoYDeclinei) increased sales promotion and discounts to decrease the inventory of Emission 5 modelsJune 1-9Week: -24%Week: -48%DeclineSource: CPCA, HSBC estimatesJob cut reports in Automotive sector04-Dec-19VDABernhard Mattes, president of industry association VDA has said that employment in the Auto sector had fallen thisReutersyear and this trend would worsen in 2020