德意志银行–Great Wall Motor-A:JV set-up with BMW confirmed【公司研究】_研报(yanbao)

【研究报告内容摘要】

A 50:50JV to develop and manufacture both new energy and traditionalvehicles

On 10July, Great Wall Motor entered into a JV contract with BMW Group(BMWG.DE, EUR80.21, Buy) regarding the establishment of Spotlight AutomotiveLimited, a 50:50JV company based in China mainly to develop, manufactureand sell both new energy vehicles (NEV) and traditional vehicles, includingexport. Total investment is estimated to be RMB5.1bn, with registered capital ofRMB1.7bn to be equally contributed by Great Wall and BMW (i.e., the remainingRMB3.4bn funding will be raised by the JV via other means). Planned initial annualcapacity is 160k units. The initial concession period is 15years, with the optionto extend upon mutual consent of the two parties.

Great Wall Motor believes the JV will greatly improve the technology level andbrand premium of the company, and further tap into the NEV market at homeand overseas.

Deutsche Bank view – a positive for Great Wall but don’t get overexcited

Where the JV contract differs from the letter of intent dated February is that: 1)the traditional vehicle business is formally included in the contract, 2) the vehicleexport possibility is formally included, and 3) Great Wall will not have majoritystake.

While a new MINI JV, after ramping up, shall add an earnings component to GreatWall besides acquiring advanced NEV technologies (and NEV credits), we stillhave doubts about the extent of the positive impact in the foreseeable future. Tobegin with, considering the time to set up the JV and get ready for production, wedo not expect to see meaningful sales until 2020. Furthermore, MINI’s global saleswere 372k units in 2017, with 35k units of sales in China. Even if we optimisticallyassume that the JV will be responsible for producing 100k vehicles at an averageASP of RMB200k, a 10% net profit margin and 50% earnings share would implyincremental profit of RMB1bn, or 11% of our FY20earnings forecast. While thisis definitely a positive to Great Wall Motor, it cannot mask the concerns we haveabout Great Wall’s own brand’s competitive pressure due to market share erosion.