标题：Camel GroupPoised to benefit from steady growth in after-sales market and popularization of stop-start batteries
发布日期：2016-02-15 16:06:44
内容： We expect Camel to post a net profit CAGR of 20% over the next 3 years We are initiating coverage of Camel Group with a Buy rating. The company is a leaderin China's auto-start battery industry and we estimate its overall market share in 2015at 21%, ranking No. 1. While the market is concerned that ongoing weakness inChina's auto industry could adversely affect Camel's sales, we expect the vehiclepurchase tax-halving policy to drive the country's auto production to grow 6.3% YoY in2016. We believe the market has not fully anticipated: 1) strong support to industrydemand fuelled by steady after-sales market growth; and 2) a powerful boost tocompany profitability as a result of the rapid popularization of start-stop batteries. Assuch, we look for Camel to post an earnings CAGR of 20% over the next three years. Industry 3-year CAGR of 10% on steady demand growth in after-sales market We estimate the total sales volume of China's auto-start battery industry approximated97m units in 2015 and the mix of the pre-sales and after-sales markets was 1:3.Looking into the three years ahead, we anticipate a decelerating auto-start battery presalesmarket alongside falling growth in China's auto production. However, consideringcontinued robust growth in the total number of cars on the road in the country and theaverage lifecycle of two years for auto-start batteries, we expect the after-sales marketto sustain rapid growth. We forecast China's auto-start battery pre-sales, after-salesand overall market 2016-18 CAGRs to be 4%, 12% and 10%, respectively. Major trend: Start-stop batteries replacing conventional start batteries Start-stop technology can help cars reduce 8-10% of fuel consumption. As 2020 isdrawing nearer, when Stage IV standards for passenger vehicle fuel consumption areslated to be implemented, we look for a large increase in the penetration of start-stopsystems in China in the next five years. Europe saw penetration of such systems risingrapidly to nearly 60% in 2014 from 5% in 2008 due to increasingly stringent laws andregulations on fuel consumption. We expect China's penetration of the systems tojump to 60% in 2020 from 7% in 2014. Compared to conventional ones, start-stopbatteries command more than 1x higher prices and 5-10 percentage points higher ingross margin, which could help boost the company's profitability significantly. Valuation: Initiating with Buy rating and price target of Rmb17.5 We estimate 2015-17E EPS at Rmb0.71/0.85/1.05, given popularization of start-stopbatteries and steady growth in the after-sales market. Our DCF-based PT of Rmb17.5(WACC 7.7%) implies 20.6x 2016E PE (vs. its historical band of 10-25x).
发布日期：2016-02-15 16:06:44
内容： We expect Camel to post a net profit CAGR of 20% over the next 3 years We are initiating coverage of Camel Group with a Buy rating. The company is a leaderin China's auto-start battery industry and we estimate its overall market share in 2015at 21%, ranking No. 1. While the market is concerned that ongoing weakness inChina's auto industry could adversely affect Camel's sales, we expect the vehiclepurchase tax-halving policy to drive the country's auto production to grow 6.3% YoY in2016. We believe the market has not fully anticipated: 1) strong support to industrydemand fuelled by steady after-sales market growth; and 2) a powerful boost tocompany profitability as a result of the rapid popularization of start-stop batteries. Assuch, we look for Camel to post an earnings CAGR of 20% over the next three years. Industry 3-year CAGR of 10% on steady demand growth in after-sales market We estimate the total sales volume of China's auto-start battery industry approximated97m units in 2015 and the mix of the pre-sales and after-sales markets was 1:3.Looking into the three years ahead, we anticipate a decelerating auto-start battery presalesmarket alongside falling growth in China's auto production. However, consideringcontinued robust growth in the total number of cars on the road in the country and theaverage lifecycle of two years for auto-start batteries, we expect the after-sales marketto sustain rapid growth. We forecast China's auto-start battery pre-sales, after-salesand overall market 2016-18 CAGRs to be 4%, 12% and 10%, respectively. Major trend: Start-stop batteries replacing conventional start batteries Start-stop technology can help cars reduce 8-10% of fuel consumption. As 2020 isdrawing nearer, when Stage IV standards for passenger vehicle fuel consumption areslated to be implemented, we look for a large increase in the penetration of start-stopsystems in China in the next five years. Europe saw penetration of such systems risingrapidly to nearly 60% in 2014 from 5% in 2008 due to increasingly stringent laws andregulations on fuel consumption. We expect China's penetration of the systems tojump to 60% in 2020 from 7% in 2014. Compared to conventional ones, start-stopbatteries command more than 1x higher prices and 5-10 percentage points higher ingross margin, which could help boost the company's profitability significantly. Valuation: Initiating with Buy rating and price target of Rmb17.5 We estimate 2015-17E EPS at Rmb0.71/0.85/1.05, given popularization of start-stopbatteries and steady growth in the after-sales market. Our DCF-based PT of Rmb17.5(WACC 7.7%) implies 20.6x 2016E PE (vs. its historical band of 10-25x).
