Pedal to the metal in the Deep South

Transcription

Global
26 June 2012
Pedal to the metal in the Deep
South
• An on-the-ground look at the efforts of HMC, Kia, Honda, VW and
Nissan to meet strong-end demand in the US car market
• 2012E US auto industry demand should increase to 14.4m units on
healthy pent-up demand; long-term outlook also promising
• Reiterating HMC and Nissan as our top Pan-Asia auto picks
Sung Yop Chung
(82) 2 787 9157
[email protected]
Eiji Hakomori
(81) 3 5555 7072
[email protected]
Takuo Katayama
(212) 612-6181
[email protected]
About Lost & Found
In this series of reports, Daiwa
analysts and guest experts head
off the beaten track to offer a
different take on topical issues.
These can be company notes from
far-flung operations, macro pieces
from the unlikeliest of places, or
strategy reports offering a fresh
first-hand perspective.
But the goal is always to provide
on-the-ground colour as an aid to
investment decision-making.
For this edition, our Asia, Japan
and US auto analysts hit the road
in the southern states of Alabama,
Georgia, and Tennessee to assess
conditions in the US auto market,
visiting plants operated by HMC,
Kia, Honda, VW, and Nissan.
Most of the automakers were
planning to move from two to
three daily shifts to accommodate
the thriving US car market.
The auto market in the US continues to thrive due to healthy
pent-up demand. To get an on-the-ground feel for market
conditions we headed to the Deep South, which is increasingly a
focal point for global automakers’ US production, not least
because of its cheap workforce and lack of labour unions.
We visited the plants of Honda Motor (Honda) and Hyundai
Motor (HMC) in Alabama, Kia Motors (Kia) in Georgia and
Nissan Motor (Nissan) and Volkswagen (VW) in Tennessee. We
found that all were ramping up capacity to meet the strong auto
demand in the US, and all were planning to move from two to
three daily shifts, albeit via different manufacturing methods.
Inside we take a plant-by-plant look at these operations.
Following our tour, we remain Positive on the US Auto Sector.
We look for US auto industry demand to total 14.4m units in
2012 (up 13.1% YoY), backed by resilient replacement demand.
We find the US auto market has inherent demand of more than
15m units on a normalised basis, as about 5.5% of the 235m
registered vehicles are scrapped annually (12.9m units), and the
US driving-age population (aged 16-75) is growing by just under
1% per annum and these new drivers will need cars (2.3m units).
Our tour strengthened our conviction in our top Pan-Asia picks.
We reiterate our Buy (1) rating on HMC with a DCF/PER-based
target price of W330,000. We forecast HMC’s operating-profit
margin to expand in 2012 as a result of its recent launch of the
all-new Santa Fe, together with a rise in the proportion of cars
sold using an integrated platform.
We reaffirm our Buy (1) rating on Nissan and PER-based target
price of ¥1,000. We expect Nissan’s scheduled launches of
redesigned volume-sellers, such as the Altima (in the US) and
Teana (in China), to drive its 2012 earnings. Long term, we look
for Nissan to penetrate emerging markets with its V-platform
strategy, which along with its efforts to reduce its Yen exposure
could lead to multi-year earnings growth.
Our plant visits reinforce our
positive views on HMC and
Nissan as our top picks among our
Pan-Asia auto stocks.
Source: Daiwa
Source: Daiwa
Important disclosures, including any required research certifications, are provided on the last two pages of this report.
Lost & Found
26 June 2012
Table of contents
Lost in the Deep South ..................................................................................................................... 3 Overview of the southern US (economy, demographics) ............................................................ 4 What’s the draw for global automakers? ...................................................................................... 5 Automakers in the southern US (capacity, number of employees) ............................................. 6 Found in the Deep South.................................................................................................................. 7 Timetable ...................................................................................................................................... 7 Key highlights from each site (Hakomori-san, SY and Katayama-san) .......................................... 9 Company Section
Hyundai Motor ........................................................................................................................... 20 Kia Motors .................................................................................................................................. 24 Honda ......................................................................................................................................... 28 Nissan ......................................................................................................................................... 33 Volkswagen AG ........................................................................................................................... 38 Conclusion ......................................................................................................................................40 Daiwa’s top Pan-Asia picks ........................................................................................................40 Reiterating our Positive rating for the US Auto Sector, as we expect robust growth over next
few years ..................................................................................................................................... 41 Appendix: global auto-stock valuation ...................................................................................... 46 Notes: 1) 12-month target prices for the Japan stocks; six-month target prices for the Korea stocks; 2) financial year-ends: FY12= year ended 31 March 2013 for the Japan
companies, FY12= year ended 31 December 2012 for the Korea companies.
Please also see the following Daiwa reports:
5 January 2012
13 October 2011
Trading Places 1:
Job swap: in
Hakomori’s shoes
Trading Places 2:
Job swap: in SY’s
shoes
Trading Places 3:
Bringing our Japan
experience home
Trading Places 4:
Bringing our Korea
experience home
Korea Auto Sector:
Imports – When will
they start to hurt?
Sung Yop Chung (82) 2 787 9157
([email protected])
Eiji Hakomori (81) 3 5555 7072
([email protected])
([email protected])
Eiji Hakomori (81) 3 5555 7072
([email protected])
([email protected])
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Lost & Found
26 June 2012
LOST IN THE DEEP SOUTH
This was SY Chung’s third consecutive yearly visit with investors to the southern US.
But this time, rather than just visiting the Korean automakers, we at Daiwa decided to
expand the trip into a plant tour of the global automakers. SY was joined by Mr. Eiji
Hakomori (Daiwa’s Japan auto analyst) and Mr. Takuo Katayama (Daiwa’s US auto
analyst). Our trio visited HMC and Honda in the state of Alabama, Kia in Georgia, and
VW and Nissan in Tennessee.
The south of the US is often referred as the Deep South, and has become a key
manufacturing base for many industries, ranging from chemical products to cars.
Major auto manufacturing states in the US: Deep South compared with Michigan
MI
MI
TN
MS
AL
GA
SC
LA
Deep South
<GDP by state (Motor and parts)>
Deep South: US$9.12bn (17%) vs. Michigan: US$14.78 bn(27%)
* For the purposes of this report, the Deep South comprises AL, GA, LA, MS, SC and TN
Source: US Department of Commerce, US Bureau of Economic Analysis
The states in the Deep South look poised to outpace Michigan as the largest
automobile manufacturing key spot in the US. Already in 2010, about 16.5% of the US
auto industry’s total output by value of US$126bn was from the Deep South, compared
with 27.0% from the state of Michigan.
With no labour unions present in the area and global automakers’ rush into the Deep
South with its cheap labour costs, starting with Honda in Alabama in 2001, the Deep
South’s overall contribution to the output by value of the US auto industry has risen
rapidly by 8.9pp to 16.6% in 2010, compared to a mere 7.7% in 2000.
This contrasts starkly with a significant decline in the contribution from Michigan,
once the US auto industry’s sweet spot, of 3.2pp to 27% in 2010, from 30.2% in 2000.
This was a result of sharp declines in both market shares and profitability at the big US
automakers on weaker product quality, lower productivity and substantial yet
untenable legacy costs.
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Lost & Found
26 June 2012
US GDP breakdown by industry group (2010)
Contributions to US auto industry output by value (motors and
parts): Michigan vs. Deep South
(US$m)
US$m,
Percent of US: (% )
300,000
250,000
200,000
126,508
(7.4%)
150,000
100,000
9,116 (16.6%)
Chemical products
TN, 4.3%
35,421
(30.2%)
Plastics and rubber products
Petroleum and coal products
Paper products
Printing and related activities
Apparel and allied products
Food and beverage products
Textile mills and textile product mills
Miscellaneous manufacturing
Furniture and related products
Motor vehicles, parts and other
transportation
Electrical equipment and components
Machinery
Computer and electronic products
Primary metals
Fabricated metal products
Wood products
0
Nonmetallic mineral products
50,000
14,778
(27.0%)
SC, 3.2%
9,048 (7.7%)
MS, 0.9%
LA, 1.0%
TN, 3.5%
GA, 4.7%
SC, 1.1%
MS, 0.7% LA, 0.1%
GA, 0.7%
AL, 2.5%
AL, 1.6%
Michigan 2000
Michigan 2010
Deep South 2000
Deep South 2010
Overview of the southern US (economy, demographics)
Over the years, the auto industry has played a pivotal role in the economy of the Deep
South, now the home for global car makers such as Nissan Motor Manufacturing
Corporation in Smyrna in the state of Tennessee (established in 1983), Honda
Manufacturing of Alabama (HMA) (established in 2001) and Hyundai Motor
Manufacturing Alabama (HMMA) (established in 2005) in the state of Alabama, and
more recently Kia Motors Manufacturing Georgia (KMMG) (established in 2009) in
the state of Georgia, and Volkswagen Chattanooga Assembly Plant (established in
2011) in the state of Tennessee.
As shown in the following chart, per-capita income has risen in the southern US
since 1980, and also during the expansionary phases of the abovementioned auto
and parts makers.
The unemployment rates in the states of Alabama, Georgia and Tennessee have also
recorded steep declines following the start-ups of auto factories within their respective
regions. For instance, the unemployment rate in Alabama fell sharply to 3.8% in 2005
and 3.5% in 2006 (from 5% in 2004), following HMMA’s start-up there in May 2005.
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Lost & Found
26 June 2012
US: per capita trends in Alabama, Georgia and Tennessee
Per capita income (PCI) and PCI rank by state in the US, 1980-2011
(US$)
Volkswagen Group
opened in May‐2011
40,000
Mando
opened in Apr‐2003
35,000
Honda Motor opened in Nov‐2001
30,000
25,000
Kia Motors opened in Nov‐2009
Nissan Motor
opened in Jun‐1983
(Ra nk)
0
Hyundai Motor opened in May‐2005
20,000
5
15,000
10
10,000
15
5,000
20
0
25
30
35
42
43
36
41
46
35
40
45
50
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Tennessee
Alabama
Georgia
What’s the draw for global automakers?
So, what is it about the Deep South that has consistently enticed global automakers
into this neighbourhood? The answer is simple if you compare the average hourly
wage between the Deep South and other states in the US. As illustrated in the
following chart, the average of hourly wage in Georgia, Alabama and Tennessee is 11%
cheaper than that for the US on average.
Assuming that labour costs usually equate to 7% of automakers’ revenue, and other
variables such as unit shipments, average selling prices and costs remain the same,
this alone could result in an automaker’s operating-profit margin expanding by 0.77pp.
It’s not hard to figure out the motivation for global OEMs to reach out more into this
neck of the woods.
Furthermore, no labour unions are present in the southern part of the US, which gives
this region a more competitive edge for attracting global OEMs, versus the northern US.
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Lost & Found
26 June 2012
US: average hourly wage by state
21
21
21
Tex as (TX)
Michigan (MI)
Pennsylvania (PA)
US average
22
25
25
25
New York (NY)
20
22
20
Georgia (GA)
20
Ohio (OH)
19
20
North Carolina (NC)
19
Alabama (AL)
20
Tennessee (TN)
22
Florida (FL)
24
24
California (CA)
26
New Jersey (NJ)
(US$)
28
18
16
14
12
Virginia (VA)
Illinois (IL)
10
Source: US Department of Labour, US Bureau of Labour Statistics
Automakers in the southern US (capacity, number of
employees)
The decline of the big-3 US automakers over the years as a result of huge legacy costs
and production inefficiencies led to the global automakers rethinking their production
expansion strategies. With the northern US known for the strength of its labour union,
the United Auto Workers (UAW), the automakers gravitated towards the Deep South
because of the cheaper labour costs, and more importantly, the absence of unions.
Nissan Motors was a pioneer, building a plant in 1983 in the state of Tennessee. Today,
with a production capacity of 550,000 units, Nissan is taking further steps to ramp up
its productivity on the scheduled launch of its volume-seller, the Altima.
Automakers’ rush to the Deep South accelerated from early 2000, when the ‘Detroit
big-3’ were pushed out of their top positions in the industry by the Japanese
carmakers. After closing down its plant in Canada, HMC started up its first factory in
the US in the 1990s, on the outskirts of Montgomery, Alabama. The factory had an
annual production capacity of 300,000 units, and occupied a site of 1,744 acres with
34 tier-1 suppliers in 2005.
In 2009, Kia started operating its first plant in West Point, Georgia, with an annual
production capacity of 300,000 units and the factory occupying a site of 2,000 acres of
land near the Interstate 85 (I-85, a major interstate highway in the south-eastern US).
Starting from 2H11, KMMG ramped up its production capacity by 20% to 360,000
units, operating three production shifts, and invested a further US$100m in addition
to the US$1bn it had already spent on the West Point facility by hiring 1,000 workers,
adding more facilities such as a transfer press, and extending the production lines.
In 2011, VW opened its first factory in the US in Chattanooga, Tennessee, with a
production capacity of 150,000 units, after several attempts to tap the US market
dating back to the early 2000s.
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Lost & Found
26 June 2012
FOUND IN THE DEEP SOUTH
We visited a total of five plants operated by Japanese, South Korean, and German
carmakers in the region, and met with local managers. Interestingly, the strategies
adopted for operating the plants varied from firm to firm according to factors such as
operating policies, the position of the plant within each organisation, and when the
plant was launched. Our group comprised Daiwa’s Auto analysts from Japan, South
Korea and the US, together with around ten US-based investors.
Timetable
We visited the plants from 21-23 May in the following order: 1) Kia Motors
Manufacturing, Georgia, 2) Hyundai Motor Manufacturing Alabama, 3) Honda
Manufacturing of Alabama, 4) Volkswagen Chattanooga Assembly Plant, and 5) Nissan
Motor Manufacturing Corporation, Smyrna, Tennessee.
Daiwa’s global auto analysts hit the road: plants we visited
Nissan North America
VW Group of America
Honda Manufacturing of Alabama
Kia Motors
Manufacturing Georgia
Hyundai Motor
Source: Google Map, compiled by Daiwa
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Lost & Found
26 June 2012
We provide more details on the key highlights from our tour later in this report. In
summary, we found that the two South Korean firms were more focused on capacity
utilisation, employing the latest factory-automation technologies to respond to brisk
demand (Kia operates 24 hours a day in three shifts; HMC also plans to operate in
three shifts by the end of 3Q12). In contrast, the Honda Motor plant operates with a
stronger emphasis on manpower than the level of automation. This perhaps reflects
the capabilities of its well-trained workforce, as well as its portfolio of plants in other
areas of the US.
The VW plant was the newest of the five and featured some impressive equipment, but
productivity was lagging that of peers due to the plant’s recent start-up. Nissan’s plant
was the oldest, having started operation in 1983 (the others started after 2000).
Nissan is making effective use of the fully depreciated equipment, while replacing
ageing units as necessary.
Overview of plants visited
Plant name
Location (state)
Started production
Annual production
capacity
(Plan)
Production shifts
Number of
assembly lines
Parts local contents
ratio
Capital investment
Workforce
Production models
HMC
Hyundai Motor Manufacturing
Alabama
Alabama
2005
330,000
Engines: 660,000
2012: 340,000
Kia Motors
Honda Motor
Kia Motors America
Georgia
2009
360,000
-
Alabama
2001
300,000
Engines: 300,000
340,000 (2013~)
2 shifts (2H12: 3 shifts)
3 shifts (from November 2011)
2 shifts
1 line
1 line
2 lines
VW
Volkswagen Group of America,
Chattanooga plant
Tennessee
2011
150,000
Nissan Motor
Nissan North America,
Smyrna plant
Tennessee
1983
550,000
180,000
2 shifts
Move frame models to
Canton plant
2 shifts (2H12: 3 shifts)
1 line
2 lines
85%
65%
90%
N.A.
N.A.
US$1.7bn
2,500
Sonata
Elantra
US$1.1bn
N.A.
Sorento
Santa Fe (HMC)
Optima
US$2.0bn
4,000
Odyssey
Pilot
Ridgeline
Acura MDX (2013~)
US$1.0bn
3,000
US Passat
N.A.
7,000
Altima, Maxima, Frontier
Infiniti JX, Xterra, Pathfinder
LEAF (2012~)
Rogue (2013~)
Pictures
Source: Company materials and our interviews, compiled by Daiwa
Note: Pictures by Daiwa
-8-
Lost & Found
26 June 2012
KEY HIGHLIGHTS FROM EACH SITE
(SY, HAKOMORI-SAN AND KATAYAMA-SAN)
-
Hyundai Motor Manufacturing Alabama
HMMA is located on the outskirts of Montgomery, Alabama, and started operation in
2005. It currently employs 2,500 workers and has an annual production capacity of
300,000 units, but it aims to increase the number of workers to around 3,377 and
production capacity to 360,000 units by operating in three shifts of eight hours each,
by the end of September 2012. HMMA is wholly-owned by HMC. This stems from
strong demand for Hyundai Motor America, whose retail sales for the first five months
of 2012 increased by 11.1% to 292,586 units, from 263,588 units for the full year 2011,
and also from low inventory levels with capacity constraints.
In 2011, Hyundai Motor America sold 645,691 units (up 3.6% YoY) in the US market,
with strong demand for its fuel-efficient cars, such as the Elantra and Sonata, and
improved its brand equity with high residual value and low incentives. This resulted in
its 2011 retail share of the US market expanding by 0.5pp YoY to 5.1% last year, from
4.6% in 2010.
Of the 645,691 units sold in the US market, 338,000 units (52% of HMC’s US retail
sales) were produced at HMMA, translating into a capacity utilisation rate of 113%.
The remaining 307,691 units (48% of HMC’s US retail sales) were shipped from
HMC’s plants in Korea.
With fuel-efficient volume-sellers such as the Elantra and Sonata (these two models
accounted for 60% of its 2012 year-to-date retail sales of 292,586 units) for HMC
continuing to pave the way for its market share in the US, it has become crucial for
HMMA to increase its production in 2012.
We forecast Hyundai Motor America’s 2012 retail sales to increase by 8.4% YoY to
700,000 units on further growth in retail sales of existing volume-sellers, such as the
Elantra and Sonata, and due to the recent/new models, such as the Grandeur (1Q12),
i-30 (2Q12), Santa Fe (3Q12) and Elantra Coupe (4Q12). It is pivotal for HMC to
increase its US production volume to achieve this, in our view.
HMC: US market share and sales volume by key model
100%
HMMA: production volume trend
6%
(000 Units)
400
350
4%
300
50%
250
200
2%
150
100
0%
0%
10%
240
250
9%
301
240
196
4%
10%
8%
8%
4%
90
2%
0%
2005
2006
2007
2008
2009
2010
2011
HMMA Production Volume (LHS)
HMMA Production Volume / Global Production Volume (RHS)
Source: Automotive News
Source: Company
-9-
8%
6%
6%
0
Elantra
Santa-Fe
Others
(%)
12%
338
50
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Accent
Sonata
Tucson
HMC: US M/S (%) (RHS)
10%
Lost & Found
26 June 2012
HMMA currently produces the Sonata and Elantra, while the Santa Fe is produced
by its sister company, KMMG, in West Point, Georgia. HMMA occupies a site of
about 1,744 acres and the factory area totals about 2m sq ft. It includes a stamping
facility, paint shop, vehicle assembly ship and a two-mile test track. It also has two
engine factories.
The first engine factory produces the 2.0 litre and 2.4 litre Theta i-4 engines (350,000
units per year) for HMC’s Sonata/Santa Fe, while the second engine factory produces
the 1.8 litre Nu engine for HMC’s Elantra and the 2.4 litre Theta engine (350,000 units
per year), mainly for Kia’s Optima (K5)/ Sorento-R.
Our recent visit confirmed that HMMA remains extremely efficient. It employs only
2,500 staff, lower than 3,000-4,000 workers on average employed by other global
OEMs in the US, for an annual production capacity of 300,000 units. It also has a
high level of automation and outsources its module assembly to affiliate Hyundai
Mobis Alabama.
Most of the manufacturing processes, such as welding, stamping and painting, are
automated – even more so than at HMC’s Asan factory – while the number of staff
working in the general-assembly area is also lower than that at its Asan factory, which
is renowned for its high efficiency.
HMMA: process overview
Stamping
Welding
• Rolls of steel, 20-40,000 pounds • Over 1,900 welds applied
each
• Parts moved on an electrified
• Thinner than a dime, cut into
monorail system
blanks
• 250 robots are in charge of
• Two stamping presses deliver
sealing and welding, which is
5,400 tonnes of pressure onto
conducted 100% automatically
dies which shape the parts
• 17 different parts are stamped
• 100%-automated quality checks
are done
Painting
General Assembly
• Water-based primer and base
• Just-in-time delivery system
coat
• All cars go on test track and
shower test
• 81 paint and sealer robots
• Ro-Dip rotates car 360 degrees • 687 quality checks before
through preparation treatment,
completion
which ensures 100% coverage
Source: Daiwa
The number of units per hour stands at 73, which is even higher than the Asan factory’s
67, and comparable to other global auto manufacturers. This translates into a daily
production capacity of roughly 1,370 units and monthly production of 28,166 units.
HMMA produces the Elantra and Sonata, the best-selling sedans for Hyundai Motor
America. As shown in the following charts, monthly retail sales for both models have
been on an upward trend on their strong fuel efficiency and fluid sculptured look,
specifically aimed at US customers.
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Lost & Found
26 June 2012
US: compact-car sales trend
US: mid-sized sedan sales trend
(units)
50,000
(units)
50,000
40,000
40,000
30,000
Elantra
Sonata
Altima
Nov-11
May-12
Nov-10
May-11
May-10
Nov-09
May-09
Nov-08
May-08
Nov-07
Nov-06
May-07
Passat
Camry
Corolla
Nov-05
May-05
Nov-12
Nov-11
Forte
Focus
May-12
Nov-10
May-11
Nov-09
Elantra
Cruze
May-10
Nov-08
May-09
May-08
Nov-07
May-06
May-07
0
Nov-06
0
Nov-05
10,000
May-05
10,000
Jetta
Civic
Sonata
20,000
May-06
20,000
Optima
Fusion
Nov-12
30,000
Accord
Small-sized sedan – specification comparison in the US
Maker
Model
MSRP
Fuel economy
Incentives
(May 12)
Spec.
Hyundai
Elantra 2012
Kia
Forte (K3) 2012
Toyota
Corolla 2012
Honda
Civic 2012
Chevrolet
Cruze 2012
VW
Jetta 2012
Ford
Focus 2012
From US$15,345 to US$20,595
29 city/40 hwy mpg
From US$15,200 to US19,100
25 city/34 hwy mpg
From US$16,130 to US$17,990
27 cty/34 hwy mpg
From US$15,805 to US$22,405
28 cty/36 hwy mpg
From US$16,800 to US$23,190
25 city/36 hwy mpg
From US$15,515 to US$24,805
24 city/34 hwy mpg
From US$16,500 to US$22,200
26 cty/36 hwy mpg
US$65
US$1,787
US$1,853
US$644
US$1,322
(GLS sedan, Basic model)
Measurements
Width: 69.9 in.
Height: 56.5 in.
Length: 178.3 in.
Engine & Performance
Base engine size: 1.8 L
(LX sedan, Basic model)
Measurements
Width: 69.9 in.
Height: 57.5 in.
Length: 178.3 in.
(L sedan, Basic model)
Measurements
Width: 69.4 in.
Height: 57.7 in.
Length: 180.0 in.
(DX sedan, Basic model)
Measurements
Width: 69.0 in.
Height: 56.5 in.
Length: 177.3 in.
(LS sedan, Basic model)
Measurements
Width: 70.7 in.
Height: 58.1 in.
Length: 181.0 in.
Cam type: DOHC
Cam type: DOHC
Cam type: DOHC
Cam type: SOHC
Cam type: DOHC
Torque: 131 ft-lbs. @ 4700 rpm
148 hp @ 6500 rpm
DriveTrain
Drive type: front-wheel drive
Transmission: 6-speed manual
Warranty
Basic: 5 yr./ 60000 mi.
Drivetrain: 10 yr./ 100000 mi.
Torque: 144 ft-lbs. @ 4,300 rpm
156 hp @ 6200 rpm
DriveTrain
Warranty
Basic: 5 yr./ 60,000 mi.
Drivetrain: 10 yr./ 100,000 mi.
132 hp @ 6,000 rpm
DriveTrain
Drive type: front- wheel drive
Warranty
Basic: 3 yr./ 36,000 mi.
Free Maintenance: 2 yr./ 25,000
mi.
Roadside: 2 yr./ 25,000 mi.
140 hp @ 6,500 rpm
DriveTrain
Warranty
Basic: 3 yr./ 36,000 mi.
Hybrid Component: 8 yr./ 100,000
mi.
138 hp @ 6,300 rpm
DriveTrain
Warranty
Basic: 3 yr./ 36,000 mi.
Rust: 5 yr./ 100,000 mi.
Rust: 6 yr./ 100,000 mi.
US$1,532
(Base Sedan, Basic Model)
Measurements
Width: 70.0 in.
Height: 57.2 in.
Length: 182.2 in.
Cam type: Single overhead cam
(SOHC)
115 hp @ 5,200 rpm
DriveTrain
Warranty
Basic: 3 yr./ 36,000 mi.
mi.
US$1,346
(S sedan, Basic model)
Measurements
Width: 71.8 in.
Height: 57.8 in.
Length: 178.5 in.
Cam type: DOHC
160 hp @ 6,500 rpm
DriveTrain
Warranty
Basic: 3 yr./ 36,000 mi.
Source: Edmunds.com
Mid-sized sedan – specification comparison in the US
Maker
Model
MSRP
Fuel economy
Incentives
(May 12)
Spec.
Hyundai
Sonata 2012
Kia
Optima (K5) 2012
Toyota
Camry 2012
Honda
Accord 2012
Nissan
Altima 2012
VW
Passat 2012
Ford
Fusion
From US$19,795 to US$26,445
24 city/35 hwy mpg
From US$19,500 to $26,500
24 city/35 hwy mpg
From US$21,955 to US$24,725
25 city/35 hwy mpg
From US$21,380 to US$29,630
23 city/34 hwy mpg
From US$20,550 to US$25,570
23 city/32 hwy mpg
From US$19,995 to US$23,725
22 city/32 hwy mpg
From US$20,200 to US$25,350
22 city/32 hwy mpg
US$1,313
US$1,841
US$2,021
US$3,906
(GLS sedan, Basic model)
Measurements
Width: 72.2 in.
Height: 57.9 in.
Length: 189.8 in.
Measurements
Width: 72.1 in.
Height: 57.3 in.
Length: 190.7 in.
(L sedan, Basic model)
Measurements
Width: 71.7 in.
Height: 57.9 in.
Length: 189.2 in.
Measurements
Width: 72.7 in.
Height: 58.1 in.
Length: 194.9 in.
Cam type: DOHC
Cam type: DOHC
Cam type: DOHC
Cam type: DOHC
198 hp @ 6,300 rpm
DriveTrain
200 hp @ 6,300 rpm
DriveTrain
178 hp @ 6,000 rpm
DriveTrain
177 hp @ 6,500 rpm
DriveTrain
Transmission: 6-speed automatic Transmission: 5-speed manual
Warranty
Basic: 5 yr./ 60,000 mi.
Warranty
Basic: 5 yr./ 60,000 mi.
Warranty
Basic: 3 yr./ 36,000 mi.
mi.
Rust: 5 yr./ 100,000 mi.
Warranty
Basic: 3 yr./ 36,000 mi.
US$2,993
US$2,007
(2.5 Sedan, Basic Model)
Measurements
Width: 70.7 in.
Height: 58.0 in.
Length: 190.7 in.
Cam type: Double overhead cam
(DOHC)
175 hp @ 5,600 rpm
DriveTrain
Transmission: continuously
variable-speed automatic
Warranty
Basic: 3 yr./ 36,000 mi.
(S PZEV Sedan, Basic Model)
Measurements
Width: 72.2 in.
Height: 58.5 in.
Length: 191.6 in.
Cam type: Double overhead cam
(DOHC)
170 hp @ 5,700 rpm
DriveTrain
(S sedan, Basic model)
Measurements
Width: 72.2 in.
Height: 56.9 in.
Length: 190.6 in.
Warranty
Basic: 3 yr./ 36,000 mi.
mi.
Warranty
Basic: 3 yr./ 36,000 mi.
- 11 -
US$3,540
Cam type: DOHC
175 hp @ 6,000 rpm
DriveTrain
Drive type: front- wheel drive
Lost & Found
26 June 2012
US-made Sonata in Alabama
US-made Santa Fe in Alabama
Source: Daiwa
Source: Daiwa
-
Kia Motors
KMMG is located in West Point, Georgia, and has an annual production capacity of
360,000 units. KMMG started production on 16 November 2009 with the mass
production of the Sorento-R. From September 2011, KMMG ramped up its production
capacity by 20% to 360,000 units from 300,000 units, operating three production
shifts, and invested a further US$100m in addition to the US$1bn it had already spent
on the West Point facility by hiring 1,000 workers in addition to its existing 2,000
workers, adding more facilities such as a transfer press, and extending the production
lines. KMMG is wholly owned by Kia.
Major projects that were completed in September 2011, include: 1) a second 5,400tonne transfer press in the stamping shop, 2) more robots added to the welding shop,
3) the size of the paint shop being increased to accommodate the complexities involved
in producing the Optima (K5), 4) the production line being extended within the
existing facilities and new equipment installed inside the general assembly shop, and
5) the rail spur being expanded to efficiently handle the additional volume.
Following the path of its brother company, Hyundai Motor America, Kia Motors
America (KMA) got its act together with enough capacity to accommodate sales of its
mid-sized sedan Optima (K5), launched in 2H11 for the US market. Bolstered by KMA’s
volume-sellers, the Sorento and Optima, both produced at KMMG, and also given their
fuel-efficient line-up, KMA’s 2011 US retail sales increased by a significant 36.4% YoY to
485,492 units, from 356,000 units in 2011. During the corresponding period, Kia’s 2012
retail share of the US market increased by 0.7pp to 3.8%, from 3.1% in 2011.
- 12 -
Lost & Found
26 June 2012
Kia: US market share and sales volume by key model
KMMG: production volume trend
(000 Units)
300
50
Forte
K5
Others
11%
7%
200
0
(%)
12%
274
250
May-12
Jan-12
0%
Sep-11
100
0%
May-11
1%
Jan-11
20%
Sep-10
150
May-10
2%
Jan-10
40%
Sep-09
3%
May-09
60%
Jan-09
4%
Sep-08
80%
May-08
5%
Jan-08
100%
10%
8%
154
6%
4%
0 0%
2007
Soul
Sorento
Kia: US M/S (%) (RHS)
0 0%
15
2%
1%
0%
2008
2009
2010
2011
KMMG Production Volume (LHS)
KMMG Production Volume / Global Production Volume (RHS)
Source: Company
KMMG currently produces the Optima and Sorento for KMA, as well as the Santa Fe
for Hyundai Motor America. KMMG occupies a site of 2,259 acres with the factory
taking up about 2.2m sq ft. In addition to its stamping, welding, paint and assembly
plant, the facility also includes a transmission shop (Hyundai Power Tech), a moduleassembly shop (Hyundai Mobis Georgia) and a two-mile test track.
We were reminded of KMMG’s efficiency on our visit; it employees only 3,000 staff,
has a high level of automation, and also outsources its module assembly to affiliate
Hyundai Mobis Georgia. KMMG’s level of automation is even higher than that of
HMMA. For example, the cockpit modules are transported from the Hyundai Mobis
Georgia plant, located just next door, and then installed by industrial robots in
KMMG’s facility.
The number of units produced per hour stands at 68, the same as Kia Motors Slovakia
and comparable to the global auto manufacturers. This translates into a daily
production capacity of roughly 1,468 units and monthly production of 29,583 units.
Outside KMMG
Source: Daiwa
KMMG’s first produced Sorento
Source: Daiwa
- 13 -
Lost & Found
26 June 2012
2012 Optima at KMMG
2012 Sorento-R at KMMG
Source: Daiwa
Source: Daiwa
-
HMA is a US production base wholly owned by Honda Motor. It began operations in 2001
and is the largest of Honda’s global light-truck production facilities. It boasts an annual
production capacity of 300,000 vehicles (two shifts per day), comprising just over 20% of
the firm’s production volume in North America. It also produces all of the V6 engines that
power the vehicles made at the plant. The plant also has an engine assembly line.
HMA produced 270,000 vehicles in FY11, with output depressed by the Japan
earthquake in March 2011 and the Thai floods. Production volumes by model were:
Odyssey, 137,000 units; Pilot, 120,000; Ridgeline, 12,000. The plant aims to produce
around 320,000 vehicles in FY12 by operating overtime, if brisk demand continues (it
was producing around 1,500 vehicles a day during our visit). In FY13, HMA plans to
strengthen the stamping processes, which had been a bottleneck, and raise annual
production capacity of vehicles and engines to 340,000 units. It also plans to start
production of the new Acura MDX (the current model is produced in Canada).
HMA: annual production volume
(000)
350
25%
300
20%
250
200
15%
150
10%
100
5%
50
0
0%
FY06
07
08
09
10
Production volume (LHS)
HMA production volume / global production volume (RHS)
HMA production volume / North American production volume (RHS)
Source: Company materials, compiled by Daiwa
- 14 -
11
Lost & Found
26 June 2012
Vehicles produced at HMA
Pilot
Odyssey
Ridgeline
Acura MDX (2013-)
Source: MSN Autos, compiled by Daiwa
We were impressed by the large number of processes conducted in-house, as well as
the company’s greater emphasis on manual labour than other car makers. At other
plants we visited, carmakers assembled components, such as cockpit modules and
front-end modules, which had been procured from auto-parts makers. This is an
attractive option for carmakers in that they can utilise the workforce of parts makers
and also count the modules as variable costs.
However, HMA does not procure modules aggressively, and prefers to accumulate
know-how in-house, and reduce transportation costs. Furthermore, the company
intentionally stresses the use of manpower over machines, as it believes trained staff
are able to spot problems in their own work and in work already done, better than a
machine, which can only perform predetermined tasks.
We attribute HMA’s stance of relying less on automation to the following two factors.
First, HMA boasts a well-trained workforce (HMA started production in 2001 but
Honda Motor began four-wheel car production in Ohio in 1982, so we infer that
expertise was passed on to HMA). Second, Honda Motor owns a number of plants in
North America and operates flexibly by shuffling the models it produces among plants.
The vice president we met has more than 20 years of experience at Honda’s plants.
- 15 -
Lost & Found
26 June 2012
Picture taken at HMA
Picture taken at HMA
Source: Daiwa
Source: Daiwa
-
Nissan
Our visit left us with high expectations for a rebound in Nissan’s US production
volume, which had slackened following the Lehman Brothers collapse. Production of
the new Altima model is brisk and the old Smyrna plant is revamping its painting
equipment and preparing for the transfer of body-on-frame vehicle production.
The Smyrna plant of Nissan North America (wholly owned subsidiary of Nissan
Motor) started operations in 1983. Nissan has two car assembly plants in the US,
Smyrna in Tennessee, and Canton in Mississippi (it also has a powertrain plant in
Decherd, Tennessee). Both plants have assembly lines for monocoque body cars
(passenger cars) and body-on-frame cars (SUVs). The Smyrna plant has an annual
production capacity of 550,000 vehicles, but actual production volume depends on the
capacity utilisation of the assembly line for body-on-frame cars.
The assembly lines for the new Altima and Maxima models were operating briskly at
the time of our visit. The Infiniti JX (monocoque-type frame), production of which
commenced in December 2011, was being rolled out on an assembly line that mainly
produces body-on-frame cars. The Pathfinder, which is a body-on-frame vehicle, is to
shift to the same monocoque body as the Infiniti JX at the upcoming model change
scheduled for September 2012.
In 2013, production of the remaining body-on-frame cars at Smyrna, such as the
Xterra, is to shift to a body-on-frame assembly line in Canton. The Smyrna plant will
then comprise two assembly lines producing monocoque body cars. At the same time,
production of the Rogue, which is now done in Japan (Nissan Motor Kyushu), is to be
transferred to Smyrna at the next model change. Also, the plant’s painting equipment
is slated for renewal after almost 30 years in operation. We see a likelihood of Nissan’s
US production volume accelerating on the revamped production system.
- 16 -
Lost & Found
26 June 2012
Nissan: North America production volume
(ooo)
1,600
80%
1,400
70%
1,200
60%
1,000
50%
800
40%
600
30%
400
20%
200
10%
0%
0
FY05
06
07
Americas (US＋ Mexico)
08
09
US (Smyrna＋ Canton)
10
11
12 CP
US / Americas (%)
Source: Company materials, compiled by Daiwa
Mainstay models produced at the Smyrna plant
New Altima
Infiniti JX
Maxima
Xterra
Source: MSN Autos, compiled by Daiwa
With respect to the company’s electric car, the Nissan LEAF, battery production is to
be launched at the Smyrna plant by the end of December 2012 and the vehicle is to be
mixed into production with other vehicles. Annual battery-production capacity is
planned at around 200,000 units, with initial production likely to be less than
100,000 units.
Given the prospective increase in production of the Altima, the Smyrna plant is likely
to operate with three shifts per day (the Canton plant already produces vehicles in
three shifts). The new Altima began production in mid-May this year and is to debut in
late June.
- 17 -
Lost & Found
26 June 2012
The Smyrna plant has been operating for almost 30 years, while the other plants we
visited were all launched after 2000. The plant has changed production lines and
reshuffled equipment depending on changes in demand over the years. We were
impressed by its efforts to make effective use of equipment that has been fully
depreciated. This factor sets it apart from the other players, in our view. Its staff
turnover rate is less than 2% per year, and its workforce is well trained. The plant
indeed looks old compared with others, but its long history is probably one factor
behind its cost competitiveness.
Nissan North America Inc in Smyrna, Tennessee
Source: Daiwa
2012 Nissan’s Infiniti JX
Source: Daiwa
-
Volkswagen AG
As a part of Volkswagen’s medium-term plan to sell more than 10m units per year and
become the world’s largest automaker by 2018, the company is targeting sales of more
than 1m units in the US market by 2018 (Volkswagen sold 442,000 units in 2011). An
integral part of this plan is Volkswagen’s Chattanooga plant, in Tennessee, which
began production in 2011 with the US version of the Passat, a medium-sized sedan.
The plant is capable of producing 150,000 units per year, with two crews working a
combined 100 hours per week (base of 80 hours per week plus overtime and
weekends). The current headcount is 2,500 associates, but to increase capacity,
Volkswagen will be adding a third crew, which will increase its headcount to 3,500
associates by the end of 2012. The plant’s 2013 capacity will increase to 180,000 units
per year, as all crews will no longer work overtime (or on weekends), increasing plant’s
weekly operating hours by 20 to 120 hours.
Volkswagen’s annual output per person is the lowest among the five plants we visited.
The company explained that, with the Chattanooga plant, it was dealing with a brand
new factory, a brand new vehicle, and a brand new team. For long-term success in the
US market, Volkswagen felt that launching the new Passat with the highest level of
quality possible was of the utmost importance, and as a result it took a cautious
approach and launched the plant with a relatively low output goal. Management
explained that, with incremental investments, the plant’s capacity can be expanded
from the current 35 jobs per hour to 60 jobs.
We estimate that the Chattanooga plant’s capacity could be readily increased to
225,000 units by increasing the working week to 150 hours per week. This should be
feasible as the current two-crew configuration is already doing 100 hours per week.
- 18 -
Lost & Found
26 June 2012
Volkswagen Chattanooga has enough land behind the plant to build a mirror image of
itself, in essence enabling the company to double its capacity. This suggests to us that
Volkswagen could boost the Chattanooga plant’s annual capacity to 450,000 units
with a 150-hour working week.
Selling 450,000 Passat vehicles may be difficult (the top-selling mid-sized passenger
car for 2011 was the Toyota Camry at 308,500 units), so Volkswagen could add one or
two vehicles to the plant. Ideally, this would include a vehicle based on the Passat for
efficiency. It remains to be seen if Volkswagen will make the decision to expand
Chattanooga, but considering its US sales target of 1m units by 2018, Volkswagen
could announce its expansion plan within the next 2-4 years, if not sooner.
Volkswagen’s Chattanooga plant
Source: Daiwa
Volkswagen’s US-made Passat
Source: Daiwa
- 19 -
Lost & Found
26 June 2012
Hyundai Motor (005380 KS)
Rating: Buy (1); target price: W330,000
Multiple drivers underpin multi-year growth story
What we recommend
We reaffirm our Buy (1) rating for HMC and a DCF/PER-based target price
of W330,000. The company is one of our two top picks in our Pan-Asia auto
universe, along with Nissan, as we expect the magnitude of earnings-forecast
upgrades by the Bloomberg consensus to outpace those for other global
peers.
We believe HMC offers a multi-year earnings-growth story, due to: 1) its
exposure to emerging markets (given its fuel-efficient line-up and a pricing
strategy that focuses more on affordability than its global peers), where we
expect auto-industry demand to thrive on the back of motorisation, 2)
improved brand equity, which should translate into higher product prices,
along with the company’s cost structure benefiting from the positive impact
of Hyundai Motor Group’s (HMG) number of integrated platforms set to be
reduced to six by 2014, from 13 currently, and 3) a rise in the earnings
contribution from its captive finance business in the US, which we expect to
reach a similar level to the likes of the top-tier Japan automakers.
Forecast revisions (%)
Year to 31 Dec
Revenue change
Net-profit change
EPS change
12E
0.0
0.0
0.0
13E
0.0
0.0
0.0
14E
0.0
0.0
0.0
Source: Daiwa forecasts
Share price performance
(W)
(%)
300,000
150
260,000
130
220,000
110
180,000
90
140,000
Jun-11
Sep-11
70
Jun-12
Mar-12
Dec-11
Hyundai Motor (LHS)
Relative to KOSPI (RHS)
12-month range
Market cap (US$bn)
161,500-268,500
45.70
Average daily turnover (US$m)
Shares outstanding (m)
130.84
220
Major shareholder
Hyundai Mobis (20.8%)
Key share-price catalysts
We expect the new Santa Fe to drive HMC’s 2012 earnings. We forecast the
operating profit from the new Santa Fe to increase to W1,032bn for 2012
(11% of HMC’s total operating profit) from W682bn (8.4% of total operating
profit) in 2011. Meanwhile, we have been impressed by HMC’s market-share
gains in Europe along with affiliate Kia, as these are the only two massmarket brands for which unit shipments have risen year-to-date. While we
forecast auto demand in Europe to fall by 5.5% YoY to 12.8m units for 2012,
we expect HMC’s retail sales there to increase by 5-7% YoY on the back of
recently launched models such as the i-30 (a model in a volume segment),
the face-lift of the i-20 in June, and an increase in the proportion of
exclusive dealerships. This should translate into an increase in HMC’s
market share in Europe of 0.5pp YoY to 3.5% for 2012.
Financial summary (W)
We envisage upward revisions to the consensus 2012 net-profit forecasts on
an acceleration in the company’s global unit shipments, which we expect to
beat HMC’s 2012 global shipment guidance of 4.29m units (up 5.7% YoY),
and an improving cost structure, with the proportion of cars sold under an
integrated platform increasing to 70% for 2012E, and low incentive levels
being maintained for its vehicles given their high quality.
Source: Bloomberg, Daiwa forecasts
Valuation
We believe HMC offers a promising risk-reward profile. Its valuation
appears compelling based on the key parameters, with strong fundamentals
ahead, in our view. On our forecasts, the stock is trading at a 2012E PBR of
1.1x (with a 2012 ROE forecast by us at 22%), and at a 2012E PER of 6.9x, at
a 5% discount to its global peers (using Daiwa and the Bloomberg consensus
forecasts for the latter). In addition, the stock is trading below its past-5-year
PER average of 10.1x, which makes it appealing from a historical
perspective. The key risks to our investment view would be a rapid
appreciation of the Won against the US dollar and the Yen.
- 20 -
Year to 31 Dec
Revenue (bn)
Operating profit (bn)
Net profit (bn)
Core EPS
EPS change (%)
12E
85,170
13E
91,814
14E
98,036
9,415
9,956
10,559
11,127
11,491
12,108
34,876
22.8
38,976
11.8
42,413
8.8
Daiwa vs Cons. EPS (%)
15
18
23
PER (x)
Dividend yield (%)
6.9
0.7
6.2
0.8
5.7
0.8
1,800
1.1
1,900
0.9
1,900
0.8
6.6
22.3
5.9
21.1
5.4
20.2
DPS
PBR (x)
EV/EBITDA (x)
ROE (%)
Lost & Found
26 June 2012
HMC: geographical sales mix (2011)
Korea
16.7%
Others
18.4%
N. America
18.9%
Asia
31.4%
Europe
14.6%
Source: Company, Daiwa
HMC: new-model launch schedule, globally (2012-13)
HMC
1Q12
2Q12
3Q12
4Q12
Equus face-lift
Avante Coupe
i30 (GD)
Santa Fe
Avante Coupe
Avante
Santa Fe
Santa Fe
i20 face-lift
Korea
US
China
EU
India
San a Fe
Grandeur
Genesis Coupe
face-lift
i30 (GD)
Sonata
i20 face-lift
Avante
Source: Company, Daiwa forecasts
- 21 -
1Q13
2Q13
Genesis
Tucson face-lift
3Q13
4Q13
Sonata
Accent face-lift
Grandeur
I10
Lost & Found
26 June 2012
Hyundai Motor: Financial summary
Key assumptions
Year to 31 Dec
Sales volume (units)
Average selling price (LC)
2007
2008
2009
2010
2011
2012E
2013E
2014E
2,844,054 3,238,606 3,698,651 4,055,750 4,401,633 4,760,589 4,998,619
14,809,134 15,819,392 16,220,531 17,270,000 17,973,360 18,346,141 18,899,987
Profit and loss (Wbn)
Year to 31 Dec
Auto
Finance
Others
Total revenue
Other income
COGS
SG&A
Other op. expenses
Operating profit
Net-interest inc./(exp.)
Assoc/forex/extraord./others
Pre-tax profit
Tax
Min. int./pref. div./others
Net profit (reported)
Net profit (adjusted)
EPS (reported) (W)
EPS (adjusted) (W)
EPS (adjusted fully-diluted) (W)
DPS (W)
EBIT
EBITDA
2007
34,997
2,645
1,983
39,626
0
(32,022)
(4,958)
(286)
2,359
(254)
(179)
1,925
(468)
0
1,458
1,458
5,117
5,117
5,117
1,000
2,359
3,658
2008
41,155
3,274
2,433
46,863
0
(36,481)
(7,225)
(423)
2,733
47
(1,038)
1,742
(384)
0
1,358
1,358
4,765
4,765
4,765
850
2,733
4,339
2009
48,975
3,843
2,862
55,680
0
(43,490)
(7,928)
(354)
3,908
(562)
1,060
4,406
(955)
0
3,451
3,451
12,096
12,096
12,096
1,150
3,908
5,648
2010
57,293
6,520
3,172
66,985
0
(52,076)
(8,635)
(355)
5,918
(192)
1,766
7,492
(1,491)
0
6,001
6,001
21,021
21,021
21,021
1,500
5,918
8,101
2011
67,128
7,288
3,382
77,798
0
(58,902)
(10,155)
(666)
8,075
(36)
2,408
10,447
(2,342)
0
8,105
8,105
28,391
28,391
28,391
1,750
8,075
10,410
2012E
73,019
8,731
3,420
85,170
0
(64,776)
(10,397)
(582)
9,415
(137)
3,252
12,530
(2,573)
0
9,956
9,956
34,876
34,876
34,876
1,800
9,415
11,955
2013E
78,600
9,611
3,603
91,814
0
(69,205)
(11,240)
(809)
10,559
(152)
3,501
13,909
(2,782)
0
11,127
11,127
38,976
38,976
38,976
1,900
10,559
13,280
2014E
83,787
10,453
3,796
98,036
0
(73,747)
(11,949)
(848)
11,491
(168)
3,812
15,135
(3,027)
0
12,108
12,108
42,413
42,413
42,413
1,900
11,491
14,378
2007
1,925
1,300
(468)
(1,872)
1,563
2,449
(4,381)
(1,203)
(5,058)
(10,643)
8,697
0
(350)
314
8,661
0
468
(1,932)
2008
1,742
1,606
(384)
1,776
(5,401)
(660)
(4,967)
(1,256)
(3,373)
(9,595)
11,830
0
(404)
146
11,572
0
1,317
(5,627)
2009
4,406
1,740
(955)
1,937
6,468
13,596
(3,763)
(2,504)
(536)
(6,802)
(4,047)
0
(277)
(918)
(5,242)
0
1,552
9,833
2010
7,492
2,183
(1,491)
146
(4,057)
4,273
(2,045)
(6,245)
(157)
(8,447)
5,764
0
(588)
(750)
4,426
0
252
2,228
2011
10,447
2,335
(2,342)
5,247
(11,511)
4,177
(2,899)
(4,224)
14
(7,109)
3,928
0
(458)
(940)
2,530
0
(401)
1,278
2012E
12,530
2,540
(2,573)
1,235
(9,015)
4,717
(2,169)
1,123
(3,866)
(4,913)
(2,124)
0
(396)
1,128
(1,393)
0
(1,589)
2,548
2013E
13,909
2,721
(2,782)
(75)
(5,614)
8,159
(2,234)
(395)
(5,772)
(8,402)
(440)
0
(419)
(698)
(1,557)
0
(1,799)
5,925
2014E
15,135
2,887
(3,027)
799
(7,468)
8,326
(2,301)
(414)
(5,698)
(8,413)
612
0
(419)
(2,102)
(1,908)
0
(1,995)
6,025
Cash flow (Wbn)
Year to 31 Dec
Profit before tax
Depreciation and amortisation
Tax paid
Change in working capital
Other operational CF items
Cash flow from operations
Capex
Net (acquisitions)/disposals
Other investing CF items
Cash flow from investing
Change in debt
Net share issues/(repurchases)
Dividends paid
Other financing CF items
Cash flow from financing
Forex effect/others
Change in cash
Free cash flow
- 22 -
Lost & Found
26 June 2012
Balance sheet (Wbn)
As at 31 Dec
Cash & short-term investment
Inventory
Accounts receivable
Other current assets
Total current assets
Fixed assets
Goodwill & intangibles
Other non-current assets
Total assets
Short-term debt
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Total liabilities
Share capital
Reserves/R.E./others
Shareholders' equity
Minority interests
Total equity & liabilities
EV
Net debt/(cash)
BVPS (W)
2007
7,040
9,754
4,183
1,089
22,066
18,173
2,048
24,122
66,409
18,339
7,656
1,538
27,532
13,368
1,794
42,694
1,487
22,227
23,714
0
66,409
77,656
24,667
107,853
2008
9,389
15,057
5,412
1,686
31,544
20,202
2,391
28,292
82,429
24,119
9,916
1,349
35,384
17,956
2,031
55,371
1,489
25,570
27,059
0
82,429
85,676
32,686
123,064
2009
12,301
10,213
4,892
1,572
28,978
20,260
2,548
28,320
80,106
17,907
9,713
2,651
30,271
19,453
2,530
52,254
1,489
26,363
27,852
0
80,106
78,146
25,059
126,443
2010
13,638
5,491
5,225
1,434
25,789
18,514
2,652
47,760
94,714
15,011
9,912
6,522
31,445
22,737
7,644
61,826
1,489
31,399
32,888
0
94,714
77,197
24,110
149,303
2011
15,415
6,238
6,013
21,260
48,926
19,548
2,660
38,345
109,480
15,277
10,419
7,467
33,164
27,138
8,850
69,152
1,489
38,839
40,328
0
109,480
80,088
27,001
183,079
2012E
14,380
10,796
8,754
22,323
56,253
17,914
2,793
42,874
119,834
16,041
10,523
7,840
34,405
24,250
12,014
70,670
1,489
47,675
49,164
0
119,834
78,999
25,912
223,193
2013E
14,863
11,534
8,926
24,109
59,433
17,427
2,933
46,400
126,194
16,843
10,629
8,232
35,704
23,008
11,318
70,031
1,489
54,674
56,163
0
126,194
78,075
24,988
254,965
2014E
15,367
12,496
9,804
26,038
63,705
16,841
3,079
50,178
133,803
17,686
10,735
8,644
37,064
22,778
10,018
69,860
1,489
62,454
63,943
0
133,803
78,184
25,097
290,283
2007
14.9
31.8
51.5
16.7
16.6
19.2
9.2
6.0
6.9
2.4
4.8
4.2
104.0
24.3
33.3
69.4
9.3
19.5
2008
18.3
18.6
15.9
(6.8)
(6.9)
22.2
9.3
5.8
5.4
1.8
4.4
3.9
120.8
22.0
37.4
68.4
n.a.
17.8
2009
18.8
30.2
43.0
154.0
153.9
21.9
10.1
7.0
12.6
4.2
5.8
5.4
90.0
21.7
33.8
64.3
7.0
9.5
2010
20.3
43.4
51.4
73.9
73.8
22.3
12.1
8.8
19.8
6.9
8.7
8.6
73.3
19.9
27.6
53.5
30.8
7.1
2011
16.1
28.5
36.4
35.1
35.1
24.3
13.4
10.4
22.1
7.9
10.5
10.1
67.0
22.4
26.4
47.7
224.4
6.2
2012E
9.5
14.8
16.6
22.8
22.8
23.9
14.0
11.1
22.3
8.7
10.9
10.5
52.7
20.5
31.6
44.9
68.6
5.2
2013E
7.8
11.1
12.2
11.8
11.8
24.6
14.5
11.5
21.1
9.0
11.4
10.8
44.5
20.0
35.1
42.0
69.4
4.9
2014E
6.8
8.3
8.8
8.8
8.8
24.8
14.7
11.7
20.2
9.3
11.5
10.8
39.2
20.0
34.9
39.8
68.4
4.5
Key ratios (%)
Year to 31 Dec
Sales (YoY)
EBITDA (YoY)
Operating profit (YoY)
Net profit (YoY)
EPS (YoY)
Gross-profit margin
EBITDA margin
Operating-profit margin
ROAE
ROAA
ROCE
ROIC
Net debt to equity
Effective tax rate
Accounts receivable (days)
Payables (days)
Net interest cover (x)
Net dividend payout
Company profile
Established in 1967, HMC is the largest vehicle manufacturer in Korea. With the 33.58%-owned Kia Motors, it has 6.4m units of
production capacity globally. The company produces a range of vehicles, including passenger cars, SUVs, minivans and
commercial vehicles.
- 23 -
Lost & Found
26 June 2012
Kia Motors (000270 KS)
Rating: Buy (1); target price: W100,000
Forecast revisions (%)
Shifting up a gear
What we recommend
We reiterate our Buy (1) rating and DCF/PER-based target price of W100,000
for Kia. Over the next three years, we believe Kia will follow the path of its
older brother, HMC. We expect Kia to close the current price gap of about 9%
globally with HMC, as the former is still in the process of ramping up its global
product line-up for volume-sellers in volume car segments, with the K5 (the
US: Optima), the recently launched K2 (China: Pride), and the launch of the
K3 (which shares the same platform as HMC’s Elantra) due in 3Q12, and also
has room to improve its brand equity in developed markets. Kia could also be a
multi-year earnings-growth story on the back of acceleration in its global unit
shipments, a rise in its global average selling prices, and a more flexible cost
structure, with the number of integrated platforms for HMG set to decline to
four by 2014, from 13 currently.
We expect a strong QoQ improvement in 2Q12 earnings and the launch of the
K3 in 3Q12 to be the key share-price catalysts over the next six months. We
forecast its 2Q12 net profit to rise by 11% QoQ to W1.33tn, with: 1) a 13.1%
QoQ increase in its 2Q12 global shipments to 700,000 units, up from 619,008
for 1Q12, due to stronger shipments to the US, China, and Europe, 2) an
improvement in 2Q12 domestic average selling prices to W18.8m/car (from
W18.1m/car for 1Q12), with the positive impact coming from the recently
launched flagship sedan K9 in the domestic market, 3) tailwinds from a
weaker Won against the US dollar, with the 2Q12 QTD average exchange rate
at US$:W1,152 compared with an average of US$1:W1,131 rate for 1Q12, and 4)
the positive impact of platform integration, with cars sold under an integrated
platform increasing to 65% of 2Q12E global shipments (1Q12: 62%).
We expect the launch in 3Q12 of the K3, which shares the same platform as
HMC’s Elantra, to drive up earnings from 4Q12. Kia’s compact car, the Forte,
which is being redesigned and will be renamed the K3 for the domestic market
in September 2012, is a global volume-seller, with 2011 global retail sales
reaching 385,612 units, accounting for 16% of the company’s 2011 global retail
sales of 2,477,668 units. On the back of our forecasts of the K3’s 2013 global
average selling price and unit shipments increasing by 7% YoY and 6% YoY,
respectively, to W16.1m and 441,449 units, and assuming an operating-profit
margin of 9% for the new K3, we forecast the vehicle to generate revenue of
W7.1tn and an operating profit of W638bn for 2013. This equates to 10.4% of
our 2013 net-profit forecast for Kia, up from 8.2% for 2012E.
Valuation
We believe Kia offers a promising risk-reward profile. Its valuation looks
compelling based on the key parameters and the strong fundamentals that we
see ahead. Based on our forecasts, the stock is trading currently at a 2012E PBR
of 1.7x (with a 2012 ROE forecast by us at 34%), and is one of the most attractive
of the major global automakers, trading at a 2012E PER of 5.8x, compared with
an average of PER 7.3x for its global peers based on the Bloomberg consensus
forecasts. The key risks would be a rapid appreciation of the Won against the US
dollar or Yen.
- 24 -
Year to 31 Dec
Revenue change
Net-profit change
EPS change
12E
0.0
0.0
0.0
13E
0.0
0.0
0.0
14E
0.0
0.0
0.0
Source: Daiwa forecasts
Share price performance
(W)
(%)
88,000
160
80,000
140
72,000
120
64,000
100
56,000
Jun-11
Sep-11
80
Jun-12
Mar-12
Dec-11
Kia Motors (LHS)
Relative to KOSPI (RHS)
12-month range
Market cap (US$bn)
59,000-83,800
26.61
Average daily turnover (US$m)
Shares outstanding (m)
109.97
400
Major shareholder
Hyundai Motor (33.9%)
Financial summary (W)
Year to 31 Dec
Revenue (bn)
Operating profit (bn)
Net profit (bn)
Core EPS
EPS change (%)
12E
52,394
13E
61,508
14E
65,240
5,020
5,318
5,901
6,160
6,383
6,693
13,300
50.8
15,406
15.8
16,737
8.6
Daiwa vs Cons. EPS (%)
12
19
19
PER (x)
Dividend yield (%)
5.8
0.9
5.0
1.0
4.6
1.1
DPS
PBR (x)
700
1.7
800
1.6
850
1.4
EV/EBITDA (x)
ROE (%)
5.2
33.8
4.4
32.8
4.1
31.8
Lost & Found
26 June 2012
Kia: geographical sales mix (2011)
Korea
19.9%
Others
31.5%
US
19.4%
China
17.5%
Europe
11.7%
Source: company, Daiwa
Kia: new-model launch schedule, globally (2012-13)
Kia
1Q12
Korea
US
China
EU
2Q12
K9 (Opirus)
3Q12
Sorento-R
face-lift
K3 (Forte)
Cee'd
Sorento-R
face-lift
Rest of the world
- 25 -
4Q12
1Q13
2Q13
3Q13
4Q13
K7 face-lift
Carens
Carnival
K5 face-lift
Soul
Sportage facelift
K3 (Forte)
K3 (Forte)
Carens
K5 face-lift
Lost & Found
26 June 2012
Kia Motors: Financial summary
Key assumptions
Year to 31 Dec
Sales volume (units)
Average selling price (LC)
2007
1,268,000
2008
2009
2010
2011
2012E
2013E
2014E
1,378,175 1,650,500 2,087,377 2,476,761 2,776,360 3,021,496 3,209,001
14,362,500 14,745,528 15,145,336 15,844,037 16,644,881 17,153,474 17,841,232
Profit and loss (Wbn)
Year to 31 Dec
Korea
N.America
Others
Total revenue
Other income
COGS
SG&A
Other op. expenses
Operating profit
Net-interest inc./(exp.)
Assoc/forex/extraord./others
Pre-tax profit
Tax
Min. int./pref. div./others
Net profit (reported)
Net profit (adjusted)
EPS (reported) (W)
EPS (adjusted) (W)
EPS (adjusted fully-diluted) (W)
DPS (W)
EBIT
EBITDA
2007
0
0
0
20,312
0
(16,494)
(618)
(3,258)
(58)
(243)
201
(100)
(73)
0
(172)
(172)
(496)
(496)
(496)
0.000
(58)
669
2008
0
0
0
22,218
0
(17,560)
(714)
(3,943)
1
(541)
243
(297)
191
0
(106)
(106)
(305)
(305)
(305)
0.000
1
838
2009
0
0
0
29,445
0
(22,769)
(827)
(4,654)
1,195
(455)
481
1,221
(200)
0
1,021
1,021
2,775
2,775
2,775
250
1,195
2,280
2010
9,315
9,673
23,302
42,290
0
(33,098)
(895)
(5,462)
2,836
(174)
849
3,511
(668)
0
2,842
2,842
7,230
7,230
7,230
500
2,836
3,896
2011
9,502
13,821
19,868
43,191
0
(33,138)
(895)
(5,632)
3,525
(186)
1,383
4,723
(1,204)
0
3,519
3,519
8,822
8,822
8,822
600
3,525
4,507
2012E
9,772
17,973
24,649
52,394
0
(39,941)
(1,065)
(6,369)
5,020
(197)
1,892
6,715
(1,396)
0
5,318
5,318
13,300
13,300
13,300
700
5,020
6,208
2013E
10,943
21,189
29,377
61,508
0
(46,673)
(1,225)
(7,709)
5,901
(210)
2,009
7,700
(1,540)
0
6,160
6,160
15,406
15,406
15,406
800
5,901
7,295
2014E
10,994
22,703
31,542
65,240
0
(49,397)
(1,273)
(8,186)
6,383
(223)
2,206
8,366
(1,673)
0
6,693
6,693
16,737
16,737
16,737
850
6,383
7,858
2007
(100)
727
(73)
(5)
(1,517)
(968)
(1,672)
(1,694)
2,027
(1,338)
2,344
0
0
113
2,457
0
151
(2,639)
2008
(297)
837
191
(50)
(1,195)
(514)
(1,680)
(2,169)
1,995
(1,854)
2,416
0
0
184
2,599
0
232
(2,194)
2009
1,221
1,085
(200)
307
1,875
4,288
(980)
(1,712)
988
(1,703)
(2,078)
0
0
525
(1,552)
0
1,032
3,308
2010
3,511
1,060
(668)
883
(36)
4,750
(1,229)
(2,645)
1,671
(2,203)
(2,428)
0
(97)
557
(1,968)
0
579
3,521
2011
4,723
982
(1,204)
2,526
(3,435)
3,591
(1,266)
(366)
(1,050)
(2,682)
613
0
(240)
(995)
(621)
0
288
2,326
2012E
6,715
1,189
(1,396)
2,899
(5,800)
3,607
(1,304)
204
(1,043)
(2,142)
232
0
(280)
(772)
(820)
0
645
2,303
2013E
7,700
1,393
(1,540)
1,460
(5,107)
3,907
(1,343)
200
(1,854)
(2,996)
244
0
(320)
(628)
(704)
0
207
2,564
2014E
8,366
1,475
(1,673)
958
(4,233)
4,893
(1,383)
196
(1,882)
(3,069)
256
0
(340)
(1,534)
(1,618)
0
205
3,510
Cash flow (Wbn)
Year to 31 Dec
Profit before tax
Depreciation and amortisation
Tax paid
Other operational CF items
Cash flow from operations
Capex
Net (acquisitions)/disposals
Other investing CF items
Cash flow from investing
Change in debt
Net share issues/(repurchases)
Dividends paid
Other financing CF items
Cash flow from financing
Forex effect/others
Change in cash
Free cash flow
- 26 -
Lost & Found
26 June 2012
Balance sheet (Wbn)
As at 31 Dec
Cash & short-term investment
Inventory
Accounts receivable
Other current assets
Total current assets
Fixed assets
Goodwill & intangibles
Other non-current assets
Total assets
Short-term debt
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Total liabilities
Share capital
Reserves/R.E./others
Shareholders' equity
Minority interests
Total equity & liabilities
EV
Net debt/(cash)
BVPS (W)
2007
1,162
4,917
1,675
296
8,050
7,324
907
3,180
19,461
6,012
3,662
746
10,421
3,156
1,342
14,919
1,849
2,694
4,542
0
19,461
34,848
8,007
13,081
2008
1,428
6,929
2,280
635
11,272
9,554
1,031
3,726
25,584
7,451
5,316
926
13,693
4,548
1,523
19,764
1,849
3,971
5,820
0
25,584
37,413
10,572
16,760
2009
2,812
4,717
2,743
524
10,797
9,513
1,124
4,529
25,963
4,624
5,745
2,541
12,910
4,241
1,508
18,659
2,054
5,250
7,304
0
25,963
36,074
6,053
18,807
2010
3,680
3,300
2,700
84
9,764
9,654
1,272
5,581
26,270
2,729
7,207
1,059
10,994
3,077
1,956
16,027
2,102
8,142
10,243
0
26,270
32,880
2,126
25,747
2011
4,570
3,682
4,199
100
12,551
9,938
1,336
6,058
29,882
2,865
7,279
1,111
11,255
3,554
1,427
16,236
2,102
11,544
13,646
0
29,882
32,760
1,849
34,125
2012E
5,232
4,660
5,531
300
15,722
10,052
1,402
6,743
33,920
3,008
7,352
1,167
11,527
3,643
936
16,106
2,102
15,712
17,814
0
33,920
32,330
1,420
44,549
2013E
5,450
5,834
5,980
200
17,464
10,002
1,472
7,634
36,572
3,159
7,425
1,225
11,809
3,736
1,236
16,781
2,102
17,689
19,791
0
36,572
32,356
1,445
49,492
2014E
5,679
6,312
6,524
201
18,716
9,910
1,546
8,608
38,779
3,317
7,499
1,287
12,103
3,834
555
16,493
2,102
20,185
22,286
0
38,779
32,383
1,472
55,733
2007
2.5
88.6
n.a.
n.a.
n.a.
18.8
3.3
n.a.
n.a.
n.a.
n.a.
n.a.
176.3
n.a.
31.4
66.1
n.a.
n.a.
2008
9.4
25.2
n.a.
n.a.
n.a.
21.0
3.8
0.0
n.a.
n.a.
0.0
0.0
181.7
n.a.
32.5
73.7
0.0
n.a.
2009
32.5
172.1
n.m.
n.a.
n.a.
22.7
7.7
4.1
15.6
4.0
7.0
6.7
82.9
16.4
31.1
68.6
2.6
9.0
2010
43.6
70.9
137.3
178.5
160.5
21.7
9.2
6.7
32.4
10.9
17.6
17.9
20.8
19.0
23.5
55.9
16.3
6.9
2011
2.1
15.7
24.3
23.8
22.0
23.3
10.4
8.2
29.5
12.5
19.5
18.9
13.5
25.5
29.2
61.2
19.0
6.8
2012E
21.3
37.8
42.4
51.1
50.8
23.8
11.8
9.6
33.8
16.7
22.5
22.9
8.0
20.8
33.9
51.0
25.4
5.3
2013E
17.4
17.5
17.6
15.8
15.8
24.1
11.9
9.6
32.8
17.5
23.1
23.3
7.3
20.0
34.2
43.8
28.1
5.2
2014E
6.1
7.7
8.2
8.6
8.6
24.3
12.0
9.8
31.8
17.8
22.7
22.7
6.6
20.0
35.0
41.7
28.6
5.1
Key ratios (%)
Year to 31 Dec
Sales (YoY)
EBITDA (YoY)
Operating profit (YoY)
Net profit (YoY)
EPS (YoY)
Gross-profit margin
EBITDA margin
Operating-profit margin
ROAE
ROAA
ROCE
ROIC
Net debt to equity
Effective tax rate
Accounts receivable (days)
Payables (days)
Net interest cover (x)
Net dividend payout
Company profile
Kia Motors (Kia) is the second-largest automaker in Korea, with a global production capacity of 2.5m units for 2012. The
company is a 33.58%-owned subsidiary of HMC. Kia has overseas factories in China, Slovakia and the US.
- 27 -
Lost & Found
26 June 2012
Honda (7267 JP)
Rating: Buy (1); target price: ¥3,300 Æ ¥3,100
Focus on earnings/sales recovery over short term,
earnings growth over medium term
What we recommend
We reiterate our Buy (1) rating but trim our PER-based target price to
¥3,100 (from ¥3,300) and equivalent to a PER of 11x on our FY12 EPS
forecast for Honda, following earnings revisions to reflect the FY11 results.
The stock has been performing poorly year-to-date, probably due to high
levels of sales incentives in the US and concerns about a sales slowdown in
motorcycle markets in emerging economies. Despite this, we continue to
expect Honda’s earnings and sales momentum to strengthen over the next
few years.
We would continue to focus on the Accord, which is due for a model change
this autumn. Honda plans to use a new powertrain starting with the new
Accord. Thus, we expect the model to have a competitive edge in fuel
efficiency in the mid-sized sedan segment (the core market in the US), like
Nissan’s Altima. Meanwhile, we are concerned about sales of the current
Accord model. We also believe the benefits from the new Accord could be
diluted by the surprisingly strong marketability of the Nissan Altima. That
said, the Honda stock has recently underperformed its two major domestic
peers, and we believe such concerns are largely factored into the current
share price.
We expect a recovery in earnings momentum over the short term. Revenue
for April-June 2012 should be on a par with the firm’s bullish guidance,
underpinned by solid demand and a rebound in production following the
Thailand floods. The product mix may also improve on the back of a decline
in sales of the compact car, the FIT, in the US (exported from Japan). We
also note that Honda is typically conservative on the cost front, usually
assuming a heavy cost burden. As such, we expect it to work through its cost
budget cautiously given recent currency movements and the murky outlook
for the macroeconomic environment. We expect elevated earnings for 1H12,
with cost increases lagging brisk top-line growth.
Honda plans to increase its capex by 43% YoY for 2012 (5.6% of its sales
guidance). We expect R&D costs to remain high this year (up 7% YoY and
representing 5.4% of the company’s sales guidance). Its medium-term
business growth strategy is somewhat unclear following the launch of the
new Accord and powertrain.
Valuation
The stock is trading largely in line with the end-FY11 BVPS of ¥2,443 and at
a low FY12E PER of less than 10x based on our EPS forecast. Market
expectations for the share price seem to have been low recently, but we
envisage valuation multiple expansion in the next few months, in line with a
prospective recovery in short-term earnings and sales momentum.
- 28 -
Share Price Chart
3 ,9 0 0
R e l a ti ve to T OP IX
160
3 ,4 0 0
140
2 ,9 0 0
120
2 ,4 0 0
100
(Y )
1 ,9 0 0
6 /0 9
80
1 /1 0
9 /1 0
4 /1 1
1 1 /1 1
6 /1 2
Source: Compiled by Daiwa.
Market Data (consol)
12-month range (Y)
2,127-3,300
Market cap (Y mil; 25 Jun)
4,795,919
Shares outstanding (000; 6/12)
1,802,300
Foreign ownership (%; 3/12)
35.6
Investment Indicators (consol)
3/12
3/13 E
3/14 E
P/E (X)
22.7
9.5
7.9
EV/EBITDA (X)
14.6
8.6
7.6
P/B (X)
1.09
1.00
0.92
Dividend yield (%)
2.25
3.08
3.76
4.8
11.0
12.1
ROE (%)
Income Summary (consol)
(Y mil;SEC)
Sales
3/12
3/13 E
3/14 E
7,948,095
10,000,000
10,560,000
Op profit
231,364
650,000
770,000
Pretax income
257,403
680,000
800,000
Net income
211,482
505,000
607,000
EPS (Y)
117.3
280.2
336.8
DPS (Y)
60.00
82.00
100.00
Source: Company, Daiwa forecasts.
Lost & Found
26 June 2012
Honda: geographical sales mix (FY11)
Others
5.2%
Japan
19.3%
Asia
27.6%
Europe
5.2%
- 29 -
N.America
42.7%
Lost & Found
26 June 2012
Honda: Financial summary
Profit and loss (¥bn)
FY10
FY09
(Y/E 31 March)
Sales
Japan
North America
Europe
Asia (excl. Japan)
Other
Eliminations
Motorcycle
Automobile
Financial services
Power products and other
Eliminations
COGS
Gross profit
SG&A
R&D expenses
Operating profit
Japan
North America
Europe
Asia (excl. Japan)
Other
Eliminations
Motorcycle
Automobile
Financial services
Power products and other
Net non-operating income
Net interest income
Net interest expenses
Other
Pre-tax income
Income taxes
Non-controlling interests
Equity-method income
Net income (1)
Depreciation (2)
Capex (3)
R&D expenses
Simplified cash flow (1) + (2)
Simplified free cash flow (1) + (2) + (3)
8,579.2
3,305.8
3,908.2
825.5
1,518.6
896.5
(1,875.4)
1,140.3
6,554.8
618.8
304.6
(39.4)
6,414.7
2,164.5
1,337.3
463.4
363.8
(29.1)
236.4
(10.9)
113.0
45.8
8.6
58.8
126.8
194.9
(16.7)
(27.6)
18.2
(12.6)
(33.3)
336.2
146.9
14.2
93.3
268.4
366.6
329.7
463.4
635.0
305.3
YoY %
-14.3%
-20.6%
-18.2%
-35.5%
-5.6%
-21.7%
-19.2%
-14.6%
3.7%
-17.4%
-13.5%
-16.5%
-27.3%
-17.7%
91.8%
Loss
196.6%
Loss
9.1%
-66.1%
-41.1%
416.5%
141.6%
Loss
107.9%
95.9%
8,936.9
3,611.2
4,147.9
699.3
1,841.2
982.1
(2,344.8)
1,288.2
6,802.3
573.5
318.3
(45.4)
6,496.8
2,440.0
1,382.7
487.6
569.8
66.1
300.9
(10.2)
150.6
69.5
(7.2)
138.6
264.6
186.3
(5.5)
60.8
23.6
(8.5)
45.7
630.5
206.8
29.4
139.8
534.1
325.2
311.3
487.6
859.3
548.0
- 30 -
FY11
YoY %
4.2%
9.2%
6.1%
-15.3%
21.2%
9.5%
13.0%
3.8%
-7.3%
4.5%
1.3%
12.7%
3.4%
5.2%
56.6%
Profit
27.3%
Loss
33.3%
51.8%
135.6%
108.7%
-4.4%
Loss
87.6%
99.0%
7,948.1
3,363.0
3,714.8
580.8
1,490.5
893.1
(2,094.0)
1,348.8
5,822.9
526.6
289.7
(40.0)
5,919.6
2,028.5
1,277.3
519.8
231.4
(109.8)
223.3
(12.1)
76.9
57.0
(3.8)
142.6
(77.2)
170.0
(4.0)
26.0
33.5
(10.4)
3.0
257.4
135.7
10.6
100.4
211.5
293.7
406.5
519.8
505.2
98.7
FY12E
YoY %
-11.1%
-6.9%
-10.4%
-16.9%
-19.0%
-9.1%
4.7%
-14.4%
-8.2%
-9.0%
-8.9%
-16.9%
-7.6%
6.6%
-59.4%
Loss
-25.8%
Loss
-49.0%
-18.1%
2.9%
Loss
-8.7%
Loss
-59.2%
-60.4%
10,000.0
3,500.0
4,640.0
675.0
2,253.0
1,160.0
(2,228.0)
1,551.0
7,626.0
556.0
306.0
(39.0)
7,360.0
2,640.0
1,435.0
555.0
650.0
72.0
328.0
10.0
170.0
70.0
0.0
162.0
328.0
164.0
(4.0)
30.0
35.0
(10.0)
5.0
680.0
272.0
28.0
125.0
505.0
285.0
580.0
555.0
790.0
210.0
FY13E
YoY %
25.8%
4.1%
24.9%
16.2%
51.2%
29.9%
15.0%
31.0%
5.6%
5.6%
24.3%
30.1%
12.3%
6.8%
180.9%
Profit
46.9%
Profit
121.2%
22.9%
13.6%
Profit
-3.5%
Loss
164.2%
138.8%
10,560.0
3,500.0
4,940.0
720.0
2,421.0
1,280.0
(2,301.0)
1,720.0
7,982.0
573.0
325.0
(40.0)
7,750.0
2,810.0
1,460.0
580.0
770.0
110.0
365.0
20.0
190.0
85.0
0.0
185.0
431.0
158.0
(4.0)
30.0
35.0
(10.0)
5.0
800.0
304.0
34.0
145.0
607.0
300.0
580.0
580.0
907.0
327.0
YoY %
5.6%
0.0%
6.5%
6.7%
7.5%
10.3%
10.9%
4.7%
3.1%
6.2%
5.3%
6.4%
1.7%
4.5%
18.5%
52.8%
11.3%
100.0%
11.8%
21.4%
14.2%
31.4%
-3.7%
Loss
17.6%
20.2%
Lost & Found
26 June 2012
Balance sheet (¥bn)
(Y/E 31 March)
Total assets
Current assets
Cash and cash equivalents
Accounts receivable
Finance subsidiaries’ short-term receivables
Inventories
Other
Finance subsidiaries’ long-term receivables
Operating lease assets
Investments and loans
Tangible fixed assets
Other
Total liabilities
Current liabilities
Short-term debt and long-term debt due within one year
Accounts payable
Other
Long-term debt
Other
Noncontrolling interests
Total shareholders' equity and net assets
Book value per share (Y)
FY09
11,629.1
4,613.7
1,119.9
883.5
1,100.2
935.6
574.6
2,361.3
1,308.1
642.7
2,086.7
616.6
7,172.7
3,419.1
1,788.6
827.2
803.3
2,313.0
1,440.5
127.8
4,328.6
2,385.4
FY10
11,570.9
4,690.0
1,279.0
787.7
1,131.1
899.8
592.5
2,348.9
1,357.6
639.9
1,939.4
595.0
6,988.0
3,568.2
2,057.2
716.7
794.3
2,043.2
1,376.5
132.9
4,450.0
2,469.1
FY11
11,780.8
4,739.1
1,247.1
812.2
1,081.7
1,035.8
562.3
2,364.4
1,472.8
623.6
1,973.5
607.5
7,252.5
3,579.8
1,876.2
968.9
734.6
2,235.0
1,437.7
125.7
4,402.6
2,442.8
FY12E
12,682.0
5,100.9
1,071.4
1,021.8
1,142.2
1,303.2
562.3
2,496.5
1,585.1
623.6
2,268.5
607.5
7,748.7
3,916.4
1,962.7
1,219.1
734.6
2,394.6
1,437.7
153.7
4,779.7
2,652.0
FY13E
13,232.3
5,246.4
1,071.8
1,079.0
1,157.1
1,376.2
562.3
2,542.8
1,663.5
623.6
2,548.5
607.5
7,821.9
3,964.6
1,942.7
1,287.4
734.6
2,419.6
1,437.7
187.7
5,222.6
2,897.8
FY11
6,881.1
3,689.2
1,224.2
483.4
1,035.8
945.8
825.4
1,958.7
407.8
2,972.2
1,978.6
363.5
977.0
638.1
100.4
893.2
FY12 E
7,420.1
3,933.1
1,054.8
614.9
1,317.6
945.8
825.4
2,253.7
407.8
3,239.1
2,245.9
365.0
1,242.8
638.1
100.0
893.2
FY13 E
7,813.3
4,046.4
1,057.1
650.2
1,393.3
945.8
825.4
2,533.7
407.8
3,290.5
2,297.3
345.0
1,314.2
638.1
100.0
893.2
Balance sheet for automobile business (¥bn)
(Y/E 31 March)
Automobile business (excl. financials): Total assets
Current assets
Accounts receivable
Inventories
Other
Investments and loans
Other
Automobile business (excl. financials): Total liabilities
Current liabilities
Short-term debt and long-term debt due within one year
Accounts payable
Other
Long-term debt
Other
FY09
6,930.1
3,535.1
1,100.7
525.8
935.6
973.0
880.7
2,068.1
446.2
2,935.0
1,736.8
236.1
833.3
667.3
174.2
1,024.0
- 31 -
FY10
6,766.4
3,587.1
1,252.4
459.1
899.8
975.8
866.8
1,924.0
388.5
2,701.5
1,678.7
257.7
727.6
693.3
142.1
880.8
Lost & Found
26 June 2012
Cash flow statement (¥bn)
(Y/E 31 March)
Cash flows from operating activities
Automobile business (excl. financials)
Net income
Depreciation
Other
Financial business
Intersegment eliminations
Cash flows from investing activities
Automobile business (excl. financials)
Capex
Other
Financial business
Cash flows from financing activities
Automotive business (excl. financials)
Change in short-term debt
Change in long-term debt
Dividend payment
Financial services
Forex translation adjustments
Free cash flow
Automotive business (excl. financials) free cash flow
FY09
1,544.2
1,099.6
176.4
399.2
438.5
85.6
437.1
-7.5
-595.8
-259.1
-365.6
106.6
-219.2
117.5
-559.2
-446.8
-458.6
89.8
-61.7
-222.5
-110.0
40.3
948.5
840.6
- 32 -
FY10
1,070.8
634.8
456.2
349.8
-57.5
-113.8
440.7
4.6
-731.4
-263.0
-292.4
29.3
-477.5
-9.1
-100.4
-141.3
11.3
-9.4
-92.2
45.4
4.5
-79.9
339.4
371.7
FY11
737.4
393.2
109.0
319.4
51.2
-86.5
364.6
20.3
-673.1
-313.1
-371.4
58.3
-346.4
13.6
-44.1
-56.6
38.6
28.7
-108.1
-21.5
-34.0
-52.2
64.4
80.1
FY12E
823.8
574.1
400.0
321.6
-147.5
0.0
249.7
0.0
-884.9
-577.3
-577.3
0.0
-304.9
2.7
118.1
-4.9
40.7
82.3
-128.0
123.0
0.0
0.0
-61.0
-3.2
FY13E
1,117.0
799.7
505.9
333.4
-39.6
0.0
317.3
0.0
-719.7
-577.3
-577.3
0.0
-139.7
2.7
-159.0
-161.5
-10.0
12.5
-164.0
2.5
0.0
0.0
397.3
222.4
Lost & Found
26 June 2012
Nissan (7201 JP)
Rating: Buy (1); target price: ¥1,000
New Altima should herald higher profitability on a better
product mix
What we recommend
We have a Buy (1) rating and a PER-based target price of ¥1,000 (equivalent
to a PER of 10x on our FY12 EPS forecast) for Nissan. The shares have been
flattish over recent months amid growing investor concerns about currency
rates and the global economy. That said, the company’s FY11 results
reaffirmed its ability to generate profit despite a stronger Yen. We believe
the recent pullback in the share price provides a good entry point in light of
the company entering a good model-change cycle, and maintaining its sales
expansion, backed by increased market share even in the slowing China
market.
Share Price Chart
(Y )
930
R e l a ti ve to T OP IX
170
810
150
690
130
570
110
450
6 /0 9
90
1 /1 0
9 /1 0
4 /1 1
1 1 /1 1
6 /1 2
Source: Compiled by Daiwa.
Market Data (consol)
12-month range (Y)
614-905
Market cap (Y mil; 25 Jun)
3,051,275
Shares outstanding (000; 6/12)
4,191,312
Foreign ownership (%; 3/12)
With global sales brisk and the stock’s low valuation multiples relative to
rivals widely recognised, we see the launch of a new Altima (mid-sized
sedan) model as a potential share-price catalyst (the US model launch is due
in late June). We believe the fuel efficiency for the new Altima will be about
10% better than the comparable Toyota Camry or Honda Accord models.
Furthermore, the Altima (sold mainly in the US) and the Teana (sold mainly
in China) are to become the same model (perhaps under different names).
For FY11, the sales volume for these two models alone totalled 424,000, or
roughly 10% of Nissan’s global sales of 4.67m vehicles: 268,000 (26% of
Nissan’s US sales) for the Altima and 156,000 (shipment basis) for the
Teana. Given the strong product developments which should drive sales and
an ongoing market recovery, the new Altima/Teana could become Nissan’s
core product, with potential sales of 500,000 vehicles for 2012E.
We believe the new Altima/Teana will boost Nissan’s profitability as: 1) the
launch of a new model with a high sales weighting should allow the company
to reduce its sales incentives, and 2) it should improve the company’s overall
product mix. Consequently, we believe the company’s goal of a stable 8%
operating profit margin by FY16, set out in its medium-term business plan,
Nissan Power 88, could be within reach in FY13. At this juncture, the
company aims to increase its operating-profit margin from 5.8% in FY11 to
6.8% in FY12.
Valuation
The stock is trading largely on a par with its end-FY11 BVPS of ¥751 and at a
FY12E PER of 7.3x (based on our EPS forecast), lower than the average
FY12E PER of 10x for other Japanese carmakers (based on our EPS
forecasts). With Nissan building up its net cash in automobile operations, we
see the likelihood of shareholder returns being enhanced, such as through a
dividend increase at the end of FY12.
- 33 -
68.5
Investment Indicators (consol)
3/12
3/13 E
3/14 E
P/E (X)
8.9
7.3
5.7
EV/EBITDA (X)
6.8
5.5
4.5
P/B (X)
0.97
0.88
0.79
Dividend yield (%)
2.75
3.71
4.81
ROE (%)
11.2
12.7
14.7
Income Summary (consol)
(Y mil)
3/12
3/13 E
3/14 E
9,409,026
10,280,000
11,310,000
Op profit
545,839
708,000
880,000
Rec profit
535,090
690,000
875,000
Net income
341,433
420,000
540,000
EPS (Y)
81.7
100.2
128.8
DPS (Y)
20.00
27.00
35.00
Sales
Lost & Found
26 June 2012
Nissan: geographical sales mix (FY11)
Japan
13.5%
Others
42.8%
N.America
29.0%
Europe
14.7%
- 34 -
Lost & Found
26 June 2012
Nissan: Financial summary
Profit and loss (¥bn)
FY09
(Y/E 31 March)
Sales
Japan
North America
Europe
Asia other
Asia
Other
Eliminations
Automobile
Sales financing
Consolidated eliminations
COGS
Gross profit
SG&A
Operating profit
Japan
North America
Europe
Asia other
Asia
Other
Eliminations
Automobile
Sales financing
Eliminations
Non-operating income
Net interest income
Other
Recurring profit
Extraordinary gains
Extraordinary losses
Pre-tax income
Income taxes
Net income (1)
Depreciation (2)
Capex (3)
R&D
Simplified cash flow (1) + (2)
Simplified free cash flow (1) + (2) + (3)
7517.3
3776.7
2795.2
1164.6
1733.9
(1953.2)
6994.9
558.4
(36.0)
6146.2
1371.1
1059.4
311.6
(4.3)
208.6
8.4
88.7
10.1
226.1
77.5
8.0
(103.9)
(13.2)
(50.6)
(40.0)
207.7
20.6
(86.7)
141.6
91.5
7.7
42.4
363.3
273.6
385.5
405.7
132.1
FY10
YoY %
-10.9%
-10.1%
-11.5%
-24.4%
-2.8%
-10.5%
-17.5%
-13.7%
4.0%
-27.2%
profit
Loss
profit
profit
14.7%
profit
133.7%
profit
profit
profit
8773.1
4423.9
3268.5
1421.7
2578.7
1908.5
670.2
(2919.6)
8320.4
503.3
(50.6)
7155.1
1618.0
1080.5
537.5
76.4
225.6
36.4
195.7
171.1
24.6
3.4
425.5
100.4
11.6
0.3
(12.8)
43.0
(29.9)
537.8
28.0
(85.7)
480.1
132.1
28.8
319.2
372.1
312.0
399.3
691.3
379.3
- 35 -
FY11
YoY %
16.7%
17.1%
16.9%
22.1%
18.9%
-9.9%
16.4%
18.0%
2.0%
72.5%
profit
8.2%
331.0%
88.2%
29.5%
158.9%
239.0%
653.1%
9409.0
4755.1
3344.5
1680.1
2844.1
2124.9
719.2
(3214.7)
8988.8
490.6
(70.3)
7772.8
1636.2
1090.4
545.8
85.5
210.1
23.2
207.3
181.8
25.5
19.8
391.7
140.1
14.0
(10.7)
(9.9)
19.1
(19.9)
535.1
56.0
(61.8)
529.3
151.5
36.4
341.4
334.4
406.4
428.0
675.8
269.4
FY12E
YoY %
7.2%
7.5%
2.3%
18.2%
10.3%
11.3%
7.3%
8.0%
-2.5%
8.6%
1.1%
0.9%
1.6%
11.9%
-6.9%
-36.3%
5.9%
6.3%
3.6%
-7.9%
39.6%
-0.5%
10.2%
7.0%
10280.0
4900.0
3720.0
1680.0
3360.0
2480.0
880.0
(3380.0)
9845.0
510.0
(75.0)
8300.0
1980.0
1272.0
708.0
174.0
280.0
13.0
241.0
210.0
31.0
0.0
588.0
120.0
0.0
(18.0)
(9.0)
10.0
(19.0)
690.0
0.0
(20.0)
670.0
207.7
42.3
420.0
360.0
550.0
485.0
780.0
230.0
FY13E
YoY %
9.3%
3.0%
11.2%
0.0%
18.1%
16.7%
22.4%
9.5%
4.0%
6.8%
21.0%
16.7%
29.7%
103.5%
33.3%
-43.9%
16.3%
15.5%
21.7%
50.1%
-14.3%
29.0%
26.6%
23.0%
11310.0
4900.0
4200.0
1840.0
3840.0
2870.0
970.0
(3470.0)
10860.0
530.0
(80.0)
9060.0
2250.0
1370.0
880.0
245.0
340.0
15.0
280.0
240.0
40.0
0.0
770.0
110.0
0.0
(5.0)
(7.0)
20.0
(18.0)
875.0
0.0
(20.0)
855.0
265.1
50.0
540.0
390.0
500.0
500.0
930.0
430.0
YoY %
10.0%
0.0%
12.9%
9.5%
14.3%
15.7%
10.2%
10.3%
3.9%
9.2%
13.6%
7.7%
24.3%
40.8%
21.4%
15.4%
16.2%
14.3%
29.0%
31.0%
-8.3%
26.8%
27.6%
28.6%
Lost & Found
26 June 2012
Balance sheet (¥bn)
(Y/E 31 March)
Total assets
Current assets
Accounts receivable
Finance receivables
Inventories
Other
Fixed assets
Investments and other assets
Total liabilities
Current liabilities
Accounts payable
Short-term borrowings
Lease obligations
Other
Long-term liabilities
Bonds
Long-term borrowings
Lease obligations
Other
Total shareholders' equity and net assets
Shareholders’ equity
Valuation and translation adjustments
Book value per share (¥)
FY09
10,214.8
5,580.4
802.4
641.2
2,645.9
802.3
688.7
4,634.4
3,858.1
776.3
7,199.7
3,856.9
1,001.3
1,626.6
65.0
1,164.0
3,342.9
507.1
1,792.0
86.6
957.2
3,015.1
3,599.0
(891.6)
305.4
663.9
FY10
10,736.7
6,345.8
998.8
739.0
2,746.8
982.2
879.0
4,390.9
3,637.0
753.8
7,462.9
4,380.5
1,181.5
1,871.0
77.6
1,250.5
3,082.4
640.9
1,422.5
67.1
951.9
3,273.8
3,981.5
(1,040.1)
330.0
703.2
FY11
11,072.1
6,610.1
765.4
820.0
3,210.3
1,019.0
795.3
4,462.0
3,731.2
730.7
7,622.1
4,145.2
1,377.3
1,292.5
38.2
1,437.3
3,476.8
585.0
1,878.0
34.6
979.3
3,450.0
4,269.8
(1,123.1)
300.9
750.8
FY12E
11,495.4
6,843.4
752.5
895.9
3,286.4
1,113.3
795.3
4,652.0
3,921.2
730.7
7,677.7
4,063.9
1,504.7
1,083.6
38.2
1,437.3
3,613.9
600.0
2,000.0
34.6
979.3
3,817.7
4,597.6
(1,123.1)
343.2
829.0
FY13E
11,874.4
7,112.4
771.3
985.7
3,335.3
1,224.8
795.3
4,762.0
4,031.2
730.7
7,596.7
3,932.9
1,655.5
801.9
38.2
1,437.3
3,663.9
600.0
2,050.0
34.6
979.3
4,277.7
5,007.7
(1,123.1)
393.1
926.8
FY12E
6,400.4
3,133.4
687.3
894.0
(3.3)
1,102.8
452.6
3,267.0
2,677.8
589.2
3,096.9
1,723.1
1,462.2
(1,020.0)
38.1
1,242.8
1,373.8
340.0
520.0
34.5
479.3
FY13E
6,731.0
3,354.1
704.2
984.1
(3.3)
1,216.5
452.6
3,377.0
2,787.8
589.2
3,037.6
1,663.9
1,612.9
(1,230.0)
38.1
1,242.8
1,373.8
340.0
520.0
34.5
479.3
Balance sheet of automobile business (¥bn)
(Y/E 31 March)
Automobile business: total assets
Current assets
Accounts receivable
Finance receivables
Inventories
Other
Fixed assets
Investments and other assets
Automobile business: total liabilities
Current liabilities
Accounts payable
Short-term borrowings
Lease obligations
Other
Long-term liabilities
Bonds
Long-term borrowings
Lease obligations
Other
FY09
5,858.9
2,572.9
795.4
640.8
(72.4)
782.1
426.9
3,286.0
2,641.7
644.4
3,275.8
1,830.6
974.9
(240.0)
64.8
1,031.0
1,445.2
270.0
587.4
86.2
501.5
- 36 -
FY10
6,322.4
3,197.5
977.6
738.7
(45.7)
964.3
562.5
3,124.9
2,487.1
637.8
3,468.2
2,216.1
1,133.3
(122.3)
77.5
1,127.7
1,252.1
370.0
304.9
66.9
510.3
FY11
6,057.1
2,980.1
705.8
818.0
(3.2)
1,006.9
452.6
3,077.0
2,487.8
589.2
3,065.3
1,643.6
1,335.0
(972.4)
38.1
1,242.8
1,421.7
340.0
567.9
34.5
479.3
Lost & Found
26 June 2012
Cash flow statement (¥bn)
(Y/E 31 March)
Cash flows from operating activities
Automobile business
Pre-tax income
Depreciation
Other
Financial business
Cash flows from investing activities
Automobile business
Fixed-asset purchases
Other
Financial business
Cash flows from financing activities
Automobile business
Change in short-term debt
Change in long-term debt/bonds
Dividend payment
Other
Financial business
Forex translation adjustments
Free cash flow
Free cash flow from automobile business
FY09
1,177.2
707.5
61.5
402.0
248.7
50.6
(55.3)
469.7
(496.5)
(332.0)
(272.9)
(59.1)
(164.5)
(664.0)
(351.4)
(507.8)
189.5
(2.8)
(30.3)
(312.6)
(2.2)
680.7
375.5
- 37 -
FY10
667.5
614.5
382.7
411.2
(10.1)
(43.0)
(126.2)
53.0
(331.1)
(155.3)
(263.7)
108.5
(175.9)
110.6
(19.5)
153.4
(114.6)
(24.0)
(34.2)
130.1
(60.3)
336.4
459.3
FY11
696.3
726.9
390.7
369.0
157.8
(19.1)
(171.6)
(30.6)
(685.1)
(347.4)
(370.0)
22.6
(337.6)
(308.5)
(716.1)
(680.4)
85.0
(76.5)
(44.2)
407.7
(15.6)
11.2
379.5
FY12E
694.5
947.3
590.0
400.0
(42.7)
(10.0)
10.0
(252.8)
(858.4)
(550.0)
(550.0)
0.0
(308.4)
(177.7)
(95.5)
(47.6)
(47.9)
(105.9)
105.9
(82.2)
0.0
(164.0)
397.3
FY13E
873.6
1,164.5
785.0
430.0
(50.5)
(20.0)
20.0
(290.9)
(808.4)
(500.0)
(500.0)
0.0
(308.4)
(375.4)
(210.0)
(210.0)
0.0
(143.6)
143.6
(165.4)
0.0
65.1
664.5
Lost & Found
26 June 2012
Volkswagen AG (VOW: GR)
Rating: Not rated; target price: N/A
Aiming to become No.1 by 2018 as it sets its global
sales target at 10m units, including 1m in the US
Volkswagen was the second-largest auto manufacturer worldwide in 2011 (in
terms of volume) and aims to become the biggest by 2018. The company’s
product portfolio ranges from small cars to heavy trucks, and the company
manages 10 brands (Volkswagen, Audi, Seat, Skoda, Bentley, Bugatti,
Lamborghini, Volkswagen Commercial Vehicles, Scania, and Man), globally.
It sold 8.2m vehicles in 2011, 47% of them in Europe (west, central, and
east), and more than 29% in China.
As part of its quest to become the world’s largest automaker by 2018, the
company is embarking on a new strategy to take modular design to the next
level, which will increase the proportion of shared components, and reduce
costs and development time. Volkswagen’s modular transverse matrix
architecture will be used first on the next-generation Golf and Audi A3
(scheduled for launch at the end of 2012), and will be flexible enough to
underpin small cars such as the Polo (subcompact car) and larger cars, such
as the Passat (mid-size car), as long as the vehicle has a transversely
mounted front-engine layout.
The company has already rolled out its modular longitudinal matrix
architecture on its larger Audi vehicles, encompassing vehicles with a
longitudinally mounted front-engine layout, and the new small family
architecture used in the micro cars, such as the Volkswagen Up! and Seat Mii.
Volkswagen is currently developing another architecture, modular standard
matrix, which will underpin the large front-engine, rear-wheel-drive
vehicles, such as the Volkswagen Touareg (crossover utility vehicle [CUV]),
the Porsche Cayenne (CUV), Porsche Panamera (sedan), and the Bentley
Continental (super luxury car).
Volkswagen's unit sales composition
SEAT
4%
SKODA
11%
Audi
16%
(%)
(€)
300
150
250
Relative to DAX
200
100
150
100
50
50
0
Jun-09
0
Jan-10
Aug-10
Mar-11
Oct-11
May-12
Source: Source: Bloomberg, Compiled by DCMA
Market Data
12-month range(€)
82.35-138.80
DAX（6/25/12）
6,132.39
Market Cap（€ mil; 6/25/12）
53,577.4
295.1
Shares outstanding（mil; 3/31/12）
Investment Indicators
09/12
10/12
11/12
47.66
7.45
3.41
EV/EBITDA (X)
2.8
3.0
2.3
P/B (X)
1.3
1.2
1.0
Dividend yield (%)
1.4
1.9
2.7
2.7%
15.3%
26.8%
P/E (X)
ROE (%)
Income Summary
(€ mil)
09/12
10/12
11/12
Sales
105,187
126,875
159,337
EBT
1,261
8,994
18,926
Net income
960
6,835
15,409
EPS($)*
2.37
15.17
33.10
DPS($)
1.60
2.20
3.00
Source: Bloomberg, Company materials;
Compiled by DCMA
E: DCMA estimate *EPS, EBT, Net income : Non-GAAP
See end of report for notes concerning indicators.
Volkswagen: unit sales composition (2011)
Commercial
Vehicles (incl.
Scania, MAN)
8%
Share Price Chart
Volkswagen
Passenger Cars
61%
- 38 -
Lost & Found
26 June 2012
Volkswagen: geographical sales mix (2011)
Others
15.3%
Germany
14.1%
N. America
8.2%
Asia
31.5%
Europe
30.9%
- 39 -
Lost & Found
26 June 2012
CONCLUSION
Daiwa’s top Pan-Asia picks
Our trip to the Deep South reinforced our positive views on HMC and Nissan among
the Pan-Asia auto stocks in our coverage, as both companies are on track to increase
output by implementing three production shifts from 3Q12. HMMA is also adding a
third shift from 3Q12, taking its annual production capacity to 360,000 units, to
resolve the current low inventory level of just over 1.2 months (for volume-sellers such
as the Elantra and Sonata in particular). Nissan is hiring 1,000 workers to add a third
shift in Smyrna to address possible capacity constraints for its all-new Altima. We
believe this should alleviate market concerns about a possible capacity constraint for
both companies in the US market.
Furthermore, we believe the manufacturing methods of both HMC and Nissan in the
US, focused more on the level of automation, the efficient use of its equipment, and
the outsourcing of low-value-added module assembly, could prove to be more costcompetitive than the methods adopted by its peers over the long term.
HMC and Nissan are our top picks among the Pan-Asia stocks we cover. We believe
both have the potential to improve their cost structures by increasing the proportion of
shared parts among cars, and adopting a global platform-integration strategy in a
more agile manner than their peers. We also continue to give credit to both companies
for their strong execution capabilities and strong potential to fare well in emerging
markets, where auto industry demand should continue to flourish on the back of the
motorisation trend, with fuel-efficient cars and an appealing pricing strategy.
HMC
We reiterate our Buy (1) rating for HMC and DCF/PER-based target price of
W330,000. We expect: 1) upward revisions to the Bloomberg-consensus 2012 netprofit forecast for the company on the back of an acceleration in global unit shipments
and an improving cost structure, bolstered by the positive impact of platform
integration and lower marketing expenses, 2) the recent launch of the company’s
volume-seller, the all-new Santa Fe, in the domestic market on 19 April, and the
launches scheduled in Europe in June and in the US for September this year, to be the
key earnings drivers from 2Q12 onwards.
Nissan
We have a Buy (1) rating and a PER-based target price of ¥1,000 for Nissan
(equivalent to a PER of 10x on our FY12 EPS forecast). With global sales already brisk
and the stock’s low valuation multiples relative to rivals widely recognised by the
market, we see the launch of the new Altima (mid-sized sedan) model as a potential
catalyst for the share price. The fuel efficiency of the new model will be about 10%
better than comparable models, in our view. Furthermore, the Altima (sold mainly in
the US) and the Teana (sold mainly in China) are to be streamlined to become the
same model.
Given the strong products driving up its sales volumes and ongoing market recovery,
the new Altima/Teana could become Nissan’s core product, with potential sales of
500,000 vehicles in FY12. We expect the addition of the new model to the product mix
to boost the company’s profitability, as: 1) the launch of a new model with a high sales
weighting should allow Nissan to reduce its sales incentives, and 2) we see benefits
resulting from elevated sales volume for a high-priced model (we believe it will have a
high gross-profit margin).
- 40 -
Lost & Found
26 June 2012
Reiterating our Positive rating for the US Auto Sector, as
we expect robust growth over next few years
We have a Positive rating on the US Auto Sector. We expect sound fundamentals to
drive sales growth in the market over the next few years, following the low of 10.4m
unit sales reached for 2009. We forecast US sales volume of 14.4m units for 2012,
15.0m for 2013, and 15.9m for 2014.
US auto sales forecasts (1980-2020E)
(m units)
18.0
DCMA forecast
2000: 17.3
17.0
2014E: 15.9
16.0
2013E: 15.0
15.0
2012E: 14.4
14.0
13.0
12.0
11.0
10.0
2009: 10.4
9.0
8.0
1980
Units
YoY %
1985
2000
17,350
2.7%
2001
17,122
-1.3%
1990
2002
16,816
-1.8
1995
2003
16,639
-1.1%
2004
16,867
1.4%
2000
2005
16,948
0.5%
2006
16,504
-2.6%
2005
2007
16,089
-2.5%
2008
13,195
-18.0%
2010
2009
10,402
-21.2%
2010
11,555
11.1%
2015
2011
12,734
10.2%
2012E
14,404
13.1%
2020
2013E
15,036
4.4%
2014E
15,876
5.6%
Source: Ward’s Auto, compiled by DCMA
E: DCMA forecasts
Pent-up demand should drive US auto sales to 14.4m for 2012
Despite slower-than-anticipated economic growth and headwinds such as high fuel
prices, US auto demand has remained strong in 2012, supported by resilient
replacement demand. Consumers have been waiting on the sidelines for economic
conditions to improve for the past few years, but they probably will not wait much
longer as the age of their vehicles passes 10 years. We believe consumers have become
accustomed to the slow pace of the recovery, and although conditions are not ideal,
they have begun to replace their ageing vehicles, leading to the demand we are seeing
currently. We expect the current level of demand to remain intact for at least the next
few quarters, and as such, believe the market will continue to track along at the low-tomid 14m seasonally adjusted annual rate seen over the first five months of this year,
leading to sales of 14.4m units in 2012.
Incremental to this replacement demand, we believe new demand (demand from new
buyers as opposed to those replacing old vehicles) will pick up gradually, and could
provide upside to our 14.4m sales forecast. However, for this to occur the economy
would need to show signs of a continuous improvement, and at this time we do not
expect such an improvement to take place soon enough to affect 2012 US sales.
- 41 -
Lost & Found
26 June 2012
We estimate inherent demand in the US auto market of 15.3m units;
continued expansion expected over next few years
We believe that under normal conditions, the US market has inherent demand of
15.3m units, since about 5.5% of the 237m registered vehicles are scrapped annually
(13.0m units), and the US driving-age population (16-75) is growing at just under 1% a
year, and these people need cars (2.3m units, our estimate). Although our 2012 sales
forecast of 14.4m may look rich for a developed market, we do not think it is
unreasonable given that the US market shrank to 10.4m units in 2009, and it still has
some way to go before returning to the normalised annual rate of more than 15m units.
We note that US auto sales have fallen short of inherent demand for several years now,
which suggests that consumers who held off on car purchases over the past few years
should return to the market, pushing demand to more than 15.3m units for at least a
few years. We forecast US auto-market sales of 15.0m for 2013, followed by 15.9m for
2014. Barring a deceleration in the US economy, we expect sales in the US auto market
to continue to expand, possibly reaching 17m a few years after 2014.
Product mix, product flow, incentives, pricing to be tailwinds for
profitability, further supporting our positive stance on the industry
In addition to market growth, factors such as product mix, product pipeline, incentive
spending, and price trends point in a generally positive direction, providing more
support to our positive view for the US auto industry. The product mix looks positive
from 2012, as: 1) the small-car segment’s popularity should cool following an unusually
strong 2011, and 2) consumers are likely to return to the larger and more expensive
segments, such as CUVs and SUVs, as the economic recovery progresses. The industry
as a whole is entering a period in which more than the average number of major model
changes are scheduled.
In 2012, the spotlight is on the medium-sized car segment, as some of the segment’s
top models, such as the Honda Accord, Chevy Malibu, Ford Fusion, and Nissan Altima,
are receiving full makeovers. We believe this will boost segment volume and have a
positive impact on overall market demand. Incentive spending has been declining for
the past few years, and this trend is likely to continue as manufacturers, especially US
automakers, are much less inclined to spend as industry capacity is more in line with
demand. Average transaction prices have been trending up over the past few years due
to: 1) price hikes by the auto makers to combat rising raw-material prices, and 2)
consumer purchases of more vehicles with a greater number of optional extras.
US: car sales by segment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
Small
- 42 -
Middle
Large/luxury
Specialty
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
0%
Lost & Found
26 June 2012
Toyota and Honda could be the winners in terms of 2012 market
share
Our 2012 sales forecast of 14.4m units equates to robust market expansion of 13.1%
YoY. This implies that an automaker would need to increase its sales volume by 13.1%
YoY or more just to maintain its market share. Automakers are trying to keep up with
the strong demand through measures such as implementing overtime and adding a
third crew.
Our estimates suggest that the degree of market-share increases will be stronger for
Toyota and Honda on the back of strong model launches in the volume-car segments,
such as Toyota’s Camry (3Q11) and Honda’s CRV (1Q12) and Accord (likely in 3Q12),
and the low base in 2011 due to the Japan earthquake in March 2011.
For 2012, we forecast Toyota’s retail share of the US market to increase by 1.7pp YoY
to 14.6%, from 12.9% for 2011, bolstered by stronger sales of the Camry (with average
monthly unit sales of more than 30,000) and the Prius series. For 1Q12, Toyota’s
hybrid electric vehicle (HEV) Prius brand recorded strong sales for green cars (HEVs,
plug-in HEVs, and electric vehicles) in the US. For the same period, US sales of green
cars rose by 44% YoY to 113,457 units, representing 3.3% of the 1Q12 US auto industry
demand, compared with 2.2% for 2011. Of this, HEVs accounted for 106,207 units,
compared with 7,250 electric vehicles and plug-in HEVs.
In terms of the quality of market-share gains, we prefer HMC and Kia, which have the
lowest incentives per car in the US and a declining proportion of fleet sales compared
with 2011. We forecast HMC’s 2012 US market share to increase by only 0.1pp YoY to
5%, despite an increase in its volume-sellers such as the Elantra and the Sonata, and
the launch of the Santa Fe in 3Q12. However, we consider this an impressive feat, as
capacity constraints (with the inventory level trending below 1.3 months currently) is
only likely to be resolved from 3Q12. In particular, we believe the quality of retail sales
of HMC is the highest among all the major automakers in the US, with the company’s
incentives declining to US$862/car for May compared with the industry average of
US$2,600/car, and given that the proportion of fleet sales is currently below 10%,
while it has increased to 13% for Toyota, up from 10% for last year.
We forecast Kia’s 2012 retail share of the US market to increase by 0.2pp YoY to 3.9%
on stronger sales of the Optima (K5), Sorento, and Soul. Monthly sales of the
company’s flagship mid-sized sedan, the Optima (built on the same platform as HMC’s
Sonata), are on track to surpass 15,000 units/month, which should boost Kia Motor
America’s 2012 profit.
We expect both Nissan and Volkswagen to see moderate market-share gains from 3Q12
on the back of new model launches, such as Nissan’s Altima and Volkswagen’s Passat.
- 43 -
Lost & Found
26 June 2012
US: monthly market share by brand (%)
US: annual market share by brand
35%
40%
30%
30%
25%
20%
20%
15%
10%
HMC+Kia
5%
0%
HMC+Kia
Toyota
Honda
Nissan
GM
Ford
VW
Others
Source: Automotive news
30,000
Sonata
20,000
GM
Ford
Toyota
Honda
HMC
Kia
Industry average
10,000
Sonata
Altima
Nov-12
May-12
Nov-11
Nov-10
Optima
Fusion
May-11
Nov-09
May-10
Nov-08
May-09
Nov-07
May-08
May-07
Nov-06
May-06
0
Nov-05
2013E
2012E
2011
2010
2008
2007
2006
2005
2004
2009
Honda
Ford
US: incentive per car by major brands
40,000
May-05
Toyota
GM
Source: Automotive news, Daiwa forecasts
(units)
50,000
Source: Automotive news
2003
HMC/Kia
Nissan
US: mid-sized sedan sales
Passat
Camry
2002
2000
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
0%
2001
10%
Accord
Source: Autodata
- 44 -
2007
2,926
4,001
1,086
1,158
1,817
2,561
2,640
2008
3,287
3,879
1,391
1,248
2,194
2,864
2,792
2009
3,590
2,751
1,579
1,486
2,506
3,446
2,776
2010
3,393
2,914
2,042
2,072
1,649
2,136
2,718
2011 Mar 12 Apr 12 May 12
3,223 3,266 3,164 3,369
2,691 2,790 2,420 2,616
1,987 1,723 1,688 1,944
2,123 2,220 2,486 2,353
1,005
843
907
914
1,540 1,715 1,729 1,666
2,520 2,547 2,428 2,545
Lost & Found
26 June 2012
US: new-model launch schedule by automakers
(’000 vehicles)
GM
PV
Light trucks
Ford
PV
Est
SOP
2012 models
New model
Chevrolet Aveo（Small）
Buick Verano (Small)
Regal GS (Small)
New model
Ford Focus (Small)
Lincoln C Car (Small)
1Q11
2012
volumes
(E)
120
60
30
30
New
model
(M/S) 2013 models
7% New model
Chevrolet Spark (Small)
260
240
20
15%
0
0%
Light trucks
Chrysler
PV
New model
Toyota
PV
New model
Yaris (Small)
Scion iQ (Small)
Camry (Middle)
Prius V (HEV)
Lexus GS (Luxury)
Prius c (Small)
620
80
30
390
50
20
50
35%
4Q11
4Q11
3Q11
4Q11
1Q12
1Q12
Honda
PV
New model
Acura ILX (Luxury)
240
20
14%
2Q12
Light trucks
CR-V (CUV)
Acura RDX (CUV)
New model
Versa (Small)
Light trucks
Nissan
PV
1Q12
2Q12
3Q11
200
20
70
70
4Q11
5
5
50
50
Light trucks
Mitsubishi
PV
Subaru
PV
Light trucks
Mazda
PV
Light trucks
Hyundai/Kia
PV
New model
i-MiEV (EV)
New model
Impreza (Small)
New model
50
CX-5 (CUV)
New model
Accent (Small)
Veloster (Small)
Kia Rio (Small)
1Q12
3Q11
3Q11
2Q11
50
100
50
30
20
1Q12
110
5
5
100
Light trucks
BMW
PV
New model
Active E (EV)
Mini Roadster
3 Series (Luxury)
Light trucks
Daimler
PV
Light trucks
Volkswagen
PV
New model
SLS E-cell (EV)
SL (Specialty)
GL (CUV)
New model
Beetle (Speciality)
Passat (Middle)
Audi E-Tron (EV)
3Q11
Light trucks
35
5
10
20
80
30
50
0
Chevrolet Malibu（Middle）
Buick Encore (Small)
Cadillac XTS (Luxury)
Cadillac ATS (Luxury)
GMC Granite (MPV)
New model
Ford Fusion (Middle)
Lincoln MKZ (Middle)
Ford Electric Focus (EV)
Ford C-Max (VAN)
Ford Escape (CUV)
New model
Chrysler Compact Sedan (Small)
Dodge Viper (Sport)
New model
Lexus ES (Luxury)
Lexus IS (Luxury)
Plug-in Prius (PHEV)
Scion xD (Small)
FR-S (Specialty)
Avalon (Large)
RAV-4 (CUV)
RAV-4 EV (CUV)
New model
Accord (Middle)
Fit EV (EV)
Acura TL (Luxury)
Acura MDX (CUV)
4% New model
Altima (Middle)
Sentra (Small)
Infiniti JX (CUV)
Pathfinder (SUV)
NV200 (Van)
0% New model
Mirage (Small)
3% New model
BRZ (Specialty)
Forester (CUV)
3% New model
Mazda6 (Middle)
6% New model
Azera (Middle)
Fuel-Cell EV
Kia Forte (Small)
Kia Cadenza (Middle)
Kia Rondo (CUV)
Santa Fe (CUV)
6% New model
1 Series (Luxury)
Megacity vehicle (EV)
X5 (CUV)
X1 (CUV)
2% New model
5% New model
Audi Q7 (Luxury)
Source: Automotive news, Daiwa estimates
- 45 -
2013
volumes
(E)
310
30
200
20
20
20
20
325
130
30
5
20
140
55
50
5
400
70
50
5
30
20
80
140
5
525
420
5
50
50
New
model
(M/S)
12%
520
270
100
30
70
50
20%
1%
1Q13
20
20
80
10
70
60
60
220
20
8%
2Q12
Est
SOP
3Q12
4Q12
2Q12
3Q12
3Q12
1Q13
2Q12
4Q12
3Q12
4Q12
80
20
20
80
65
10
5
12%
2%
15%
20%
3%
2%
2%
30
20
0
0%
20
1%
20
Lost & Found
26 June 2012
Appendix: global auto-stock valuation
Automakers globally: valuation data
Bloomberg
code
Curr.
Company
US
FORD
F US
GM
GM US
Europe
DAIMLER
DAI GR
BMW
BMW GR
VW
VOW GR
Japan
HONDA
7267 JP
NISSAN
7201 JP
TOYOTA
7203 JP
China
SAIC
600104 CH
DONGFENG* 489 HK
GUANGZHOU* 2238 HK
Korea
HYUNDAI*
005380 KS
KIA*
000270 KS
Industry average
Share
Price
Market cap Absolute (%)
(US$m)
1M 3M
Daiwa
Rating
**Relative
(%)
1M 3M
EV/
PBR (x) EBITDA (x)
12E 13E 12E 13E
PER (x)
12E 13E
P/CF (x)
12E 13E
Div. yield
(%)
12E 13E
ROE (%)
12E 13E
OPM (%)
12E 13E
US$
US$
10.2
20.6
Outperform
Outperform
38,889
32,257
0.0 (17.3) (1.4) (13.1)
(4.2) (17.8) (5.6) (13.6)
6.9
6.0
6.0
4.5
2.0
0.9
1.6
0.7
9.2
1.9
8.0
1.7
4.7
4.7
3.7 37.9 35.8
3.6 21.4 21.8
2.0
0.1
2.3
0.0
€
€
€
34.7
56.3
115.6
Not rated
Not rated
Not rated
46,305
44,824
68,414
(9.0) (22.5) (5.3) (11.2)
(11.2) (16.9) (7.4) (5.6)
(6.9) (5.2) (3.1) 6.1
6.6
7.0
5.3
5.8
6.8
4.9
0.9
1.2
0.8
0.8
1.1
0.7
7.4
7.0
6.1
6.6
6.7
5.6
4.0
4.1
2.9
3.6 13.7 14.5
3.9 18.3 16.6
2.6 16.1 15.8
6.3
4.8
3.4
7.0 7.9 8.7
5.2 11.0 10.8
4.1 6.6 7.4
¥
¥
¥
2,661
728
3,080
Buy
Buy
Outperform
60,208
41,108
132,649
4.8 (16.3) 1.6 (3.7) 9.5
(3.6) (14.9) (6.8) (2.3) 7.3
0.5 (11.1) (2.7) 1.5 11.6
7.9
5.7
9.5
1.0
0.9
0.9
0.9 8.6
0.8 5.5
0.8 10.1
7.6
4.5
8.7
6.1
3.9
6.2
5.3 11.0 12.1
3.3 12.7 14.7
5.5 7.7 8.9
3.1
3.7
2.1
3.8
4.8
2.6
14.2
Not rated
12.3 Outperform
6.5 Underperform
24,634
13,613
6,884
(3.7) (0.1) 1.0 5.2
(1.8) (8.2) (2.7) 0.3
0.5 (15.3) (0.5) (6.7)
6.9
7.5
7.5
6.1
6.5
6.4
1.3
1.6
1.1
1.1
1.3
1.0
3.4
2.5
6.3
3.0 4.9 3.8 18.9 18.2
1.9 4.5 4.5 23.2 21.8
5.8 (5.6) (3.9) 15.0 15.8
2.4
1.7
1.9
4.0 8.8 8.8
1.7 10.3 10.3
2.3 (5.6) (8.4)
45,691
26,970
44,804
3.4 7.1 3.4 17.1
1.2 7.4 1.1 17.3
(2.3) (10.1) (2.2) (0.7)
6.9
5.8
7.3
6.2
5.0
6.2
1.1
1.7
1.2
0.9
1.6
1.0
6.6
5.2
6.1
5.9 14.6
4.4 8.6
5.4 4.9
0.7
0.9
2.6
0.8 11.1 11.5
1.0 9.6 9.6
3.0 6.8 7.0
Rmb
HK$
HK$
W 241,000
W 77,300
Buy
Buy
8.4 22.3 21.1
7.9 33.8 32.8
4.0 19.4 19.2
5.5
3.9
6.5
6.9
5.3
Source: Bloomberg, *Daiwa forecasts
Note: 1) Share prices are as of 25 June 2012, except for the US and Europe automakers (as of 22 June 2012).
Note: 2) **Relative to each country index
Automakers globally: PBR and ROE (2012E)
(PBR, 2012E, X)
2.0
1.8
Overvalued
Kia
1.6
Dongfeng
1.4
SAIC
1.2
Guangzhou
Honda
1.0
BMW
Undervalued
HMC
Toyota
Nissan
0.8
Daimler
VW
0.6
5.0
10.0
15.0
20.0
25.0
(ROE, 2012E, %)
- 46 -
30.0
35.0
40.0
6.2
5.0
7.3
7.8
6.1
Lost & Found
26 June 2012
HMC: share prices and Daiwa recommendation trends
Date
Target price
Rating
20/06/2012
330,000
1
09/04/2012
330,000
1
22/12/2011
300,000
1
28/07/2011
330,000
1
360,000
26/04/2011
300,000
1
15/11/2010
230,000
2
330,000
330,000
19/10/2010
200,000
2
330,000
300,000
300,000
300,000
270,000
230,000
240,000
200,000
210,000
180,000
150,000
120,000
90,000
60,000
30,000
Target price (W)
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
0
Closing price (W)
Source: Daiwa
Kia: share prices and Daiwa recommendation trends
Date
Target price
Rating
20/06/2012
100,000
1
27/04/2012
96,000
1
09/04/2012
93,000
1
27/01/2012
81,000
1
22/12/2011
90,000
1
05/09/2011
100,000
1
29/07/2011
100,000
2
20/06/2012
100,000
1
Date
Target price
Rating
26/04/2011
95,000
2
28/03/2011
78,000
2
06/01/2011
66,000
2
15/11/2010
58,000
2
29/10/2010
52,000
2
25/10/2010
47,000
2
24/09/2010
41,000
2
23/07/2010
37,000
2
120,000
100,000
95,000
100,000
81,000
78,000
80,000
100,000
96,000
93,000
90,000
66,000
60,000
41,000
37,000
40,000
58,000
52,000
47,000
20,000
Target price (W)
Source: Daiwa
- 47 -
Closing price (W)
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
0
Lost & Found
26 June 2012
Daiwa’s Asia Pacific Research Directory
HONG KONG
Nagahisa MIYABE
Regional Research Head
SOUTH KOREA
(852) 2848 4971
[email protected]
Chang H LEE
(82) 2 787 9177
[email protected]
Head of Korea Research; Strategy; Banking/Finance
Christopher LOBELLO
(852) 2848 4916
Regional Research Co-head
[email protected]
Sung Yop CHUNG
(82) 2 787 9157
[email protected]
Pan-Asia Co-head/Regional Head of Automobiles and Components; Automobiles; Shipbuilding; Steel
John HETHERINGTON
(852) 2773 8787
Head of Product Management
[email protected]
Anderson CHA
Banking/Finance
(82) 2 787 9185
[email protected]
Tathagata Guha ROY
(852) 2773 8731
[email protected]
Head of Thematic Research; Product Management
Mike OH
(82) 2 787 9179
Capital Goods (Construction and Machinery)
[email protected]
Mingchun SUN
(852) 2773 8751
[email protected]
Head of China Research; Chief Economist (Regional)
Sang Hee PARK
Consumer/Retail
[email protected]
Dave DAI
(852) 2848 4068 [email protected]
Deputy Head of Hong Kong and China Research; Pan-Asia/Regional Head of Clean
Energy and Utilities; Utilities; Power Equipment; Renewables (Hong Kong, China)
Jae H LEE
(82) 2 787 9173
[email protected]
IT/Electronics (Tech Hardware and Memory Chips)
Kevin LAI
Deputy Head of Regional Economics; Macro Economics (Regional)
Jihye CHOI
(82) 2 787 9121
Materials (Chemicals); Oil and Gas
[email protected]
Chi SUN
(852) 2848 4427
Macro Economics (China)
Thomas Y KWON
[email protected]
[email protected]
(82) 2 787 9181
Pan-Asia Head of Internet & Telecommunications; Software (Korea) – Internet/On-line Game
Jonas KAN
Head of Hong Kong Research; Head of Hong Kong and China Property; Regional
Property Coordinator; Property Developers (Hong Kong)
Jeff CHUNG
(852) 2773 8783
Automobiles and Components (China)
(82) 2 787 9165
Shannen PARK
Custom Products Group
(82) 2 787 9184
[email protected]
[email protected]
TAIWAN
Grace WU
(852) 2532 4383
[email protected]
Head of Greater China FIG; Banking (Hong Kong, China)
Jerry YANG
(852) 2773 8842
[email protected]
Banking/Diversified Financials (Taiwan)
Yoshihiko KAWASHIMA
(886) 2 8758 6247 [email protected]
Consumer/Retail
Christine WANG
IT/Technology Hardware (Communications Equipment); Software; Small/Medium Caps
Queenie POON
(852) 2532 4381
Banking (Hong Kong, China)
Alex CHANG
IT/Technology Hardware (Handsets and Components)
[email protected]
Joseph HO
Capital Goods –Electronics Equipments and Machinery (Hong Kong, China)
Chris LIN
(886) 2 8758 6251
IT/Technology Hardware (PC Hardware - Panels)
Bing Zhou
(852) 2773 8782
Consumer/Retail (Hong Kong, China)
INDIA
[email protected]
[email protected]
Hongxia ZHU
Consumer, Pharmaceuticals and Healthcare (China)
Punit SRIVASTAVA
(91) 22 6622 1013
Head of Research; Strategy; Banking/Finance
[email protected]
Alicia HU
(852) 2532 4180
Internet (Hong Kong, China)
Rajiv PATHAK
Banking/Finance
(91) 22 6622 1086
[email protected]
Eric CHEN
(852) 2773 8702
[email protected]
Pan-Asia/Regional Head of IT/Electronics; Semiconductor/IC Design (Regional)
Saurabh MEHTA
Capital Goods; Utilities
(91) 22 6622 1009
[email protected]
Alexander LATZER
Pan-Asia/Regional Head of Materials; Materials/Energy (Regional)
Percy PANTHAKI
FMCG; Consumer
(91) 22 6622 1063
[email protected]
Felix LAM
Materials (China)
[email protected]
Deepak PODDAR
Materials
(91) 22 6622 1016
[email protected]
[email protected]
Nirmal RAGHAVAN
Oil and Gas; Utilities
(91) 22 6622 1018
[email protected]
(852) 2532 4341
Alex YE
(852) 2848 4471
Property (Hong Kong, China)
[email protected]
Mark CHANG
(852) 2773 8729
[email protected]
Regional Head of Small/Medium Cap; Small/Medium Cap (Regional)
SINGAPORE
John CHOI
(852) 2773 8730
Small/Medium Cap (Regional)
[email protected]
Tony DARWELL
(65) 6321 3050
[email protected]
Head of Singapore Research, Pan-Asia Head of Property
Cris XU
(852) 2773 8736
Small/Medium Cap (Regional)
[email protected]
Josh CHERIAN
Quantitative Research
(65) 6499 6549
[email protected]
Pranab Kumar SARMAH
Head of Solar
[email protected]
Suzanne HO
Quantitative Research
(65) 6499 6545
[email protected]
Kelvin LAU
(852) 2848 4467
[email protected]
Transportation – Aviation, Land and Transportation Infrastructure (Regional)
Srikanth VADLAMANI
Banking (ASEAN)
(65) 6499 6570
[email protected]
Justin LAU
(852) 2773 8741
[email protected]
Head of Custom Products Group; Custom Products Group
Adrian LOH
(65) 6499 6548
[email protected]
Regional Head of Oil and Gas; Oil and Gas (ASEAN and China); Capital Goods (Singapore)
Philip LO
(852) 2773 8714
[email protected]
David LUM
Property and REITs
Jibo MA
(852) 2848 4489
[email protected]
Ramakrishna MARUVADA
(65) 6499 6543
[email protected]
Head of ASEAN & India Telecommunications; Telecommunications (ASEAN & India)
(852) 2848 4441
PHILIPPINES
Rommel RODRIGO
(63) 2 813 7344
[email protected]
ext 302
Head of Philippines Research; Strategy; Capital Goods; Materials
Alvin AROGO
(63) 2 813 7344
[email protected]
ext 301
Economy; Consumer; Power and Utilities; Transportation – Aviation
Danielo PICACHE
(63) 2 813 7344
ext 293
Property; Banking; Transportation – Port
[email protected]
- 48 -
(65) 6329 2102
[email protected]
Lost & Found
26 June 2012
Daiwa’s Office
Office / Branch / Affiliate
Address
Tel
Fax
DAIWA SECURITIES GROUP INC
HEAD OFFICE
Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6753 (81) 3 5555 3111
(81) 3 5555 0661
Daiwa Securities Trust Company
One Evertrust Plaza, Jersey City, NJ 07302, U.S.A.
(1) 201 333 7300
(1) 201 333 7726
Daiwa Securities Trust and Banking (Europe) PLC (Head Office)
5 King William Street, London EC4N 7JB, United Kingdom
(44) 207 320 8000 (44) 207 410 0129
Daiwa Europe Trustees (Ireland) Ltd
Level 3, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland
(353) 1 603 9900
Daiwa Capital Markets America Inc
Financial Square, 32 Old Slip, New York, NY10005, U.S.A.
(1) 212 612 7000
(1) 212 612 7100
Daiwa Capital Markets America Inc. San Francisco Branch
555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A.
(1) 415 955 8100
(1) 415 956 1935
Daiwa Capital Markets Europe Limited
5 King William Street, London EC4N 7AX, United Kingdom
(44) 20 7597 8000 (44) 20 7597 8600
Daiwa Capital Markets Europe Limited, Frankfurt Branch
Trianon Building, Mainzer Landstrasse 16, 60325 Frankfurt am Main,
Federal Republic of Germany
(49) 69 717 080
Daiwa Capital Markets Europe Limited, Paris Representative Office
36, rue de Naples, 75008 Paris, France
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Japan
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Korea
The developing analyst of this research and analysis material hereby states and confirms that the contents of this material correctly reflect the analyst’s views and opinions and that the analyst
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Name of Analyst : Sung Yop Chung
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If an analyst engaging in or a person who exercises influences on the preparation or publication of a Research Report containing recommendations for general investors to trade financial
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regard to:
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2.
3.
The equity, the equity-linked bonds and the instruments with the subscription right to the equity issued by the legal entity covered in the Research Report (or the legal entity subject to the
investment recommendations);
The stock option granted by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); or
The equity futures, the equity options and the equity-linked warrants backed by the equity prescribed in the preceding Paragraph 1 as the underlying assets.
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Daiwa Securities Korea hereby states and confirms that Daiwa Securities Korea has no conflicts of interests with the legal entity covered in this Research Report:
1.
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In that Daiwa Securities Korea does NOT offer direct or indirect payment guarantee for the legal entity by means of, for instance, guarantee, endorsement, provision of collaterals or the
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In that, although Daiwa Securities Korea offers advisory services for the legal entity with regard to an M&A deal, the size of the M&A deal does NOT exceed five-hundredths (or 5/100) of
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The following explains the rating system in the report as compared to KOSPI, based on the beliefs of the author(s) of this report.
"1": the security could outperform the KOSPI by more than 15% over the next six months.
"2": the security is expected to outperform the KOSPI by 5-15% over the next six months.
"3": the security is expected to perform within 5% of the KOSPI (better or worse) over the next six months.
"4": the security is expected to underperform the KOSPI by 5-15% over the next six months.
"5": the security could underperform the KOSPI by more than 15% over the next six months.
“Positive” means that the analyst expects the sector to outperform the KOSPI over the next six months.
“Neutral” means that the analyst expects the sector to be in-line with the KOSPI over the next six months
“Negative” means that the analyst expects the sector to underperform the KOSPI over the next six months
Additional information may be available upon request.
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Singapore Limited in respect of any matter arising from or in connection with the research.
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Investment Banking Relationships
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DCMA Market Making
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- 51 -
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26 June 2012
Research Analyst Conflicts
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the past 12 months except as noted: no exceptions.
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individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.
The following explains the rating system in the report as compared to relevant local indices, based on the beliefs of the author of the report.
"1": the security could outperform the local index by more than 15% over the next six months.
"2": the security is expected to outperform the local index by 5-15% over the next six months.
"3": the security is expected to perform within 5% of the local index (better or worse) over the next six months.
"4": the security is expected to underperform the local index by 5-15% over the next six months.
"5": the security could underperform the local index by more than 15% over the next six months.
Additional information may be available upon request.
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If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the
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• For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the
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When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions
regarding the signing of the agreement with us.
Corporate Name: Daiwa Securities Co. Ltd.
Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108
Memberships:
Japan Securities Dealers Association, The Financial Futures Association of Japan
Japan Securities Investment Advisers Association
Type II Financial Instruments Firms Association

Pedal to the metal in the Deep South

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