High expectations for growth in the Chinese auto market have led to significant gains for Hong Kong-listed firms. A few notable names:
Brilliance China (1114.HK)
In addition to a joint-venture operation with BMW, Brilliance produces its own Zhonghua brand. The company’s unit sales have been boosted by the strong performance of its small Zhonghua Junjie FRV sedan. However, Brilliance faces serious balance sheet issues: It posted a loss of more than US$30 million in 2008, from a profit of US$40 million in 2007, and gross margins stand at 0.9%. Gerwin Ho, head of regional autos coverage at Citi in Hong Kong calls the company’s margins “horrific.” Investors don’t seem to mind: Brilliance share are up more than 53% this year.
The company shot to international prominence last September thanks to a US$230 million investment from Warren Buffett’s Berkshire Hathaway. BYD, originally a battery manufacturer, is placing its bets on hybrid and electric vehicle technology, but is also diversifying into other areas. A series of product introductions in the second half of 2009 will significantly broaden the company’s product range, and analysts expect growth. However, they also say the stock is overvalued, having risen 117% since January.
Dongfeng has done well through the success of its three joint ventures. Its JV with Nissan saw unit sales rise by 54% year-on-year in 2008, while sales in its JV with PSA rose 28%; Honda JV sales were up 11%. The company, a long-time maker of buses, trucks and other commercial vehicles, also introduced its own sedan, the Fengshen, in March. A healthy balance sheet has attracted investors, propelling its share price up more than 147% between January and mid-May.
Other Hong Kong-listed car firms:
Geely (0175.HK), Great Wall (2333.HK)