Quarterly Strategy Report: Focus on Passenger Cars and Horizontal Expansion Automotive Parts Companies

In 2011, the auto market started flat. In the first two months of 2011, China achieved a total of 3.5155 million vehicle sales, an increase of 9.71% year-on-year. The overall auto market remained flat and the growth rate slowed down initially. The performance of narrow passenger vehicles is still better than that of the overall market. Cross-type passenger vehicles have a negative growth. Commercial vehicles, with the exception of light passengers, have generally performed generally. Auto exports have gradually returned to normal.

The auto market will enter the adjusted year in 2011. In 2011, the annual sales of automobiles will exceed 20 million units, an increase of 12.6% year-on-year. The growth of narrow-minded passenger vehicles is worry-free. The adjustment of cross-type passenger vehicles is inevitable. The long-term value of heavy trucks will be upgraded, and the school buses will be the future of large and medium-sized passenger vehicles. The growth of light passengers caters to the current trend of refinement of urban functions;

Passenger vehicles continued to increase holdings in the second quarter and commercial vehicles were neutral. The growth of passenger cars in the second quarter did not change fundamentally. Prices also tended to be stable, and the probability of a price war was not high, so the original rating of holdings was maintained. The slowdown in investment and exports was expected to impact commercial vehicle sales. Give a neutral rating;

It is recommended to focus on passenger cars and horizontal expansion automotive parts companies. Passenger vehicle listed companies still have certain valuation advantages. Relative to their long-term growth prospects, current prices have a considerable margin of safety. Auto parts companies want to outperform the overall market and can only rely on horizontal expansion;

Passenger vehicle listed companies are advised to focus on Shanghai Automotive, Huayu Automotive and Fuyao Glass, and horizontal expansion auto parts companies are advised to focus on Songzi shares.