Automotive industry: Continue to favor large and medium passenger cars, high-quality passenger cars and parts and components companies

The main points:

Investment options: In 2011, the automotive industry was clearly differentiated. Sales volume of SUVs, MPVs, Dazhong passengers and sedans continued to grow steadily throughout the year, while sales of heavy-duty trucks and light trucks related to investment fell sharply year-on-year. The performance of listed companies was significantly different. High-quality companies achieved decisive growth in 11 years, and the performance of trucks and parts companies related to heavy trucks fell to varying degrees. We maintain the view of the annual meeting that the 2012 division will remain the theme, continue to “keep” high-quality companies, and grasp “strong” cyclical companies at the point of time. High-quality companies (market share continues to increase, deterministic growth in performance) Investment characteristics gradually shift from Beta characteristics to Apha characteristics, continue to look good. Continue to choose high-quality companies: Yutong Bus, SAIC Group, and Huayu Automobile; grasp the strong cycle company rebound opportunity when the policy inflection point appears; the vehicle is still optimistic about Yutong Bus and SAIC Group; parts are optimistic: Huayu Automobile, Zhongding Shares, Jingfu Forging technology, if the policy is relaxed, it may consider heavy-duty rebound opportunities.

Continue to be optimistic about the large and medium-sized industry and leading companies. It is expected that the leading Yutong bus annual report performance will increase by more than 27%. Under the stimulation of school bus demand in 2012, it is expected that its performance growth will be the most deterministic. In 2011, the sales volume of large and medium-sized coaches was 159,900, a year-on-year increase of 11.6%, which was much higher than the overall sales growth of the auto industry. The leading company’s market share further increased. Yutong’s annual sales of Dazhong Passenger Bus reached 44,000, a year-on-year increase of 16.7%. The product mix continued to be optimized, and the volume of school bus orders increased in December to boost its performance contribution. It is expected that Yutong’s net profit for 2011 will increase by more than 27% year-on-year, and Jinlong Motor’s growth will be around 4% year-on-year. Continue to be optimistic about the needs of the large and medium-sized bus industry in 2012. School buses, buses and new energy buses are expected to be the new growth highlights for passenger cars in the 12 years. Continue to push the Yutong Bus, the leading company of large and medium passenger coaches.

Passenger car: It is expected that the growth rate of high-quality passenger cars and their parts and components companies in 2011 will far exceed the average growth rate of the industry, and it is expected that the 12-year differentiation will continue to strengthen and continue to be optimistic about SAIC Motor and Huayu Automotive. In 2011, the sales volume of sedan was 10.12 million, an increase of 6.62% year-on-year, while the self-owned brand sedan only achieved an increase of 0.5%, the market share decreased by 1.8 percentage points from the same period; the joint-venture brand sedan increased by 9.37% year-on-year, and the quality company SAIC Motor Corporation Shanghai General Motors Co., Ltd. Shanghai Volkswagen's sales increased by 18% and 16% respectively; SAIC Group, which is expected to perform well in the overall vehicle business, is expected to increase its net profit by 49% year-on-year in 2011. Yueda Investment's performance will be lower than the market due to partial asset accrual in the fourth quarter. It is expected that the full-year results will increase by about 40%. The annual performance of FAW Cars is far lower than expected due to the sharp decline in self-owned brand demand. It is expected that annual performance will decline by about 80%; About 22%, Zhongding shares increased by about 25% year-on-year, precision forging technology increased by about 25%.

Heavy trucks: Affected by the decline in industry demand throughout the year, it is expected that the annual performance of heavy truck-related listed companies will experience different levels of decline in performance. In 2011, the cumulative sales of heavy trucks reached 881,000, a year-on-year decrease of 13.4%, and sales of semi-trailer tractors fell by 27%. Affected by this, it is expected that Weichai Power's net profit will decline by around 13% in 2011, Foton Motors will decline by 17% year-on-year, China National Heavy Duty Truck Group will drop by about 35% year-on-year, and Weifu High-Tech will decline by around 6% year-on-year.