Vehicle makers' shares are boosted by leap in mainland sales

But as sector's stocks continue their rally, manufacturers and analysts say timing of the Lunar New Year is likely to hit figures this month

PUBLISHED : Saturday, 16 February, 2013, 12:00am
UPDATED : Saturday, 16 February, 2013, 4:13am

Vehicle makers' stocks continued to rally yesterday, with electric-car manufacturer BYD closing above HK$30 for the first time in 21 months after robust sales on the mainland last month.

However, carmakers and analysts said year-on-year sales would drop this month as the Lunar New Year holiday, when most showrooms are closed for days, occurred in February this year, while last year it was in January.

The vehicle sector, led by the mainland carmakers Geely and BYD, has outperformed the Hong Kong stock market since it resumed trading on Thursday.

Boosted by a year-on-year jump of 46.4 per cent in mainland vehicle sales last month, BYD, Geely Auto, Dongfeng Motor, Great Wall Motor and Brilliance Auto closed between 1.3 per cent and 7.7 per cent higher yesterday, against a rise of just 0.13 per cent in the Hang Seng Index.

But stocks like BYD, which closed 7.2 per cent higher at HK$32.10 yesterday, may have topped out for the moment. BYD's share price has more than doubled since it fell below HK$13 last July.

Huang Leping, an analyst from Nomura International, said the stock had already had risen above his target price of HK$30. "Its fundamentals remain strong and we believe an improvement in its solar business and new car launches would bring a strong turnaround in its earnings this year," Huang said.

The firm expected BYD's net profit to jump more than 30 times year on year to 1.27 billion yuan (HK$1.57 billion) this year.

BYD, which is backed by American billionaire Warren Buffett, warned of a 97 per cent loss of earnings for the 2012 financial year but saw vehicle sales jump 85 per cent to 55,800 units last month after a good market response to its new products, including the Su Rui and L3 saloon cars. The company will launch a luxury sport-utility vehicle later this year.

The share price of Geely Auto, which saw record year-on-year sales growth of 67 per cent in January, closed 7.66 per cent higher at HK$4.64 yesterday.

The CASH financial services group said in a report that Geely's SUV products, such as the GX7 and SX7, would help drive the company's overall growth, despite strong competition from foreign brands. Xinhua reported last week that Geely would begin selling vehicles in Russia, Kazakhstan and the European Union this year.

Almost all carmakers with a presence in the mainland reported good sales last month, including Japanese manufacturers, which saw a turnaround in sales for the first time since a territorial dispute between Beijing and Tokyo affected sales over the four months from August.