Brilliance China Automotive November Sales: A Brilliant Month

| About: Brilliance China (BCAUY)
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BCA reported November shipments at +44% y/y driven by BMW sales.

5-Series extends steady growth, while X1 and 3-series are seeing demand pick up.

7.5x FY15E P/E is the lowest in the sector.


Brilliance China Automotive (OTCPK:BCAUY) reported its November wholesale data with shipments up a whopping +44%. Retail sales of locally produced BMW saw +48% y/y growth in shipments. Clearly, everyone in China wants a BMW. BCA's November shipments data is consistent with that reported by Tata Motors (NYSE:TTM) on the demand of its JLR units in China (See: Tata Motor 2Q15 Review: Sprint Like A Jaguar).

5-Series demand continues to be strong, but most importantly the 3-Series and the X1 compact SUV are seeing stronger demand as middle class individuals with more disposable income are buying into entry-level luxury models, which should continue to support the growth within the luxury segment. Finally, incentives remain low on the models, which bodes well for pricing power. I reiterate my overweight position on BCA.


5-Series remains the bread and butter. 5-Series volume grew +32% y/y to 11.8k units and accounted for just under half of the total volume. YTD volumes was up +13% y/y driven by solid new and replacement demand from Tier 1 and upper Tier 2 cities. The 5-series remains the popular brand among the newly rich and the entrepreneurs in China, and I expect the demand to remain sustainable heading into the Chinese New Year.

Entry-level models seeing strong momentum. The entry-level 3-series and X1 compact SUV continue to see strong demand from first-time luxury car buyers. The demand for X1 compact SUVs is consistent with the read-through we have seen in the other domestic OEMs on car buyers' preference towards compact SUVs rather than the larger models due to parking space constraint and fuel efficiency concerns for urban settings. Moreover, the capacity expansion in Tianjin last year also allowed for higher sell-through. 3-Series volume was up +49% y/y to 7.6k units while the X1 volume was up +75% y/y to 4.4k units, highlighting the strong demand for compact sedans and SUVs.

Channel destocking remains. BMW branded vehicle delivery was up +12% y/y driven mostly by the locally made models (+48% y/y). Retail growth of +48% suggests that channel destocking remains, a trend that we have witnessed since August.


I continue to prefer BCA given the strong growth prospect of BMW in China and the sector low valuation of 7.5x FY15 P/E.

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