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Great Business And Cheap Stock Price (Great Wall Motor HKG:2333)

  • Target price: hk$10, now hk$6.9
  • Business and its moat

GWM is a leading SUV manufacturer,whose main market is in China, taking about 10% of SUV market. The top model is H6, which was sold 56k in Oct. and about 430k totally til Oct. this year, growing at 48%. But the total viechle sold til Oct. is 794k (667k last year) growing at 19%.
Large scale production of Good Value-price products
great management

  • Management

Founder Jianjun Wei, who holds 56% of the shares. In his early days, he successful developed and marketing UTE and Haval SUV, and had several failed cases.

  • Earning capability: From 2011-2015; Net income:3b to 8b; Cash from op: 4b to 10b; sales from 30b to 76b; Net Profit margin is 10%+, which is very healthy; Besides, no share diluted.
    Depreciation 1.97b (1.67b in 2015)
    Cap Exp: 5.8B (7.22B in 2015)
    It may be acceptable considering the fast growing business.
  • P/E: 6.1, (toyota is 9.2; Geely is 22)
  • Valuable Assets

In FR 2015, The equity was 71.9b; total liability was 33.5b. among liability, there were 31.7b is current liability, which include a/p 21b, and prepaid 4.9b, salary and tax payable about 2.5b.

  • Almost no debt.
  • Dividends: Usually 30% pay out

So, the dividend in 2015 is 0.27 rmb = 0.336 hk$. Dividend yield about 4.8%.

  • Competitors: Car manufacturers. Geely, Dongfeng motor, BYD, changan motor
  • Industry and environment

Government may cancel the tax cut policy for new car purchasing in the end of the year.

  • Weak and risk:
    Focus too much on SUV.
    Arguably solo successful product.
    The SUV market will be increasly competitive.
  • Data

Disclosure: I am/we are long HKG:2333.