Yutong New Energy bus sales volume in December sales or over 1200 units


According to the 28 new energy demonstration cities promotion plans, we expect that the new energy bus market will reach 1.5-2 million units/year in 2014-15. If the second batch of new energy demonstration cities is approved, it may also bring about 0.5- An increase of 10,000 units/year. As the four ministries and commissions in mid-2014 will review the promotion of demonstration cities, we will judge that the next six months will be the peak of new energy bus procurement. It is expected that Yutong’s new energy sales in December will be more than 1,200 units, and sales may reach 4,000 units in the first half of next year. At the same time, the conventional subsidy policy for hybrid buses may be introduced soon. Yutong is the absolute leader in the conventional hybrid field (40% market share). If the subsidy amount can reach the level of 10-20 million, Yutong will benefit significantly. We believe that the performance of the Company's new energy business in 2014 is expected to exceed market expectations and the company's valuation is expected to increase to 15 times. At the same time, the injection of the Group's spare parts assets is expected to increase the company's 2014 earnings per share. We maintain our Buy rating and target price of $22.46.

The point of support rating

It is expected that Yutong’s new energy bus will enter the peak period of sales since December of this year. At present, the company has successively received orders for plug-in hybrid power outside the province. We believe that the volume of new energy buses will boost the company's profitability and valuation levels.

If the subsidy policies of conventional hybrid buses can be issued, the company is expected to achieve industrialization in this area with mature hybrid control technology.

The company received other receivables of RMB 800 million on November 27. Therefore, the company’s accrued provision for RMB 260 million in devaluation will be fully reversed in the fourth quarter. This matter will have an impact on the company’s fourth quarter results.

We expect the sales volume of the company is expected to reach 9,000-10,000 units in December, hitting a record high, increasing 22%-36% year-on-year. In the fourth quarter, sales of the company increased by about 30% year-on-year. Benefiting from this, the company's performance target for 2013 equity incentive plan is expected to be successfully achieved. Looking ahead to 2014, we expect the company's sales volume to reach 63,555 units, an increase of about 11% year-on-year.

The major risks faced by ratings

The domestic seating bus market continued to be lower than expected. The actual promotion of new energy buses is lower than expected.

Valuation

We estimate that the company's earnings per share for 2013-15 will be 1.29 yuan, 1.50 yuan and 1.84 yuan (without considering the impact of asset injection). The current stock price of the company corresponds to a 12x 2014 PER, and the valuation is not expensive. Maintain Buy rating and target price unchanged at $22.46.

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