NEW YORK, April 9 /PRNewswire-Asia/ --
Brean Murray, Carret & Co. (BMC) yesterday launched research coverage of the China auto parts industry. In the report, Senior Analyst Fawne Jiang notes that the company has a favorable view on the China auto industry, and believes that it is well positioned to benefit from multiple positive secular trends: strong GDP growth, continued infrastructure build-out, increased penetration of private ownership, improving personal income, and urbanization. BMC picks in the space include SORL Auto Parts (SORL), Wonder Auto Technology (WATG), and China Automotive Systems (CAAS).
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"The long rally in 2009 presents challenges for investors to outperform in 2010. Given BMC's research driven platform we are committed to help investors find investment ideas with the best fundamentals and attractive valuations and this roll-out is a prime example. Ms. Jiang's research offers insight in one of the most booming industries in China," stated David A. Dunn, Head of Capital Markets.
In 2009 China laid claim to the world's largest auto market, with record-high production and sales. Brean Murray, Carret's research indicates that the industry could deliver sustainable growth with an average rate in the range of 10-15% over the next five years. In particular, the company is encouraged by the strong growth potential of China's top auto parts suppliers given their competitive cost structures and improving R&D capabilities.
"Auto parts suppliers should benefit from increased local access as foreign OEMs shift manufacturing to China and domestic OEMs grow organically as well as through acquiring foreign firms. By sourcing from top OEMs, we expect top auto part suppliers to deliver growth that outperforms the auto industry as a whole. Investors who want to participate in China's booming industrial growth and increasing consumer spending will find attractive investment opportunities here," stated Fawne Jiang.
BMC is initiating coverage of SORL Auto Parts with a Buy, assuming coverage of Wonder Auto Technology with a Buy, and initiating coverage of China Automotive Systems with a Hold rating. These companies were picked because they posses market leading positions in their respective niche segments, deep-rooted OEM relationships, strong R&D capabilities, and capabilities to be the industry consolidators.
- SORL (Buy - Top Pick): Most overlooked and undervalued. With exclusive
exposure to the commercial vehicle segment to date, SORL has largely been
overlooked by the market. In BMC's view, the segment in general and heavy
trucks in particular (SORL's major end market) is set to ride the upward
economic cycle. Furthermore, multiple initiatives in place bode well for the
long-term growth.
- Wonder Auto Technology Group (Buy): Growth propelled by strong execution;
valuation is still attractive. Wonder Auto is an industry consolidator with a
proven track record. While competing in a highly fragmented market, the
company has been able to defend and increase its market share through its
strong execution.
- China Automotive Systems (Hold): Most balanced platform; constructive on the
fundamentals, but wait for a better entry point. China Automotive Systems
manufactures safety-related components with established OEM relationships in
both the passenger and commercial vehicle segments, a well balanced business
platform. In BMC's view, while CAAS is expected to continue to outperform
the industry, valuation is appropriate at the current level.
Fawne Jiang covers Chinese companies in the consumer and industrial sectors for Brean Murray, Carret & Co. She joined the company in January 2010 and has been covering US-listed China ADRs since 2008.
About Brean Murray, Carret & Co.:
Brean Murray, Carret & Co. is a research-driven investment bank and asset management firm, dedicated to Small and Midcap growth companies and their investors. BMC focuses on delivering high quality investment ideas and investment banking services to institutional and corporate clients in the following 5 verticals: Consumer Products and Retailing, Healthcare, Natural Resources, Technology and private/publicly traded Chinese Companies. Services include equity research, investment banking, institutional sales and trading, and asset management.
Headquartered in New York City, the company also maintains offices in Boston, Chicago, San Francisco and Beijing, China. In addition, the company is well known for its sector specific investment conferences. For more information on the company, please visit http://www.breanmurraycarret.com .
