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Asia’s Big Four: Hyundai and Nissan emerge as top picks on L-T industry positioning
Nissan, Hyundai: Best industry positioning
Asia’s Big Four —Toyota, Honda, Nissan and
Hyundai —will likely encounter differing fortunes
in the coming years. We expect Hyundai (CLBuy) and Nissan (Buy, added to CL) to continue
to make large strides, and they are the top
picks in our Asian autos coverage. Honda,
which emphasizes profit margin, is on track but
behind in emerging market growth strategy.
Whether sleeping giant Toyota can regain
momentum depends on the new model Corolla
which is due out in 2013 and its strategic
emerging market car.
Comparison: Hyundai margin sustainable?
Hyundai’s earnings growth has been astounding
since its margin reversed vs. the three Japanese
makers in 2008. The latter have faced a strong yen
and the earthquake, while Hyundai has (1) a weak
won, (2) market domination in Korea, (3) share
growth in the US, Japanese makers’ stronghold,
and (4) profit opportunities in emerging markets.
Nissan is the only one of the Japanese three to
emerge with many of the same characteristics as
Hyundai.
L-T industry positioning: The Two Asias
Our scorecard uses four factors—growth potential,
earnings potential, financial stability, and capacity
for dealing with CO2 regulation—to analyze
competitiveness.
In autos, there are two Asias: the DM Asia of
Japanese and Korean carmakers that compete on
the global stage, and the EM Asia of China/India,
whose companies compete on a local stage. Our
picks as global winners are Honda, Toyota,
Hyundai, and Nissan; as local winners: Maruti,
SAIC, Dongfeng. We think some local winners
have the potential to become global winners, if
they can address global shortcomings.
ROE/CROCI valuation highly explanatory
We have identified two valuation methods where
back tests suggest sustained favorable returns:
P/B-ROE correlation and EV/GCI-CROCI/WACC
correlation. Based on our FY2012 forecasts we
think Hyundai, Nissan, Honda, Dongfeng, SAIC,
Bajaj, and FHI are undervalued. Risks to our
ratings include oil prices and forex movements.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia’s Big Four: Hyundai and Nissan emerge as top picks on L-T industry positioning
Nissan, Hyundai: Best industry positioning
Asia’s Big Four —Toyota, Honda, Nissan and
Hyundai —will likely encounter differing fortunes
in the coming years. We expect Hyundai (CLBuy) and Nissan (Buy, added to CL) to continue
to make large strides, and they are the top
picks in our Asian autos coverage. Honda,
which emphasizes profit margin, is on track but
behind in emerging market growth strategy.
Whether sleeping giant Toyota can regain
momentum depends on the new model Corolla
which is due out in 2013 and its strategic
emerging market car.
Comparison: Hyundai margin sustainable?
Hyundai’s earnings growth has been astounding
since its margin reversed vs. the three Japanese
makers in 2008. The latter have faced a strong yen
and the earthquake, while Hyundai has (1) a weak
won, (2) market domination in Korea, (3) share
growth in the US, Japanese makers’ stronghold,
and (4) profit opportunities in emerging markets.
Nissan is the only one of the Japanese three to
emerge with many of the same characteristics as
Hyundai.
L-T industry positioning: The Two Asias
Our scorecard uses four factors—growth potential,
earnings potential, financial stability, and capacity
for dealing with CO2 regulation—to analyze
competitiveness.
In autos, there are two Asias: the DM Asia of
Japanese and Korean carmakers that compete on
the global stage, and the EM Asia of China/India,
whose companies compete on a local stage. Our
picks as global winners are Honda, Toyota,
Hyundai, and Nissan; as local winners: Maruti,
SAIC, Dongfeng. We think some local winners
have the potential to become global winners, if
they can address global shortcomings.
ROE/CROCI valuation highly explanatory
We have identified two valuation methods where
back tests suggest sustained favorable returns:
P/B-ROE correlation and EV/GCI-CROCI/WACC
correlation. Based on our FY2012 forecasts we
think Hyundai, Nissan, Honda, Dongfeng, SAIC,
Bajaj, and FHI are undervalued. Risks to our
ratings include oil prices and forex movements.
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