CLSA has issued a research report indicating that sales for major Chinese automotive OEMs continued to recover in June, supported by export growth, improving domestic demand, and a strong model cycle in the second quarter.
The firm maintains its "High Conviction Outperform" ratings on BYD COMPANY (ASX: 01211) and GEELY AUTO (ASX: 00175), with price targets of HK$130 and HK$30 respectively, identifying them as its top picks.
Sales for major mass-market OEMs increased by 5% month-on-month, but the gap between domestic and overseas sales widened, indicating a divergence in industry growth.
Export sales are growing faster than the domestic recovery, with some OEMs recording positive month-on-month export growth even as their domestic sales declined.
Despite rising cost inflation in the second quarter, CLSA views BYD COMPANY and GEELY AUTO as its preferred stocks due to their expanding overseas presence, technological moats, and product premiumization strategies, which are expected to effectively alleviate margin pressure.
BYD COMPANY sold 397,300 passenger vehicles in June, representing a 5% year-on-year increase and a 5% month-on-month increase.
Both export and domestic sales grew compared to the previous month, rising by 9% and 3% respectively.
GEELY AUTO sold 240,800 vehicles in June, a 2% year-on-year increase and a 1% month-on-month increase.
Benefiting from sales channel expansion and increased production capacity for new electric models, its exports reached 102,900 units, up 21% month-on-month, accounting for 43% of total sales.
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