In September, Hongguang MINIEV, which squeezed out Tes model 3, brought a lot of auto stocks on fire. Among them, the Hong Kong stock Wuling Motor once soared over 60%.

    On October 15, the Hong Kong stock Wuling Motors (00305.HK) once soared over 60% in intraday trading, and finally closed up 42.42% to 0.47 Hong Kong dollars. The market value reached 1.445 billion Hong Kong dollars, and the intraday increase reached 430 million Hong Kong dollars.

    On the news, according to multiple media reports, the A00-class new energy vehicle Hongguang MINI EV launched by Wuling Hongguang became an explosive model as soon as it was launched. The sales volume exceeded 15,000 in 20 days, becoming the fastest new energy vehicle with a sales volume of 10,000. In the latest September new energy passenger car list released by the Passenger Association, SAIC-GM-Wuling's Hongguang MINI topped the list, with sales of 14,500 vehicles in September, surpassing the Tesla Model 3 in one fell swoop.

Hongguang MINI EV Picture source: official website of the car company

    However, Times Finance found that Hongguang MINI EV is a model produced by SAIC-GM-Wuling, a subsidiary of SAIC Group (600104.SH), a listed A-share company, and is not a product of Wuling Motors. In June, Wuling Motor's share price soared because of SAIC-GM-Wuling's Wuling glorious "floor car". Is this big rise another oolong?

    Isn't Hongguang MINI EV supplier who made the wrong bid again?

    Regarding the hot sales of Hongguang MINI EV, Huachuang Securities pointed out that the short- and medium-distance transportation just needs to add price advantage or the main reason. The big sale of Hongguang MINI EV has indeed driven the performance of its suppliers and stock prices soared.

    In response, SAIC-GM-Wuling said that Hongguang MINI EV has boosted the shipment volume and sales performance of related suppliers such as Ningbo Shuanglin and Guoxuan Hi-Tech, which has stimulated the industry chain economy.

    At the same time, Ningde Times, Penghui Energy, and Guoxuan Hi-Tech, as the power battery suppliers of Hongguang MINI EV, have increased their share prices by 22.36%, 14.31%, and 13.42% respectively in the past month.

    According to Caitong Securities, if the annual sales of Hongguang MINI EV gradually increase to 600,000 in the future, the annual revenue of supporting suppliers such as Founder Motor, Penghui Energy, Wanan Technology, and Yilida will increase by 30%-60%.

Image source: SAIC-GM-Wuling

    There is no doubt that with the big sales of Hongguang MINI EV, the performance of its supporting suppliers will also rise, and the expected performance growth can indeed help its suppliers enjoy the bonus of auto sales in the capital market.

    So, is Wuling Automobile a supplier of Hongguang MINI EV?

    According to the information, Wuling Automobile is mainly engaged in the manufacturing and sales of automobile engines, accessories and special vehicles, and SAIC-GM-Wuling is its affiliates and important customers.

    Times Finance found that SAIC-GM-Wuling and Hong Kong-owned Wuling Auto have the same shareholder, Guangxi Automobile Group Co., Ltd.

    Wind data shows that Guangxi Automobile holds 60% of the shares of Hong Kong stock Wuling Motors; and Tianyancha data shows that Guangxi Automobile directly holds 0.02% of SAIC-GM-Wuling shares, and indirectly holds 5.81% of SAIC-GM-Wuling through Liuzhou Mini Car Factory The accumulated shareholding is close to 6%.

    In response, Times Finance also interviewed SAIC-GM-Wuling, and its insiders responded that Wuling Motors belongs to Guangxi Automobile Group and is indeed one of its suppliers, but Wuling Motors did not supply parts to Hongguang MINI EV.

    From this point of view, Wuling Motors, which has soared under the influence of Hongguang’s MINI EV hot news, seems to have made another “Oolong” in the capital market.

    It is worth mentioning that at the beginning of June, Wuling Motors had soared due to the hot spot of the “street car”. The cumulative increase in three days was as high as 216.58%, and the market value soared by HK$1.325 billion. The manufacturer is also SAIC-GM-Wuling, not Wuling.

    Loss of nearly 200 million in the first half of the year, asset-liability ratio of 87%

    From the industry's point of view, Hongguang MINIEV's hot sales will have limited impact on Wuling Motor's stock price in the long run. From a fundamental point of view, the company's performance is not satisfactory.

    According to data from Wuling Automobile’s semi-annual report, in the first half of this year, Wuling Automobile’s total revenue was 5.709 billion yuan, down 7.11% year-on-year; gross profit was 250 million yuan, down 52.13% year-on-year; the loss attributable to company owners was 199 million yuan, year-on-year Tumbled 6429.64%.

    In terms of gross profit, Wuling Automobile's gross profit in the first half of the year was 250 million yuan, a year-on-year decrease of 52.13%; gross profit margin was 4.4%, a decrease of 4.1 percentage points from the same period in 2019.

    In response, Wuling Motors stated in the announcement that the significant decline in revenue from the group's auto parts and industrial services segment, coupled with the additional costs of the group's production facilities adopting and implementing necessary safety and health measures, has caused a decline in gross profit margin.

    In the first half of this year, Wuling's sales from SAIC-GM-Wuling accounted for 10.8%. According to the interim report, during the reporting period, Wuling Automobile’s sales to SAIC-GM-Wuling, its core customer, totaled approximately RMB 613 million, an increase of 66.2% from the same period in 2019. The main product sold was the NP18 engine used in the 1.8L vehicle.

    However, in the first half of the year, the brakes and chassis system components, seats, different types of plastic parts and stamping and welding parts sold by SAIC-GM-Wuling, as well as other auto parts, etc. all saw a significant decline. 3C parts (ie cylinders (Body, cylinder head and crankshaft parts) sales also declined.

    In terms of sales volume, in the first half of the year, Wuling Automobile’s total sales of special purpose vehicles remained at approximately 52,600 units, while sales in the same period of 2019 were 60,900 units, a year-on-year decrease of 13.62%; modified vehicles (trucks and passenger vehicles) are still the main vehicle sales of the group Contributors, sales of approximately 51,400 units, but a decrease of 12.58% from the 58800 units sold in the same period in 2019.

    In addition, in the first half of this year, Wuling Automobile's debt-to-asset ratio remained high, up 7.97 percentage points year-on-year to 87.31%. From 2017 to 2019, Wuling Automobile's debt-to-asset ratio was 78.75%, 81.12%, and 85.31%, respectively, and the debt ratio continued to rise.