Dongfeng Motor's loss in 2012 is inevitable

The 2012 third quarterly report released by Dongfeng Motor Co., Ltd. recently showed that in the first three quarters, the company achieved operating revenue of 13.974 billion yuan, a year-on-year decrease of 13.27%; and a net profit of 0.18 billion yuan, a decrease of 94.16% year-on-year; diluted EPS was 0.01 yuan.

Cummins’ investment income contribution declined. Dongfeng Motor holds a 50% stake in Dongfeng Cummins. Affected by the continued downturn in the heavy truck industry, the sales of Dongfeng Cummins engines in the first three quarters fell by 30.46% year-on-year, and the number of vehicles completed was 124,900. This also contributed to the decline in the contribution of investment income over the same period. In the first three quarters, the company’s investment income was 231 million yuan, a year-on-year decrease of 44.43%, which was an important reason for the declining performance of the company.

Affected by the incident, the production and sales of Zhengzhou's Nissan dropped sharply. Zhengzhou Nissan is a subsidiary of Dongfeng Motor, holding 51% of the shares. It is the main development base for Dongfeng and Nissan dual-brand light commercial vehicles. The products include Nissan pickups and Paladin SUVs. Affected by the incident, the sales of Zhengzhou Nissan-related Nissan models were damaged. In the first half of the year, the overall sales volume of SUVs, MPVs, and pickup trucks of Dongfeng Motor also increased slightly. However, in the first three quarters, this growth rate had already dropped to 8.23%, which means that the sales volume in the third quarter decreased by 26.26% year-on-year. This is another important reason for the declining performance in the third quarter.

The overall performance of the light truck business was weak. Relative to the overall market situation, the company's light truck business performance was weak. Sales volume has been declining year-on-year since the beginning of this year, with the largest decline rate reaching 30%. From January to September, cumulative sales of light trucks have dropped by 17.03% year-on-year, which is a decrease of more than 5.62% of the industry as a whole. On the one hand, this is related to the overall downturn in the light-duty truck industry. On the other hand, the slower adjustment of the company's product structure and the delay in the launch of new products are also important factors.

Due to the combined effect of the decline in sales volume of Dongfeng Cummins, Zhengzhou Nissan and the headquarters, the company is expected to lose money this year. It is expected that the 2012-2013 EPS of the company will be -0.02 yuan and 0.13 yuan, respectively, and the price-earnings ratio corresponding to the closing price of 2.98 yuan on October 30 will be -183.56 times and 23.24 times respectively, and the company will give the "wait and see" rating for the first time.