SAIC Motor attended our Access China conference on 10 January. The followingare the key takeaways from investor meetings:- SAIC expects China passenger vehicle (PV) sales volume to grow by about 3-4%YoY in 2018 and commercial vehicle (CV) to decline by 6-8% YoY. In total, Chinavehicle sales volume will grow 2-3% YoY in 2018. The company thinks ASP willcontinue to go up given mix improvement. - SAIC expects the SUV segment to remain the growth driver and will make uphalf of total PV sales in the next 2-3 years. To benefit from the faster growth, thecompany will launch more SUVs in FY18E, and expects SUV to account for atleast 30% of its total sales. Meanwhile, management thinks price competition inthe SUV segment will intensify, especially for low-end SUVs. - SAIC sold 60k new energy vehicles (NEV) in 2017 and target to double that thisyear. To support this goal, the company will launch 7 NEV models, 4 of which willbe pure electric cars and 3 will be plug-in hybrids. SAIC will continue to be a localbrand leader in NEV technologies, such as for the battery management system,and will implement a flexible strategy in R&D while complying to the nationalstandard. Going forward, the company will also widen its battery supplier base. - SAIC is one of the biggest auto financing groups in China. By 2020E, itsauto financing business will probably contribute c. RMB6.5bn net profit (FY16:RMB3bn). The company's auto finance business is mainly operated by twosubsidiaries, namely the 100%-owned SAIC Finance and the SAIC GMAC JV. Thetotal loan balance at yearend 2017 is c. RMB200bn. - SAIC sold 520k local brand vehicles and expects to sell 650k-700k units in2018. The gross profit margin of the local brand is around 20%. Excluding R&D,operating profit improved in 9M17. The company expects profitability to continueto improve going forward. Deutsche Bank view. In 2017, SAIC achieved 6.8% YoY vehicle sales growth. Going forward, weexpect SAIC Motor's sales momentum to be sustained with further product miximprovement. On a high base, we envision a stable earnings growth trajectory forthe company, which should support its generous dividend payout. We maintain Hold on SAIC Motor because we think the current valuation is fair. Key downsiderisks include: 1) a weak reception for its new models from various SAIC brands;2) pricing pressure amid industry competition; and 3) worse-than- expected localbrand profitability. Key upside risks include: 1) better-than- expected sales volumeand pricing; and 2) better-than-expected local brand profitability.

Yutong sold 67,568 units of buses in 2017 (-5% YoY), including c.25k units ofnew energy (NEV) buses. Among the total NEV bus sales volume, c.90% waspublic buses. According to Yutong, it recorded over 10% YoY NEV bus volumegrowth in 4Q17. However, pricing has been trending lower in 4Q17. Management expects the company to achieve a 27-28% market share in NEVbus market in 2017 (33% in total bus market including conventional buses), aslight YoY increase with industry NEV bus sales declining more than 10% YoY. For 2018E, the company believes it will continue to outgrow the overall marketand remains positive on NEV bus sales in 1Q18 given the delay of the subsidy cut. The company will strive to maintain the relatively stable profitability of its NEVbuses and expects to partially mitigate the negative impact from the reduced NEVbus subsidy through raising net-subsidy selling price and supplier cost reduction(i.e. battery cost). Management comments that about 60% of the public transportation bus soldin 2017 were NEV buses. Despite the cuts in NEV bus subsidy in 2018-20, thecompany believes that the public transportation field would still be government’smain focus to promote the country’s vehicle electrification in future. Yutong believes the recently announced new subsidy policy provides greatopportunities to industry leaders with advanced technology, such as Yutong, tofurther gain market share in the NEV bus market. It has been investing in NEVfield for many years already and its NEV products offer better user experience andlower full life cycle maintenance costs compared to competitors. Deutsche Bank view - maintain Buy on increasing contribution from NEV bus. Despite the impact on margin due to possibly lower subsidies in 2018, we believethat major NEV makers such as Yutong can probably mitigate this in the long runby lowering production costs (e.g. battery and scale effects). Maintain Buy givenour optimism on Yutong's increasing profit contribution from NEV bus segment. Our target price is based on 14x FY18E P/E (unchanged), c.30% above Yutong's mid-cycle P/E of 11x to reflect our optimism on increasing profit contribution fromthe new energy bus. Key downside risks include: 1) unexpected changes in theChinese government's new energy bus subsidy policy; 2) weaker-than-expectednew energy bus demand; and 3) market share loss in new energy buses.

Mild profit growth with SG&A cost control offsetting weak margin 3Q17revenue grew 9.3% YoY to RMB6.3bn. However, gross profit declined 20.5%YoY to RMB0.9bn in 3Q17with 5.6ppt YoY gross margin deterioration due toincreasing revenue contribution from lower margin segments such as BMS andADAS (auto safety and interconnection system). Together with 1) 17.2% YoY dropin SG&A expenses (SG&A ratio declining to 11.1% of revenue in 3Q17vs. 14.6% in3Q16) and 2) one-off disposal gain of the remaining stake in industrial automationbusiness, but partially offset by 43.1% YoY increase in finance cost, 3Q17netprofit increased by 71.1% YoY to RMB271.1m. On a 9M17basis, Joyson's netprofit of RMB886.7m was up 1.2x YoY and accounted for 78% of our previousfull-year FY17earnings forecasts and 75% of Bloomberg consensus. Therefore,we consider the results slightly above our expectation. Deutsche Bank view - auto safety and ADAS gaining momentum Joyson is on track to consolidate the KSS and PCC businesses acquired last year.According to the company, the two segments further recorded new contract winsfor active safety products and interconnection system. We raise our FY17-19Erevenue by 2.7-3.0% and net profit by 2.8-4.0% to reflect stronger revenue growthfrom new businesses and lower SG&A cost ratio, partly offset by lower grossmargin assumptions. Maintain Buy on our optimistic view for the growth potentialof KSS in active safety and ADAS market in China. Our TP is set at 30x FY18E P/E(from 27x, given the sector re-rating over the past few months), ~15% below itsmid-cycle P/E of 36x. This is justified, in our view, since we expect the companyto deliver a 37.5% EPS CAGR in FY16-19E. Key downside risks: 1) weaker-thanexpectedauto sales; 2) failure to consolidate KSS/TS or improve profitability; 3)future capital raising to fund potential acquisitions.

48% profit growth amid improvement in passenger yield. Spring reported 3Q17 gross revenue growth of 28.9% YoY to RMB3.6bn on theback of 15.0% passenger traffic (RPK) YoY growth and passenger yield recovery,in our opinion. Meanwhile, operating expenses increased at a slower pace of27.0% YoY due mainly to an increase in capacity (ASK), higher fuel cost andtake-off/landing fees post CAAC price reform in April, according to the company. Together with 1) 22bps drop in SG&A to revenue ratio; 2) flattish net finance costand 3) limited investment loss (3Q16: RMB23.2m investment loss), the airlinerecorded a 36.6% YoY increase in operating profit to RMB696.9m. Helped byRMB195.0m non-operating income (+22.6% YoY) mainly from local airports routesubsidies, the airline’s 3Q17 net profit grew by 47.6% YoY to RMB633.9m. Ona 9M17 basis, Spring's unaudited reported net profit increased by 1.6% YoY toRMB1.2bn. Deutsche Bank view – yield recovery on track; maintain Buy. As Spring’s 9M17 profit accounted for 117% of our full-year earnings estimate and107% of consensus, we consider the results beat our expectation. Even though4Q is usually a slow season for Chinese airlines, we see upside risk to our fullyear forecast, due to a decent yield trend and recovery in the international loadfactor. In September, Spring recorded 10.3% YoY passenger traffic (RPK) growth,driven by 18.2% YoY growth in domestic passenger traffic but 3.0% YoY declinein international traffic. Passenger load factor improved 0.4ppt YoY to 89.6% inSeptember with international load factor recording YoY improvement (+2.9ppt to85.2%) for the first time since February. We maintain Buy as we expect the airline’s yield to bottom in FY17 with the loadfactor staying at c.92%. Our TP is based on 3.5x average FY18E P/BV, c.30%below Spring’s average P/BV of 5.0x since listing. We believe this is justifiedvs. sustainable ROE of about 15-16%. Key downside risks: excessive capacityaddition; competition from regional LCCs and Chinese airlines; and slower-thanexpecteddemand growth.

13% YoY earnings growth with flat margin despite SG&A expense expansion 3Q17gross revenue edged up by 12.1% YoY to RMB35.4bn. The revenue growthwas likely driven by production growth and new model launches from key OEMcustomers and good momentum on overseas business. Meanwhile, Huayu’s3Q17gross profit grew 12.4% YoY to RMB4.7bn with a mild 6bps YoY gross profitmargin expansion. Together with 10.3% YoY growth in profit contribution from itsJVs/associates, but partially offset by 18.8% YoY jump in SG&A expenses, 3Q17net profit increased by 12.9% YoY to RMB1.6bn. On a 9M17basis, Huayu’s netprofit of RMB4.8bn was up 7.8% YoY and accounted for 72% of our previousfull-year FY17earnings forecasts of RMB6.7bn (73% of Bloomberg consensus).Therefore, we consider the results in line with our expectation. Deutsche Bank view – favorable outlook intact with attractive valuation We raise our FY17E revenue by 1.5% to reflect slightly better-than-expected 3Q17revenue growth. However, with lower margin assumptions, we adjust down ourFY17E earnings forecasts by 0.7%. For FY18-19E, we increase revenue forecast by9.0-9.3% and net profit by 0.6-2.1% to factor in the impact from recent acquisitionof the remaining 50% stake in Shanghai Koito auto lamp JV. Our TP is based on 12x FY18E P/E (from 10.5x, given the sector re-rating over thepast few months), in-line with Huayu’s mid-cycle P/E of 12x. This is justified aswe expect Huayu to deliver a 12.8% FY16-19E three-year net profit CAGR. Theexpanding overseas sales of interior trim subsidiary Yanfeng and acquisition ofauto lamp business should provide an additional growth driver. Maintain Buy onattractive FY18E P/E of 11.3x and 4.8% dividend yield. Key downside risks: weakerauto sales and unexpected increase in raw material prices.

1H17not a surprise; 35% net profit decline on 27% sales volume drop Yutong Bus reported 34.8% YoY 1H17net profit decline to RMB805.1m. Thecompany’s 1H17revenue decreased by 29.8% YoY to RMB9.3bn on the back of26.7% YoY decrease in bus sales volume to 21,828units. Yutong’s 1H17net profitaccounted for 20% of our original FY17earnings forecasts and 21% of consensus.Although the result is lower than Yutong’s recent year performance (1H16netprofit accounted for 31% of FY16profit and 1H1527% of FY15), we believe itbrings no surprises to the market given weak 1H17NEV bus sales. Due to the product mix shift with decline in sales contribution from new energybuses and partially offset by reduction in procurement costs, in our view, grossprofit margin contracted merely by 26bps YoY to 24.2% in 1H17. Meanwhile,operating profit margin narrowed by 2.1ppt YoY on 1.9ppt YoY expansion in SG&Aexpenses ratio. With a 55.7% decline in non-operating income, partially mitigated by 1)RMB39.5m gain on a change in fair value (vs. loss of RMB44.8m in 1H16) mainlyfrom financial assets; 2) RMB75.0m investment gain (up 1.7x YoY) due to highercontribution from JV/associates; and 3) 72.5% YoY decline in impairment loss onassets, 1H17net profit margin decreased 67bps to 8.6%. On a quarterly basis, Yutong’s 2Q17revenue declined 33.1% YoY but improved40.7% QoQ to RMB5.4bn. Gross profit margin remained flattish YoY and expanded1.6ppt QoQ to 24.8%. 2Q17net profit dropped 42.9% YoY but increased 54.6%QoQ to RMB488.8m. Deutsche Bank view – new energy bus demand to recover; maintain Buy We cut our FY17-19E revenue estimates by 8.9-13.6% and net profit by13.1-14.5% mainly on reduced NEV bus sales forecast. Meanwhile, we forecaststable NEV gross margins for Yutong going forward, on cost reduction andbetter mix mitigating cuts in subsidies, leading to consistent c.60% gross profitcontribution from the NEV bus business. We believe the NEV bus demand will continue to recover on the clarificationof some local government subsidy and new subsidy eligibility list. MaintainBuy given our optimism on Yutong's increasing profit contribution from NEVbus segment. Target price is based on 14x FY18E P/E (rolled forward from 14xFY17E P/E), c.30% above Yutong's mid-cycle P/E of 11x to reflect our optimismon increasing profit contribution from the new energy bus. Key downside risksinclude: 1) unexpected changes in the Chinese government's new energy bussubsidy policy; 2) weaker-than-expected new energy bus demand; and 3) marketshare loss in new energy buses.

44% profit growth on strong demand from local brand customers。 Tuopu released its 1H17results after market close. The company’s 1H17grossrevenue edged up by 40.1% YoY to RMB2.3bn, achieving 46% of our originalFY17E revenue forecast. The revenue growth was mainly driven by strong ordersfrom local brands OEM customers, such as Geely, SAIC Roewe, and GACTrumpchi, according to the company. By product, revenue for shock absorber anddecorative parts increased by 20.0%/71.0% YoY to RMB1.0bn/1.1bn, respectively.1H17gross profit grew 34.4% YoY to RMB683.1m with 1.2ppt YoY grossprofit margin contraction mainly due to product mix deterioration with lesscontribution from shock absorber and intelligent braking segments. Gross marginfor shock absorber and decorative parts remained flat, improving 9/90bps YoY to35.0%/25.4%, respectively.。 Together with a slower-than-revenue growth in SG&A expenses (+25.6% YoY)and 1.1x YoY jump in other income, 1H17net profit increased by 44.1% YoY toRMB387.0m, achieving 52% of our original FY17E profit estimate and 48% ofconsensus.。 On a quarterly basis, 2Q17revenue increased by 33.3% YoY (flattish QoQ) toRMB1.2bn. Gross margin deteriorated 1.8ppt YoY (27bps QoQ) to 29.1%. 2Q17net profit increased by 50.0% YoY (24.2% QoQ) to RMB214.4m.。 Deutsche Bank view – sales momentum to remain robust; Buy。 We raise our FY17-19E revenue by 1.4-1.9% and FY17E net profit estimate by5.7% to reflect increase in government subsidy in 1H17, partly offset by weakergross margin. However, our FY18-19E earnings forecast is revised down by1.4-2.2% mainly due to more conservative gross margin assumptions. Our targetprice is set at a target 26x FY18E P/E (unchanged), on par with its mid-cycle P/E of 28x. This is justified, in our view, considering we expect the company todeliver a 23.5% three-year earnings CAGR in FY16-19E and reflects our optimisticview on the growth potential of Intelligent Braking System (IBS) and ElectricVacuum Pump (EVP) products. Key downside risks: weaker-than-expected autosales volume; failure to record new order awards for IBS/EVP products; any marketshare loss at Tuopu's key customers; and unexpected increase in raw materialprices.。

6% profit growth on 12% revenue and 17% JV contribution YoY Huayu released 1H17results after market close on 24August. The company’s1H17gross revenue edged up by 11.5% YoY to RMB68.4bn, achieving 51% ofour FY17E revenue forecast. The revenue growth was likely driven by growthand new model launches from key OEM customers and good momentum onoverseas business, according to the company. Meanwhile, Huayu’s 1H17gross profit grew 12.7% YoY to RMB9.4bn with 15.2bps YoY gross profitmargin improvement. Together with 17.4% YoY growth in profit contributionfrom its JVs/associates, but partially offset by 16.5% YoY jump in SG&Aexpenses, 1H17net profit increased by 5.5% YoY to RMB3.2bn, achieving 45%of our FY17E profit estimate and 49% of consensus. On a quarterly basis, 2Q17revenue increased by 24.5% YoY to RMB36.8bnand JVs/associates income grew by 33.9% YoY to RMB1.1bn. Offset by 24.5%YoY growth in SG&A expenses due to increasing overseas sales, 2Q17netprofit increased by 11.8% YoY to RMB1.8bn. Deutsche Bank view – attractive valuation with expanding overseas sales We raise our FY17-19E revenue by 2.1-6.2% to reflect slightly better-thanexpected1H17revenue growth. However, with lower margin assumptions andJV earnings contribution, we adjust down our FY17-19E earnings forecasts by2.5-6.1%. Our TP is based on 10.5x FY18E P/E (unchanged), about 10% belowHuayu’s mid-cycle P/E of 12x. This is justified, in our view, as we expect Huayuto deliver a 12.0% FY16-19E three-year net profit CAGR. We think that theexpanding overseas sales of its interior trim subsidiary Yanfeng should providean additional growth driver. Maintain Buy on attractive FY18E P/E of 9.2x and5.8% dividend yield. Key downside risks: weaker auto sales; inability to acquirenew customers; and unexpected increase in raw material prices.

Stronger revenue offset weaker margins 1H17revenue expanded 1.2x YoY to RMB13.1bn, driven by RMB8.5bncontribution from full-period KSS/PCC consolidation (65% of revenue) but partlyoffset by 7.3% YoY drop in HMI segment due to sales decline at one major OEMcustomer. Meanwhile, gross profit grew 93.3% YoY to RMB2.3bn in 1H17with2.5ppt YoY gross margin deterioration. The margin contraction was mainly due to1.8ppt YoY margin dip from HMI and 0.6ppt drop from KSS. Together with 1.1xYoY jump in SG&A expenses and 53.0% YoY increase in finance cost, but partiallyoffset by RMB320.3m one-off disposal gain (before-tax) of industrial automationbusiness, 1H17net profit increased by 1.5x YoY to RMB615.6m (62% of FY17DBeand 53% of consensus). Excluding after-tax disposal gain of RMB220m, 1H17core net profit grew 61.5% YoY to RMB395.6m, with 1.1ppt deterioration in corenet margin. On a quarterly basis, 2Q17revenue was flattish QoQ (+73.0% YoY). Gross margindeteriorated 1.1ppt QoQ (2.3ppt YoY) to 17.4%. 2Q17net profit increased by96.1% QoQ (2.3x YoY) to RMB407.7m. Deutsche Bank view - consolidation of KSS on track; maintaining Buy With the sequential recovery in gross margin of auto safety segment (1H1717.5%vs. 2H1614.7%), Joyson is on track to consolidate KSS albeit at a slower-thanexpectedpace. The segment recorded USD1.3bn new contract wins in 1H17,including USD130m for active safety. Maintain Buy on our optimistic view on thegrowth potential of KSS in active safety and ADAS, a market in China that weestimate could grow to c.USD11bn by 2020. We raise our FY17-19E revenue by 1.4-8.9% to reflect stronger revenue growthand FY17E net profit by 13.8% to include the one-off gain from disposal ofindustrial automation business. Our FY18-19E net profit estimates are revisedup by only 0.8-3.4% to factor in lower margins. We expect Joyson to deliver27.7% FY16-19revenue CAGR, driven mainly by KSS acquisition. Our TP is setat 27x FY18E P/E (unchanged), 25% below its mid-cycle P/E of 36x. This isjustified, in our view, since we expect the company to deliver a 36% EPS CAGRin FY16-19. Key downside risks include 1) weaker-than-expected auto sales; 2)failure to consolidate KSS/TS or improve profitability; 3) future capital raising tofund potential acquisitions.

Yield bottomed out in 2Q17; 25% 1H17profit decline due to increase in cost Spring reported 1H17gross revenue growth of 28.1% YoY to RMB5.1bn on theback of 29.1% passenger traffic (RPK) growth, while passenger yield remainflattish. However, operating expenses increased 42.4% YoY mainly due to 1)higher fuel cost amid rising fuel price; 2) increasing marketing and advertisingexpenses; and 3) higher staff wages, according to the company. Together with1) RMB1.1m investment income (vs. investment loss in 1H16) and 2)RMB655.1m non-operating income (+8.6% YoY) mainly from route subsidies,the airline’s 1H17net profit declined by 25.2% YoY to RMB554.0m. On a quarterly basis, 2Q17gross revenue grew 33.8% YoY to RMB2.5bn on32.0% YoY RPK increase and with encouraging sign of yield recovery of c.1%YoY during the quarter. However, with 42.8% YoY jump in operating expensesand 15.2% YoY decline in non-operating income, 2Q17net profit dropped32.9% YoY to RMB250.7m. Deutsche Bank view – worst is behind; pax yield to pick up in 3Q17E As Spring’s 1H17profit accounted for 55% of our full-year earnings estimateand 48% of consensus, we consider the results in-line. We maintain Buy as weexpect the airline’s yield to bottom out in 3Q17with load factor staying atc.90%. We believe Spring Airlines will be a key beneficiary of China’s LCCdevelopment, which is still in its infancy stage at the moment with only 9%penetration. Our target price is set at a target 3.5x FY18E P/BV (unchanged).We believe this is justified vs. sustainable ROE of about 15-16%. Downsiderisks include 1) excessive new capacity on international routes, 2) slower-thanexpecteddemand growth in the North Asia and ASEAN routes, and 3)competition in domestic and regional routes.

Yield: Spring attributes the passenger yield recovery mainly to yieldmanagement, especially on routes with high load factor, but less to ticketpricing increase. Management commented that yields in tier-1cities suchas Shanghai and Shenzhen recovered by double-digit in 1H17.。 Load Factor: The 1.2ppt YoY drop in load factor in 1H17was due tonew domestic flights started during the period. However, load factor onnew routes recorded sequential improvement, according to the airline. Inaddition, the company is confident to maintain load factor at over 90%level.。 Capacity: Spring recorded 31% YoY ASK growth in 1H17on the back ofadditional 7aircrafts. Domestic ASK expanded (+44% YoY) faster thaninternational ASK (+11% YoY). The airline plans to add another 4aircrafts(1self-owned; 3under operating lease) in 2H17E and 10fleets (operatinglease) in 2018E to maintain an annual ASK growth of c.15-20%.。 Domestic ASK: Domestic ASK accounts for 66% of total ASK in 1H17,an increase vs. 60% a year ago. According to management, most ofthe additional capacity was added in tier-2cities such as Shenyang,Shijiazhuang, Yangzhou, Ningbo and Harbin, while ASK growth inShanghai and Shenzhen remained muted given limited slots availability.。 International ASK: Most of the incremental international ASK was addedto Thailand market, which recovered faster than they expected despiteload factor staying low. For international routes, Spring cut somedomestic departure airports from 28to 20by the end of first-half, whilemaintained the number of international destinations unchanged at 19.。 Cost control: Spring attributes the 42% YoY increase in operatingexpenses to faster growth in fuel cost and take-off/landing charge.Although the fuel price is likely to stay high, the company aims toreduce its cost base in 2H17E by optimizing aircraft utilization, fuel savingmeasures and operating efficiency.。

HMI electronics to sustain growth; KSS acquisition for active safety initiatives Successful M&As transformed local supplier into global auto electronics player Since 2009, Ningbo Joyson has committed to a series of acquisitions which have transformed its business mix away from functional parts to higher growth areas in safety equipment and Human-Machine Interaction (HMI) products. Over 70% of revenue is derived from these deals and this will continue to generate the major share of future earnings growth. Key Safety Systems (KSS), the fourth ranked global airbag manufacturer is the most important addition and will drive our forecast of 34% EPS CAGR for 2016-19E. Integration has been successful to date and opens up new potential markets in ADAS and safety products. We initiate coverage with a BUY rating. Successful M&As transformed local supplier into global auto electronics player Five acquisitions with a c.Rmb11bn investment have materially altered the group’s scale and business mix. Revenue this year will be nearly four times the scale of 2014. Business lines now include, connectivity, automatic safety, power controls for new energy vehicles and HMI. Consolidation of these assets has been successful - for example, after acquiring Preh, net margin improved from 1% to 5+% through penetration into China and reductions in sourcing and production costs. Funding has been largely completed after a Rmb8.3bn issue in 2016 and the balance sheet gearing will be under 20% by end 2017. Autonomous driving the next driver, with new products in active safety We expect Joyson to will deliver 24% FY16-19 revenue CAGR, driven mainly by the consolidation of KSS and an 18% CAGR from HMI. EPS after dilution is expected to more than double by 2019. In addition, KSS and TechniSat will allow the company to explore opportunities in auto safety and ADAS, a market in China that could grow to c.USD11bn by 2020. Initiating with a Buy rating and target price set at 27x FY18E P/E; risks Our target price (TP) of RMB35.0 is set at 27.0x FY18E P/E. We expect Joyson to deliver a 34% FY16-19 EPS CAGR driven by robust growth at Preh and the consolidation of KSS, with a margin improvement. Key downside risks: weaker-than-expected auto sales; failure to consolidate KSS/TS; future capital raising to fund potential M&As; unexpected increase in raw material prices. (See page 4-5 for detail)

Shock and noise absorber leader tapping ADAS through intelligent braking Market leader in vibration absorber and acoustic insulation, with robust outlook Tuopu is a leader in China’s Noise, Vibration and Harshness (NVH) market and a main supplier to Geely. New initiatives in ADAS/autonomous driving will start to feature from 2018, with Intelligent Braking System (IBS) products currently at the testing stage with JV OEMs. This diversification will be funded with RMB2.4bn from a private placement to build capacity and mass production will begin in late 2018. We estimate it should deliver a 24% FY16-19E net profit CAGR, driven by robust growth in NVH and IBS/Electric Vacuum Pump (EVP) projects in FY19E. We initiate with a Buy and target price of RMB35.4. Market leader in vibration absorber and acoustic insulation, with robust outlook Tuopu ranks No. 1 in rubber shock absorbers and No.6 in acoustic insulation products in terms of market share. Geely was its largest customer in FY16, contributing c.20% of revenue, followed by SAIC GM. We expect Tuopu to benefit from the rapid growth momentum at Geely, with its popular Boyue, GS and GL models. We expect NVH parts to remain Tuopu’s major revenue contributor and forecast a 24% FY16-19E revenue CAGR with stable margins, on a robust outlook for NVH products. New initiatives in autonomous driving to support long-term growth Active safety has been increasingly included in new car safety assessments, including C-NCAP, and automatic braking is an essential active safety feature. The investment in IBS, a market previously dominated by Bosch, opens the door for Tuopu to this and other ADAS functions. It is currently testing its IBS products with some JV OEMs and after completing an RMB2.4bn private placement in May to expand its production capacity, Tuopu will be the first domestic supplier to produce IBS, starting late 2018. Initiating with Buy and target price set at 26x FY18E P/E; risks Our TP of RMB35.4 is set at a target 26.0x FY18E P/E, at par with the historical average. We expect Tuopu to deliver a 24% FY16-19E profit CAGR, driven by robust growth in NVH products and a stable margin outlook. Key downside risks: failure to record new order awards for IBS/EVP products; weaker-than-expected auto sales and unexpected increases in raw material prices.

17% profit decline mainly due to increase in cost base. Spring reported 1Q17 gross revenue growth of 23.1% YoY to RMB2.6bn on the back of 26.4% passenger traffic (RPK) growth, but partially offset by weak passenger yield, in our opinion. However, operating expenses increased 42.0% YoY on due to higher fuel cost, staff wage and increased agent commission fees, according to the company. Together with 26.7% YoY growth in net finance cost (which we believe was possibly due to increase in interest expense from enlarged loan for aircraft purchase) and a RMB0.6m investment income (1Q16: RMB23.8m investment loss), it recorded a 52.1% YoY drop in operating profit to RMB198.6m. Helped by RMB288.5m non-operating income (+69.0% YoY) mainly from local airports route subsidies, the airline’s 1Q17 net profit declined by 17.3% YoY to RMB303.3m. Deutsche Bank view - we expect yield to bottom in FY17. As Spring’s 1Q17 profit accounted for 24% of our full-year earnings estimate and 27% of consensus, we consider the results a small miss. We reduce our FY17-19E revenue by 1.4-2.2% to factor in lower yield growth. As a result, we cut our FY17-19E net profit by 8.0-12.2% due mainly to higher cost and lower margin assumptions. While we acknowledge the recent share price volatility given market concern on weak passenger yield for Korea and Thailand markets, we maintain Buy as we expect the airline’s yield to bottom in FY17 with load factor staying at c.92%. Our new TP is based on 3.5x average FY17/18E P/BV (from 4.0x FY17E P/BV on reduced ROE forecast), c.30% below Spring’s average P/BV of 5.3x since listing. We believe this is justified vs. sustainable ROE of about 14-15%. Key downside risks: excessive capacity addition; competition from regional LCCs and Chinese airlines; and slower-than-expected demand growth.

Gross margin expansion and stronger JVs income offset SG&A increase. Huayu released its 1Q17results after market close today. The company’s 1Q17gross revenue rose by 7.1% YoY to RMB34.0bn, slightly faster than passengervehicle (PV) production volume growth of 6.8% YoY in China during the period.Meanwhile, Huayu’s 1Q17gross profit grew 15.1% YoY to RMB4.8bn with1.0ppt YoY gross profit margin improvement driven by improving efficiencyand good momentum on overseas business, according to the company.Together with 1) 22.5% YoY growth in profit contribution from JVs/associates; 2) RMB41.6m of finance income in 1Q17vs. RMB15.3m finance cost in 1Q16; and 3) a lower effective tax rate, but partly offset by 1) 25.6% YoY increase inSG&A expenses and 2) 40.4% YoY decrease in non-operating income, 1Q17net profit increased 7.1% YoY to RMB1.5bn with flattish net profit margin.DB view – 1Q17profit in-line; maintain Buy on valuation and attractive yield. As Huayu’s 1Q17net profit accounted for 22% of our FY17E earnings forecastand 24% of consensus, we consider the results largely in-line. Our target priceis set at 10x FY17E P/E (unchanged), about 15% below Huayu’s mid-cycle P/Eof 12x. This is justified, in our view, as we expect Huayu to deliver 11.0%three-year net profit CAGR in FY16-19E. We think that the stable sales growthoutlook at SAIC (600104.SS, CNY27.25, Hold) would continue to ensure a solidrevenue source for Huayu. The expanding Yanfeng’s overseas sales shouldalso provide an additional growth driver. We maintain our Buy rating givenattractive FY17E P/E valuation of 9.5x. Key downside risks are weaker-thanexpectedauto sales volume, an inability to acquire new customers, marketshare loss, and an unexpected increase in raw material prices.