Q1-Q316 net profit was up 14.8% YoY, slightly miss our expectation In Q1-Q316, the company achieved revenue of Rmb53.6bn (up 11.4% YoY) and netprofit of Rmb7.74bn (up 14.8% YoY), accounting for 70% of our 2016 estimate andslightly missing our expectation. Gross margin came in at 17.2%, down 0.8ppt YoY,which we attribute to price cuts in some products and a higher weighting of low-endvehicle sales. In Q316, the company recorded revenue of Rmb17.8bn (up 18.3% YoY)and net profit of Rmb2.25bn (up 35.8% YoY). Investment income grew 16.7% YoY in 9M16 Investment income grew 16.7% YoY to Rmb7.57bn in 9M16, with investment incomeof Rmb2.36bn in Q316, up 55.3% YoY. Changan Ford's sales volume grew8.6%/33.7% YoY to 652,000/228,000 units in Q1-Q316. Proprietary brands' net profitdropped 33.5% YoY to Rmb170m, with a loss of Rmb110m in Q316, missing ourexpectation. We mainly attribute this to intensified competition in the proprietary brandindustry and competitors' promotions and price cuts in Q316, which caused an increasein selling expenses: selling expense ratio was 7.6% in Q316, growing substantiallycompared to 5.3% in Q216. We expect Changan Ford's Q416 sales to trend well Since the launch of face-lifted Kuga in the market in mid-September, Changan Ford'send-market inventory has been stabilizing at a low position. Kuga's main model isequipped with a 1.5T engine and is entitled to preferential vehicle purchase tax rate. We believe Changan Ford's sales volume will bottom out and is likely to reach ourestimate of 956,000 units in 2016 (+10% YoY). Valuation: maintain Buy rating, price target of Rmb19 Our price target of Rmb19 is based on 7.3x 2017E PE.

9M16 net profit +122%, in line with expectations. 9M16 revenue was Rmb3.4bn, up 128% YoY, and net profit (NP) was Rmb740m, up122% YoY, in the middle of the preannounced range (Rmb700-800m) and broadly inline with expectations. This included revenue of Rmb1.02bn in Q3, up 69% YoY butdown 16.5% QoQ, and net profit of Rmb200m, up 84% YoY but down 10% QoQ. We mainly attribute the QoQ earnings deterioration to: 1) a delayed rollout of thesubsidy policy leading to downstream automobile companies slowing their productionschedules for new-energy vehicles; and 2) higher expenses due to the Hefei phase IIIand Qingdao factories coming on stream. Better-than-expected GPM expansion but sharp rise in expense ratios. 9M16 gross margin was 48.1%, up 2.4ppt YoY, while Q3 gross margin was 49.1%, up5.3ppt YoY and 4.4ppt QoQ. The degree of improvement was bigger than weexpected. We think this was due to two factors: 1) capacity utilization rose due toincreased production levels; and 2) there was a major jump in raw material selfsufficiencyafter the company's cathode material production line started operation. Meanwhile, the administrative and selling expense ratio rose a sharp 4ppt to 21% in9M16, which we attribute to a substantial increase in R&D spending, staff salaries andprovisions for after-sale service costs following the launch of the new factories. Guiding for full-year NP growth of 75-105% YoY. In the Q3 report, the company disclosed full-year 2016 NP guidance of Rmb1-1.2bn,which would be a 75-105% YoY increase. Our full-year forecast of Rmb1.2bn is at theupper end of the company's guided range. Based on the midpoint of the range, Q4 netprofit could reach Rmb360m, up 42% YoY and 76% QoQ. Valuation: Maintain Buy rating, Rmb48 price target. Our Rmb48 price target is based on DCF (WACC 7.9%).

Q1-Q316 net profit fell 13.5% YoY. Q1-Q316 revenue was Rmb4.24bn, up 15.1% YoY, while net profit was Rmb324m,down 13.5% YoY, missing our expectation. Q3 revenue jumped 31.5% YoY toRmb1.76bn but net profit fell 2.4% YoY to Rmb130m. Disappointing revenue growth. We attribute the disappointing Q1-Q316 revenue growth to delayed deliveries todownstream customers amid delayed new-energy subsidy policies, resulting in arevenue contribution from the lithium battery business that was lower than weexpected. Q3 gross margin was 21.1%, down a slight 0.3ppt YoY, although down3.1ppts from H1 (24.1%). Greater product ASP declines than we expected, caused byincreased competition in the conventional start battery segment, were the main reasonfor the gross margin contraction. Q1-Q316 administrative expenses rose 25.2% toRmb160m, as operation of a lithium battery plant in August led to large upfrontexpenses, in our view. Standards to drive replacement of traditional batteries with stop-start batteries. We expect significant improvement in the penetration of stop-start systems in China inthe next five years, rising from 7% in 2014 to 60% in 2020E, due to increasinglystringent fuel consumption regulations. In our view, under the pressure of phase IV fuelconsumption standards, auto companies will have no choice but to replace traditionalbatteries with stop-start batteries, which should give the company a tailwind for anextended time. Valuation: Maintain Buy; price target of Rmb22. Our DCF-based price target assumes WACC of 7.3% and implies 19.5x 2017E PE.

9M16 net profit +22% YoY, in line with expectations 9M16 net profit was Rmb2.28bn (UBS-Se: Rmb2.4bn), +22% YoY and broadly in linewith expectations. This included Q3 net profit of Rmb1.04bn, +13% YoY. 9M16revenue was Rmb21.7bn, +15% YoY, with ASP reaching Rmb457k, +6.8% YoY, drivenmainly by product mix upgrades. 9M16 gross margin reached 25.7%, +1.8ppt YoY,and the overall expense ratio came to roughly 12.7%, +0.9ppt YoY. In addition, thecompany recorded a sharp rise in impairment losses, to Rmb210m (9M15: -Rmb3.56m),which we mainly attribute to a sizeable increase in accounts receivable. GPM kept improving on product mix upgrades; accounts receivable stayed high 9M16 gross profit margin (GPM) was 25.7%, +1.8ppt YoY, and Q3 GPM was 27%,+2.5ppt YoY, with both figures reaching historical highs. We believe this was largelydriven by product mix upgrades due to robust sales of new-energy buses (new-energybus sales reached 27% of overall sales in 9M16 vs. 23% in 9M15). Meanwhile, thecompany's accounts receivable climbed further, reaching Rmb12.9bn, or 59% ofrevenue, as of end-Q3 (beginning of year: Rmb9.9bn; end-Q2: Rmb11.2bn), mainly dueto national subsidies held in arrears. Sales of new-energy buses grew quickly, likely to reach co.'s FY16 target of 25k The company's sales of new-energy buses totalled 13k units in 9M16, +30% YoY. Thecompany has slowed shipments of new-energy buses since Q3 due to heightenedfinancial pressure caused by delays in issuing new subsidy policies and the cashsubsidies in arrears. We expect the subsidy arrears to be disbursed in late October, andgiven the current robust downstream demand and strong order backlog, we think thecompany remains likely to reach its full-year sales target for new-energy buses of 25kunits, which would be a 25% YoY increase. Valuation: Maintain Buy rating, Rmb25.7 price target Our price target is based on DCF and assumes a 7% WACC.

H1 net profit +8% YoY, in line with expectations. H1 net profit was Rmb5.49bn (UBS-S-e: Rmb5.47bn), up 8% YoY and in line withexpectations. Revenue came in at Rmb35.8bn, up 8.3% YoY, with gross margin of16.6%, down 0.8ppt YoY, which we mainly attribute to price cuts for some productscoupled with a higher proportion of low-end models. Selling and administrativeexpenses totalled 12.1% of revenue, down 0.5ppt YoY. Looking at the JV brands,Changan Ford and Changan Mazda recorded net profit of Rmb9.17bn/950m,respectively, up 4.3%/14.9% YoY. Meanwhile, its domestic brand posted profit ofRmb280m, up 130% YoY. Changan Ford: Solid earnings growth on improving product mix. Changan Ford sold 424k units in H1 (44% of our full-year estimate), down 1.4% YoYand missing expectations. However, product mix continued to improve, helped by brisksales of the high-end Vignale SUV. Revenue reached Rmb57.4bn, up 3.2% YoY. ASPreached Rmb135k, up 4.2% YoY. Net profit was Rmb9.17bn, up 4.3% YoY. Netmargin reached 16%, edging up 0.2ppt YoY, which came as a pleasant surprise to us. Changan Ford's end-market inventories are low, and we expect sales to start recoveringfrom the trough once the face-lifted Kuga hits the market in Q3. We expect full-yearsales to reach our estimate of 956k units, which would be a 10% YoY increase. Domestic brand: PVs steady, CV losses likely to narrow. The company's domestic brand sold 409k passenger vehicles (PVs, excludes mini cars) inH1, up 0.7% YoY. After the 1.5T version of the CS75 is launched in Q4, we expect thecompany's PV sales to continue logging steady growth. Its commercial vehicle (CV)business is actively refocusing towards SUVs and MPVs, and the new CX70 and Auchanmodels have both achieved decent sales since launch, selling 24k/58k units,respectively, in H1. We expect the domestic brand's ASP and margins to improve on abetter product mix. The domestic brand recorded net profit of Rmb280m in H1, up130% YoY. Our full-year estimate for domestic brand profit contribution remainsunchanged at Rmb750m. Valuation: Maintain Buy rating, Rmb19 price target. Our price target is based on 8x 2016E PE.

H116 net profit up 7.5% YoY, missing our estimate. Jianghuai Automobile's (JAC) H116 revenue was Rmb26.4bn, up 12% YoY, and netprofit was Rmb580m, up 7.5% YoY, missing our estimate (Rmb650m). The lower-thanexpectedearnings were mainly caused by a 3.8ppt contraction of core business grossmargin (GM) as a result of the company's bigger price reductions and increasedpromotional efforts in response to intensified competition in the passenger vehiclemarket. Meanwhile, its selling expense ratio was 6.1%, flat YoY, and its administrativeexpense ratio was 6.2%, up 0.3ppt YoY, due to increases in R&D spending and wages. Non-operating income came in at Rmb1.79bn, up a hefty 129% YoY, driven by asubstantial increase in new-energy subsidies. Robust sales growth across all segments H116; LDT sales beat expectations. In H116, JAC's total sales were 333,639 units, +14% YoY. SUV/MPV/LDT/pure EV salesreached 143,781/32,117/104,225/9,720 units, +30%/+5%/+14%/+261% YoY,respectively. LDT sales volume was the big bright spot, as its growth continued to beatexpectations and far outpaced industry growth (-5% YoY). We attribute this to thefollowing: 1) with its launch of a full range of State IV-compliant products, thecompany is regaining the market share it lost in the past two years due to the absenceof such products in its offerings; and 2) the rise of the e-commerce logistics and coldchaintransportation industries has fuelled demand growth for high-end LDTs, which islikely to help leading companies such as JAC further increase market share. EVs maintained rapid growth; IEV6S likely to ramp up in 2017. In H116, despite its new model IEV6S's failure to ramp up due to battery supplierproblems, JAC posted sales of 9,720 units (+261% YoY), driven solely by old modelsIEV5 and IEV4, a testament to the strong competitiveness of its products. Our recentchannel survey showed JAC changed to a made-to-order mode of production forIEV6S, which had total sales of c2,200 units in H116. The company is also consideringreplacing IEV6S's battery supplier. In view of the time required for battery re-alignmentand inclusion on the government's list of approved battery companies, we believe theramp-up of IEV6S will have to wait until 2017. JAC is also likely to launch its Yueyuebasedelectric compact car IEV6E by end-2016. We remain optimistic about it meetingits full-year sales estimate of 22,000 units of NEVs. Valuation: Buy rating and Rmb13.00 PT. Our DCF-based PT of Rmb13.00 (8.1% WACC) implies 15x 2016E PE.

H116 net profit up 6.3% YoY, in line with expectations SAIC's H116 net profit was Rmb15.1bn (UBS-S est: Rmb14.9bn), up 6.3% YoY, andEPS were Rmb1.37, basically in line with our and consensus expectations. Revenue wasRmb351.2bn (UBS-S est: Rmb336.1bn), up 8.5% YoY. The gross margin of the OEMbusiness was 10.3%, up 2.16ppts YoY, which we attribute to direct recognition ofdealer rebates as sales expenses rather than deduction of revenue after SAIC's salescompanies changed the accounting method for such rebates. That also led to a 77%YoY increase in SAIC's selling expenses to Rmb20.4bn. Also, the company's investmentgain was Rmb14.4bn, down 4.5% YoY, due to sliding profit at SAIC VW. Varying JV performances; Huayu/SAIC Finance were strong SAIC GM reported H116 revenue/net profit of Rmb89.5/8.66bn, respectively, (+6.9%/+17.6% YoY) and net margin of 9.7% (+0.4ppt YoY), mainly driven by Envision SUV'ssustained strong sales (sales volume +76% YoY in H116). SAIC VW's H116 revenue/netprofit were Rmb110.5/11.8bn (-13.2%/-21.3% YoY), respectively, and net margin was10.7% (-0.7ppt YoY), mainly due to declines in sales volumes and prices of thecompany's flagship models, Passat and Tiguan, as they are at the end of their lifecycles. Meanwhile, SAIC-GM-Wuling/Huayu Automotive/SAIC Finance reported netprofit of Rmb2.5/3.1/1.9bn, respectively, (-2%/+19%/+20%). Steady performance despite weak cycle; new product cycle likely after 2017 From 2015 to 2016 so far, SAIC VW and SAIC GM have been in weak product cycles,characterised by limited new product launches and a lack of blockbuster products,resulting in market share declines. Still, sales volumes sustained steady growth on theback of strong brand heritage and effective promotions. We look ahead to SAIC VWlaunching its next-generation Tiguan/Passat in late 2016/2017, in addition to its new Cclasscar/B-class SUV in Q416/2017, which could drive a strong pickup in sales growthfor the company in 2017. For SAIC GM, flagship SUV model Envision has exceeded20,000 units in monthly sales, while Cadillac showed a good trend of ramping up andcould become the company's new profit growth driver. Valuation: Maintain Buy, Rmb28.70 price target Our Rmb28.70 price target is based on 10x 2016E PE.

H116 net profit up 141% YoY; in line with expectations Guoxuan's H116 revenue was Rmb2.4bn (+169% YoY) and net profit was Rmb530m(+141% YoY), consistent with the company's earnings pre-announcement. The sharpearnings growth was driven by the following: 1) China's NEV industry maintained rapidgrowth in H116; and 2) the company's battery production capacity further expanded,as its new Hefei phase II, Nanjing and Suzhou factories came on stream. The grossmargin of the battery business was 50.4% in H116, down merely 1ppt YoY, in linewith expectations. Meanwhile, the administrative and selling expense ratio rose sharply,5ppts YoY to 18.8%, which we attribute to a substantial increase in R&D spending,staff salaries and a provision for after-sale service costs. Guoxuan guided Q1-Q3 net profit up 110-140% YoY Guoxuan guided Q1-Q3 net profit to come in at cRmb700-800m (+110-140% YoY),with Q3 net profit at Rmb170-270m (+56-145% YoY and -25% to +19% QoQ). Weattribute the slower earnings growth in Q3 to: 1) a delayed rollout of the subsidy policyleading to downstream automobile companies slowing down their productionschedules for new-energy vehicles; and 2) the Hefei phase III and Qingdao factoriescoming on stream to increase some costs. Net capacity + subsidy policy to drive profit to hit new high in Q4 The interim report showed Guoxuan's Hefei phase III and Qingdao factories will comeon stream in Q3. We expect the company to achieve actual effective productioncapacity of 2.7/5.5GWH in 2016/17, including 0.6/2.3GWH for ternary batteries. Thecapacity expansion will help the company further consolidate its leading position. Inaddition, we expect the new-energy subsidy policy to be rolled out in September andautomobile companies to ramp up production in Q4. Therefore, we estimate thecompany's profit is likely to be close to Rmb500m in Q4. Valuation: Maintain Buy rating, PT is Rmb48 Our DCF-based price target of Rmb48 assumes 7.9% WACC.

H116net profit up 31% YoY, in line Yutong posted H116net profit of Rmb1.24bn (we estimated Rmb1.3bn), with growthof 31% YoY, basically in line with expectations. Revenue was Rmb13.3bn, up 28%YoY, outpacing sales volume growth of 23.6% YoY, suggesting that product miximprovement continued to boost product average selling prices. Helped by product miximprovement, the company's bus segment had a gross margin of 24.9%, up 1.83pptsYoY, while the selling and administrative expense ratio was c13%, down 1ppt YoY,mainly due to decreased R&D spending. Product mix improvement drove sustained gross margin improvement The H116gross margin (24.9%, up 1.83ppts) of Yutong's bus segment was better thanwe expected, which we attribute to the following: 1) a sharp decrease in 6-8metrebuses combined with a substantial increase in 8metre+ buses in the company's mix ofnew-energy bus products led to improvement in the company's overall product mix; 2)lithium-ion battery prices dropped gradually, as downstream battery manufacturersincreased production and continued to expand capacity; and 3) the depreciationamount has dropped since the company started using the double declining balancemethod to calculate it. We expect new-energy bus sales to ramp up in Q4to meet full-year target Yutong's new-energy bus sales came to 7,400units in H116, up 104% YoY. However,since July, the company has slowed down shipment of new-energy buses due to thedelayed rollout of the subsidy policy and increased financial pressure resulting fromcash subsidy arrears. Nevertheless, since we expect the subsidy policy to be rolled out inSeptember, we believe the company is likely to achieve its full-year sales target of25,000units (+25% YoY) of new-energy buses, as the industry and the company'sshipments are likely to ramp up in Q416. Valuation: Maintain Buy rating; price target pf Rmb25.70 Our DCF-based price target assumes 7% WACC.