China Watch : SAIC Motor’s Q1 net profit soars, 29th April, 2010

SAIC Motor Corp., China’s biggest automaker, posted a more than quadrupling in first-quarter net profit, as Beijing’s policy support continues to draw buyers into showrooms in the world’s largest car market.

SAIC Motor, which runs vehicle manufacturing ventures with General Motors and Volkswagen, is a major beneficiary of Beijing’s stimulus measures, including tax incentives for small cars.

Analysts are upbeat about SAIC Motor’s outlook on continued solid demand, especially in China’s smaller cities, which could drive up industry-wide car sales by one-fifth in the Chinese market this year.

“At the begining of the year, many people expected car sales to slow after breakneck growth in 2009, but there is no sign the momentum is losing steam,” said Zhang Xin, a Beijing-based analyst with Guotai Junan Securities.

“China car sales in the third quarter and second half won’t match the 76 percent growth in Q1 as the year-ago comparative base gets higher, but they will still be solid.”

SAIC Motor did not give earnings guidance for the second quarter or full year in a brief stock exchange filing on Wednesday. January-March net profit was 2.88 billion yuan ($421.7 million), its biggest quarterly earnings ever. The result was largely in line with an average forecast of 3.1 billion yuan from three analysts surveyed by Reuters.

The automaker had said earlier this month its first-quarter profit had more than quadrupled from 626.9 million yuan in the same quarter last year. Before the results, SAIC Motor shares closed up 2.9 percent, better than a 0.3 percent fall in the benchmark index .SSEC. The stock has dropped 26.9 percent so far this year versus an 11.5 percent fall in the wider market.


[Editor’s Note: Click here for a graphic on China car sales]

Clive Goldthorp

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