Smart driving: From ADAS to unmanned driving

Please read the disclaimer at the end of the report

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Auto Industry Thematic Report

Smart driving: From ADAS to unmanned

driving

28 Jun 2016 OUTPERFORM (Reiterate)

Investment Highlights

As technology evolves, we will soon head into an era of “Internet

of Things”. Smart driving, which ultimately culminates in pilotless

driving, seems the best-fitting theme under the concept of

“Internet of Everything”. Tech companies are accelerating the pace of

technological advances and product iteration related to smart driving,

and ADAS (Advanced Driver Assistant Systems) currently stands as the

best point of exposure to the new theme. We take note of increased

investor attention on smart driving names driven by: 1) Tech companies

beyond the automotive industry, led by Tesla Motors, Apple Inc., and

China’s BAT (i.e. Baidu, Alibaba, Tencent) have accelerated

technological advances in the universe of smart driving, and consumer

and investor attention have come along with these new developments;

2) Interconnected vehicles on a real-time basis and unmanned driving

are made possible thanks to 5G communication technologies and

up-to-date sensor technologies available at a lower cost; and 3)

Conventional auto OEMs are also making efforts toward smart driving

via R&D or M&A to deal with the competition.

Smart driving will gear up on evolving technologies, clarity on

regulation and production vehicle rollouts. We estimate that the

hardware necessary for fully automatic smart vehicles may come into

mass production in 2020-2025, while smart driving services integrating

mobile internet, big data and cloud computing technologies will likely be

available in a decade. Technological progress and product iteration

related to smart driving will pace up as tech players and conventional

auto OEMs jostle to snatch a slice of the big pie. Tesla Motors added

autopilot hardware to its models in mass production at the end of 2015.

China-funded tech firms, including NextEv Limited, Future Mobility,

LeEco’s automotive arm, may launch mass production of their smart

vehicles in 2017-2018. Simultaneously, road tests and regulations will

come out to catch up with the progress in smart driving.

Listed companies may gain presences in ADAS by acquiring

shares of related companies. Despite user-oriented product

development and more flexible organizational structure, the tech

players still follow in the steps of traditional automakers in the

manufacturing process. Vehicles equipped with ADAS modules could

become important transitory smart vehicles from their traditional

counterparts in the evolution towards self-driving technologies. We

estimate a market of c.Rmb200bn for ADAS modules in China by

2020E, where traditional component suppliers will maintain its

leadership while start-ups will also cut into the market. With a strategy

that combines “imitation and independent innovation”, Chinese ADAS

manufacturers will likely develop rapidly. Given the scarcity of

CITICS Research

XU Yingbo

Tel: 010-60838704

Email: [email protected]

Practicing license:S1010510120041

CHEN Junbin

Tel: 010-60836703



GAO Deng

Tel: 010-60836729



CUI Yushuo

Tel: 010-60836750


Practicing license: S1010516050002

Performance relative to the

index

Source: CITICS Quantitative Investment

Analysis System

Auto CSI 300

mailto:[email protected]



outstanding ADAS manufacturers, listed companies will likely gain presence in the business by investing

in related companies.

ADAS sensors and actuators are also worthy of attention. We expect start-ups to focus on

technologies related to bird’s eye view systems based on camera image recognition technologies as well

as sensing applications involving automotive radars, such as collision warning. An ADAS module

consists of sensors, algorithms, and actuators. We expect ADAS sensors, such as millimeter-wave

radars, lidars, cameras, and ultrasonic radars, to represent a market of tens of billions. ADAS actuators,

including those used in the braking system, will create a market of a similar size. We also see investment

opportunities in smart-driving technologies, such as high resolution maps, Internet of Vehicles, big data

and cloud computing.

Potential risks: 1) Most listed companies entered the smart driving segment by way of either equity

investment or M&A activities. They need time to prove their operational capabilities and potential to

consolidate/integrate the newly-acquired business; 2) Profit contribution from smart driving could be

restricted given the limited number of new product offerings in the coming 1-2 years; 3) The high

valuation levels of some target companies provide minimal safety margins; and 4) Potential sell-downs

by the senior executives of listed companies.

Investment recommendations and sector rating: In our view, unmanned driving represents the

ultimate direction of the auto industry, but may only deliver a small profit over the next 1-2 years. We

think the smart driving segment will likely maintain high valuation levels driven by thematic opportunities.

Therefore, the market position of the target company will become an important valuation benchmark in a

potential acquisition deal. We reiterate our OUTPERFORM call on the sector, and advise investors to

watch the following names: Zhejiang Vie Science & Technology (002590), Tuopu Group (601689),

Asia-Pacific Mechanical & Electronic (002284), Xingyu Automotive Lighting Systems (601799), Joyson

Electronic (600699) and Shuanglin Auto Parts (300100).

Earnings forecast, valuation and investment rating of key listed companies

Company Share price (Rmb) EPS (Rmb) PE (x)

PB (x) Rating 15 16E 17E 18E 15 16E 17E 18E

Vie Science & Technology (002590) 28.94 0.19 0.24 0.31 0.37 152 121 93 78 8.5 O/W

Ningbo Tuopu Group (601689) 26.54 0.63 0.76 0.88 1.04 42 35 30 26 5.3 O/W

Asia-Pacific Mechanical& Electronic (002284) 18.18 0.19 0.25 0.29 0.34 94 73 63 53 5.3 O/W

Xingyu Automotive Lighting Systems (601799) 45.59 1.22 1.46 1.69 1.95 90 46 27 23 6.6 O/W

Joyson Electronic (600699) 36.73 0.41 0.79 1.34 1.60 70 48 39 33 7.8 O/W

Shuanglin Auto Parts (300100) 42.57 0.61 0.84 1.00 1.18 70 51 43 36 7.8 O/W

Source: Wind, CITICS Research forecast Note: Closing price as of 14 Jun 2016



Contents

Smart driving: Full speed ahead into a reality ............................................................... 1

Smart driving gives rise to fresh opportunities .................................................................... 2

Dual paths of technology evolution: Tech firms vs. traditional OEMs ................................. 3

ADAS: The first module to be commercialized .............................................................. 8

Auto safety regulations help accelerate ADAS growth ........................................................ 8

ADAS will likely be the first to be commercialized ............................................................ 10

First-movers are likely to be the ultimate winners .............................................................. 11

Components: Domestic companies will likely be able to produce sensor/map

modules in the future ...................................................................................................... 15

Sensor modules: integration of multiple sensors .............................................................. 15

Sensor modules: Millimeter wave radar ............................................................................ 16

Sensor modules: lidar (light detection and ranging) .......................................................... 18

Sensor modules: camera .................................................................................................. 21

Sensor modules - infrared night vision: Huge growth potential; focus on domestic leaders

........................................................................................................................................... 23

High resolution maps: The oligopoly competitive landscape will likely continue .............. 24

Actuators ........................................................................................................................... 25

Intelligent electronics system ............................................................................................ 25

The Internet of Vehicles (IoV) ............................................................................................ 26

Potential risks .................................................................................................................. 27

Investment strategy and recommendations ................................................................. 27

Key companies .................................................................................................................. 28



Figs

Fig. 1: Levels of driving automation according to SAE and NHTSA ................................... 1

Fig. 2: The roadmap for evolution of smart driving ............................................................. 2

Fig. 3: Future competitive landscape of smart driving ........................................................ 3

Fig. 4: More than 80mn vehicles were sold worldwide in 2015 .......................................... 3

Fig. 5: Tech firms are making inroads into smart driving ..................................................... 5

Fig. 6: The self-driving concept car from Mercedes-Benz .................................................. 7

Fig. 7: Driverless cars will hit the road in 2020, according to Nissan’s plan ....................... 7

Fig. 8: Changan Automobile’s driverless cars cruised all the way to Beijing from Chongqing

............................................................................................................................................. 8

Fig. 9: A driverless model from BAIC BJEV ........................................................................ 8

Fig. 10: Key active and passive safety technologies .......................................................... 9

Fig. 11: Key ADAS technologies ....................................................................................... 10

Fig. 12: Major ADAS system integrators and respective market share in 2013................ 12

Fig. 13: Mobileye’s OEM-embedded operations grew quickly .......................................... 13

Fig. 14: Mobileye’s operating revenue and net profit (US$mn) ......................................... 13

Fig. 15: ADAS components ............................................................................................... 15

Fig. 16: Millimeter wave radar ........................................................................................... 16

Fig. 17: Global market size of millimeter wave radar ........................................................ 17

Fig. 18: Global landscape of millimeter wave radar industry in 2015 ............................... 17

Fig. 19: Lidar’s 3D point cloud ........................................................................................... 19

Fig. 20: Rotating lidar vs. fixed lidar .................................................................................. 20

Fig. 21: China’s vehicle camera capacity in 2011-2015 .................................................... 22

Fig. 22: China’s vehicle camera market size (Rmb100mn) .............................................. 22

Fig. 23: Global market share of camera lens in 2014 ....................................................... 23

Fig. 24: Working principle of Infrared Night Vision System ............................................... 24

Fig. 25: Shipment of OEM-embedded navigation systems continued to grow in 2015 .... 25

Fig. 26: OEM-embedded navigation system market share in 2015 .................................. 25



Tables

Table 1: Former senior auto executives that are now working for tech firms ...................... 5

Table 2: The self-driving agenda of mainstream OEMs ...................................................... 7

Table 3: The self-driving agenda of Chinese local OEMs ................................................... 8

Table 4: ADAS technology is included into auto safety rules .............................................. 9

Table 5: ADAS technologies and major functions ............................................................. 10

Table 6: Total available market (TAM) of ADAS in China by 2020E ................................... 11

Table 7: World leading ADAS system integrators ............................................................. 12

Table 8: ADAS start-ups in China ...................................................................................... 13

Table 9: Equity investment in ADAS by listed companies ................................................. 14

Table 10: The target proportion of domestically-produced key components of vehicles,

according to the Made in China 2025 plan ....................................................................... 15

Table 11: Performance of vehicle sensors ........................................................................ 15

Table 12: Frequencies for millimeter wave radar .............................................................. 17

Table 13: Major domestic providers of millimeter wave radars ......................................... 18

Table 14: Rotating lidar products ....................................................................................... 19

Table 15: Fixed lidar vs. hybrid fixed lidar ......................................................................... 20

Table 16: Estimated lidar market size in 2020E ................................................................ 20

Table 17: Domestic companies related to lidar business .................................................. 20

Table 18: Applications of cameras ..................................................................................... 22

Table 19: Recommended actuator manufacturers ............................................................ 25

Table 20: Recommended vehicle-mounted intelligent electronics system vendors .......... 25

Table 21: Recommended IoV names ................................................................................ 26

Table 22: Earnings forecast ............................................................................................... 27

Table 23: Earnings forecast and valuation ........................................................................ 29







Please read the disclaimer at the end of the report 1

As technology evolves, we will soon head into an era of “Internet of Things”. Smart driving,

which ultimately culminates in pilotless driving, seems the best-fitting theme under the

concept of “Internet of Everything”. Tech companies are accelerating the pace of

technological advances and product iteration related to smart driving, and ADAS

(Advanced Driver Assistant Systems) currently stands as the best point of exposure to the

new theme. In addition, ADAS sensors (such as millimeter-wave radars, lidars, and

cameras) and actuators (mainly brake actuators) also merit attention.

Smart driving: Full speed ahead into a reality

Automotive hardware required for fully automatic driving may come into mass

production in 2020-2025 as “unmanned driving” gears up. We take note of increased

investor attention over smart driving names driven by: 1) Tech companies beyond the

automotive industry, led by Tesla Motors, Apple Inc., and China’s BAT (i.e. Baidu, Alibaba,

Tencent) have accelerated technological advances in the universe of smart driving, and

consumer and investor attention have increased along with these new developments; 2)

Interconnected vehicles on a real-time basis and unmanned driving are made possible

thanks to 5G communication technologies and up-to-date sensor technologies available at

a lower cost; and 3) Conventional auto OEMs are also making efforts toward smart driving

via R&D or M&A to cope with the competition. We estimate that mass production of

automotive hardware necessary for fully automatic smart vehicles may start in 2020-2025,

while smart driving services enabled by mobile internet, big data and cloud computing

technologies will be made available in a decade and incrementally popular thereafter.

Driving automation can be classified into different levels depending on the driver’s

control over the vehicle and the attribution of associated safety liabilities.

Organizations adopt varied criteria in their classification. The Germany Federal Highway

Research Institute (BASt), the US National Highway Traffic Safety Administration (NHTSA)

and SAE International (SAE) follow largely similar criteria, though classifications slightly

differ. SAE scales driving automation technologies into Level 0-5, i.e. driver only (Level 0),

assisted driving, partial automation, conditional automation, high automation, and full

automation (Level 5). NHTSA, however, does not differentiate high automation from full

automation, and tags both as Level 4. Concisely, the human driver monitors the driving

environment in scenarios of Level 0-2, while automated driving system monitors in

scenarios of Level 3 and beyond.

Fig. 1: Levels of driving automation according to SAE and NHTSA

Source: EPoSS, collated by CITICS Research

Starting from Level 1-2 driving automation at present, we expect fully automatic

vehicles to come into mass production in 2020-2025. Vehicles that can achieve Level



1-2 driving automation are already in mass production. Specifically, vehicles can come with

functions enabling Level-1 warning prompts, including LDW (lane departure warning),

FCW (forward collision warning), BSD (blind spot detection), and TSR (traffic sign

recognition), as well as Level-2 interventional driving assists, including ACC (adaptive

cruise control), LKA (lane keeping assist), AEB (automatic emergency braking), IHC

(intelligent headlight control), and AP (automatic parking). Available technologies are also

sufficient to facilitate Level-3 driving automation, such as Toyota's Automated Highway

Driving Assistant, Tesla Motors’ Autopilot, and General Motors’ Super Cruise. Mass

production can be possible in 2018-2020. Automakers have worked out development

mules to test high automation technologies, and such vehicles could be ready for mass

production in 2020. The ultimate smart vehicle capable of fully automated driving may

come into reality in 2025.

Smart driving will gear up on evolving technologies, clarity on regulation and

production vehicle rollouts. Technological progress and product iteration related to

smart driving will pace up as tech players and conventional auto OEMs jostle to snatch a

slice of the big pie. Tesla Motors added autopilot hardware to its models in mass

production at the end of 2015. China-funded tech firms, including NextEv Limited, Future

Mobility, LeEco’s automotive arm, may launch mass production of their smart vehicles in

2017-2018. Simultaneously, road tests and regulations will come out to catch up with the

progress in smart driving. Fu Yuwu, president of the Society of Automotive Engineers of

China, said in early June that China may publish the country’s first-ever standards for

unmanned driving within two months at the opening ceremony of National Intelligent

Connected Vehicle (Shanghai) Pilot Zone.

Fig. 2: The roadmap for evolution of smart driving

Source: Collated by CITICS Research

Smart driving gives rise to fresh opportunities

The value chain of smart driving may be shaped into a pyramid structure of three

levels: 1) Auto OEMs and tech firms: Traditional OEMs will maintain their core

competitiveness in automotive manufacturing and integrated control while tech players will

grab a share of the market leveraging their strength in artificial intelligence and

human-computer interaction; 2) ADAS suppliers, which will provide ADAS solutions to both

OEMs and tech firms given their strength in recognition algorithm than can enable

perception; and 3) Auto parts suppliers of radars, cameras, chips, and EBS (electronic

Warning Prompts Lane Departure Warning

(LDW) Forward Collision Warning

(FCW) Blind Spot Detection

(BSD)

Full Automation

ADAS + Internet of Vehicles + High Resolution Map

Comprehensive Assists

Automated Highway Driving Assist

(AHDA)

Traffic Jam Assist (TJA)

Interventional Assists Adaptive Cruise Control (ACC)

Lane Keeping Assist (LKA)

Automatic Emergency Braking (AEB) High Automation

Conditional Automation

Partial Automation

Assisted Driving

Level of A

uto

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Time



braking system). Capital/technology barriers come in a descending order from 1) to 3), and

so does the market concentration.

Fig. 3: Future competitive landscape of smart driving


Companies with a presence in smart driving will compete for a pie of trillion yuan.

Despite slower growth of auto sales globally, more than 80mn vehicles were sold

worldwide in 2015. In China alone, 24.60mn were sold, representing a value chain worth

Rmb2.5trn. Auto OEMs have acquired sufficient technologies, such as those for engines

and gearboxes, to satisfy most customer needs in terms of vehicle dynamics and control

over the past century. Going forward, services may serve as the main differentiator among

automobile players. Therefore, smart driving and associated human-vehicle interactive

services may reshape the industry.

Fig. 4: More than 80mn vehicles were sold worldwide in 2015

507 576 722 879 938 1,364 1,806 1,851 1,931 2,198 2,349 2,460

5,022 5,187 5,277 5,671 5,378 4,797 5,374 5,662 6,005 6,055 6,185 6,272

-

2,000

4,000

6,000

8,000

10,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

万辆

中国销量（万辆）其他地区销量（万辆）

Source: Marklines, collated by CITICS Research

Dual paths of technology evolution: Tech firms vs. traditional OEMs

We expect tech players to gain a 40% market share by 2025, with traditional OEMs

keeping the remaining 60%, given: 1) Tech firms have gained a head start leveraging

their strength in algorithm, a core competence to enable smart driving; and 2) Traditional

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OEMs will continue to outperform across the value chain in terms of product safety and

reliability due to the high barrier to automotive manufacturing. In addition, tech firms are

unlikely to make auto OEMs obsolete as consumers have high recognition of traditional

auto brands given the long replacement cycle of vehicles.

Tech companies grew apace on zero legacy burdens + advantage in data by starting

with the highest level of driving automation. Tech players like Tesla Motors, Google

and Baidu have ventured into unmanned driving, a step ahead of traditional OEMs. We

attribute tech firms’ faster pace in exploring the possibility of driverless cars to the following

factors: 1) As new entrants of the automotive industry, tech players can seek leapfrog

development by starting with the highest level of driving automation as they are not obliged

by burdens of producing existing models; 2) Tech firms excel in technologies for data

integration, high resolution maps and others; and 3) Tech companies have the vision to

turn vehicles into the next access gateway under the driverless scenario.

Tech firms made surprisingly speedy progress in smart driving. In 2014, Tesla

Motors began to offer Autopilot on models equipped with a forward-looking camera, a

forward radar and ultrasonic sensors, which can enable self-driving under certain road

conditions and support over-the-air software updates. Google unveiled the prototype of its

first driverless car in 2014, followed by road tests in California in January 2015 and US

authorities granting a driver’s license in February 2016. Mass production is expected in

2020. Baidu announced successful road tests in Beijing for its driverless car, jointly

developed with BMW, in December 2015, creating an unmanned driving division the same

month. Partial commercialization of highly automated driving is expected in 2018, and

mass production will be ready in 2020. LeEco set up its auto division in July 2015 and

announced later in December that it will work with Aston Martin to manufacture the

first-generation LeEco super car LeSEE. It announced the partnership with Faraday Future,

a US electric car manufacturer, in January 2016, and unveiled the super electric concept

car, FFZero1, the same month. The Chinese tech firm held the groundbreaking ceremony

for its US$1bn electric car plant in Las Vegas in April 2016. Future Mobility, established in

June 2015, obtained necessary qualifications of an auto OEM by acquiring Green Field

Motor the same month. It will operate with two brands of “Aidisheng (爱迪生)” and “iCar”,

with mass production expected in 2018. NextEv Limited was incorporated in end-2014

and its TCR team won the first driver ’s title in the Formula E championship in June 2015; it

entered into a strategic cooperation agreement of Rmb10bn with JAC Motors in April 2016.



Fig. 5: Tech firms are making inroads into smart driving

Tesla Model 3 supports Autopilot Google obtained a driver’s license for its driverless car from US authorities

Baidu completed road tests for its driverless car

LeEco unveiled its autonomous EV concept LeSEE

China Harmony Auto + Foxconn + Tencent = Future Mobility

NextEv sponsored the FIA Formula E Championship

Source: Relevant company websites, collated by CITICS Research

Tech firms hired senior executives of traditional OEMs to compete with the latter.

Parallel to the brisk progress in smart driving, tech firms welcomed a large number of

senior executives from traditional OEMs to steer their automotive ambitions. Statistics

show that LeEco’s auto division, Future Mobility, NextEV gathered a pool of 20-plus former

auto executives. We think the rationale could be: 1) Tech firms put more value on

high-level talents and senior executives have better prospects of making a difference

during the early stage of tech firms’ automotive endeavors; and 2) Tech companies are

well funded and can offer these executives much better compensation than traditional

OEMs. In addition, the large number of auto hires also indicates that tech firms are getting

closer to the stage of mass production, and commercial production could be possible in the

next few years to actually compete with auto OEMs.

Table 1: Former senior auto executives that are now working for tech firms

Tech Firms Senior

Executives Previous Titles Current Positions

LeEco’s auto

division

DING Lei

Vice President, SAIC Motor; General

Manager, former Shanghai General

Motors

Global Vice President & Executive

Director, LeEco’s auto division

ZHANG Hailiang Vice President, SAIC Motor President, LeEco’s auto division

LV Zhengyu General Manager, Infiniti China & Asia

Pacific

Vice President, LeEco’s auto

division

FU Zhenxing Chief Engineer of Electric Car R&D, SAIC

Motor

Vice President, LeEco’s auto

division

GAO Jingshen Vice General Manager, GAC Toyota Vice President, LeEco’s auto

division

Frank Sterzer Manufacturing Director,

FAW-Volkswagen

Senior Director of Manufacturing,

LeEco’s auto division

Future

Mobility

Daniel Kirchert Managing Director, Dongfeng Infiniti COO (Chief Operation Officer),

Future Mobility

Carsten Breitfeld Vice President of BMW, Project Manager

of i8

CEO (Chief Executive Officer),

Future Mobility

Benoit Jacob Vice President of Design, BMW --

Henrik Wenders Vice President of Marketing, BMW --

Dirk Abendroth Vice President of Software &

Connectivity, BMW --

Wolfram Luchner Lead Designer of Alphabet Inc.’s (i.e.

Google’s) self-driving project --



Tech Firms Senior

Executives Previous Titles Current Positions

Luca Delgrossi

Director of Autonomous Driving,

Mercedes-Benz Research &

Development North America

--

FU Qiang CEO, Volvo China Sales CEO, Zhejiang Aiche Internet

Intelligent Electric Vehicle

NextEv

Martin Leach

CEO, Maserati Global; President, Ford

Europe; Managing Director, Mazda

Global

Co-President, NextEv

QIN Lihong Deputy General Manager of Sales, Chery

Automobile Co-Founder, NextEv

ZHENG Xiancong Chairman & President, Fiat China Co-Founder, NextEv

HUANG

Chendong

Deputy General Manager of New Energy

Vehicle, SAIC Motor Vice President, NextEv

Mark Zhou

Executive Director of Purchasing, Human

Resources & Government Affairs, Qoros

Auto

Vice President of Business

Development, NextEv

Roger Malkusson Executive Director of Vehicle Integration,

Qoros Auto

Vice President of Vehicle

Engineering, NextEv

Source: Auto.163.com, Auto.qq.com, collated by CITICS Research

Traditional OEMs will steer towards driverless solutions in a stepwise approach. We

expect auto OEMs to incrementally aim higher towards ultimate driverless solutions by

starting with Level 1-2 driving automation. Our call is backed by: 1) Traditional OEMs seem

unlikely to seek leapfrog upgrades under pressure from earnings in light of their legacy

burdens to produce a massive number of existing models; 2) Traditional OEMs have

already enabled some of their models with assisted driving functions as they have the

technologies required for semi-autonomous driving; and 3) Regulatory and ethical

considerations will hamper the adoption of driverless solutions by traditional OEMs.

Auto OEMs are targeting Level-4 high automation technologies in the next step

towards smart driving, with mass-production models potentially available for sale in

2020. Traditional automotive manufacturers can currently provide models capable of Level

1-2 driving automation, and have acquired sufficient technologies to facilitate Level-3

driving automation, such as Toyota's Automated Highway Driving Assistant, Tesla Motors’

Autopilot, and General Motors’ Super Cruise. They are now working on the commercial

production of vehicles enabling Level-4 automation. At the 2015 Consumer Electronics

Show, Mercedes-Benz revealed its self-driving concept car, F015 Luxury in Motion, which

came along with connected services, a pedestrian detection system and an automatic

emergency braking system. Japanese carmaker Nissan will have self-driving cars hit the

road in 2020, but will retain the driver ’s control over such models. Mass production of

highly automated models could be possible around 2020.



Fig. 6: The self-driving concept car from

Mercedes-Benz

Source: Auto.sina.com.cn

Fig. 7: Driverless cars will hit the road in 2020,

according to Nissan’s plan

Source: Auto.qq.com

Table 2: The self-driving agenda of mainstream OEMs

OEMs Date of

Announcement

Commercialization

of Self-Driving

Cars

Details

Toyota Jan. 2015 2020 To have self-driving models ready for sale around 2020

Nissan 2013 2020

To launch multiple models enabled by commercially

viable autonomous driving technologies that are

available in mass production by 2020

Volkswagen Nov. 2015 2020 To release an electric Phaeton with up-to-date driverless

technology

BMW April 2015 2017-20

BMW signed an agreement with Baidu in Sept. 2014 to

collaborate in the research of highly automated driving

technology in China. Both sides have the confidence to

present highly autonomous BMW models able to run on

urban roads in China at the end of the three-year

collaboration.

Mercedes-Benz Jan. 2015 2020

Road tests of self-driving S500 already underway;

Highway Pilot for trucks released. Commercialization

should be expected around 2020.

General Motors Sept. 2013 2020 To unveil its first self-driving model Cadillac SRX before

2020

Hyundai May 2015 2020 Self-driving models will be put into commercial use by

2020.

Kia Motors Jan. 2016 2020

Kia Motors introduced a new “Drive Wise” sub-brand for

assisted driving and semi autonomous driving

technologies. It will focus on ADAS in 2016 for

improvement in safety and convenience, and aims to

achieve partially/highly/fully autonomous driving by

2020/2025/2030.

Volvo Car Nov. 2015 2020 Has released the Intellisafe autopilot project, and aims to

make highly autonomous driving a reality by 2020.

Ford Motor June 2015 2019

Ford Motor said its Mondeo models available for sale in

Europe have been equipped with Pre-Collision Assist

with Pedestrian Detection, and such models will be

released in the U.S. the next year. It also expects to

make multiple self-driving technologies, including

Pre-Collision Assist, available on models on sale

globally by 2019.

Source: DBScar and other websites, collated by CITICS Research

Local brands may outpace JV OEMs in smart driving commercialization by kicking

off mass production of Level-3 automated models in 2017, as: 1) Chinese local OEMs

can be more efficient in the iteration of underlying algorithm, the core competence of smart

driving, as they have more discretionary power over such decisions than JV OEMs; and 2)

Local OEMs are more eager to outbid their foreign peers with quicker progress in smart



driving amid increasingly fiercer competition. SAIC Motor and Alibaba revealed a

connected smart car at the Beijing Auto Show in April. Changan Automobile displayed its

technology of conditional driving automation (Level-3) after its driverless cars made a

highway journey of more than 1,000 miles from its base in Chongqing to Beijing for the

show. BAIC BJEV also presented a driverless model. We believe local OEMs may bring

Level-3 smart cars into mass production in 2017 at the earliest considering their strength in

relevant technologies.

Fig. 8: Changan Automobile’s driverless cars

cruised all the way to Beijing from Chongqing

Source: Changan Automobile

Fig. 9: A driverless model from BAIC BJEV

Source: www.d1ev.com

Table 3: The self-driving agenda of Chinese local OEMs

OEMs Commercialization of

Self-Driving Cars Details

Changan

Automobile 2018

Has released its connected smart car model SUV CS95 and completed

road tests for 2,000-km self-driving; targets to put self-driving cars into

mass production by 2018.

SAIC

Motor 2020

Has released its connected smart car model SUV RX5 and the MG iGS

intelligent-drive vehicle; plans to launch self-driving cars capable of

cruising on structural roads.

BAIC

Motor 2017

Working on self-driving electric cars, welcoming test rides by the general

public; commercialization expected at the end of the year at the earliest.

Geely 2018 Mass production of self-driving Volvo cars; its Emgrand GT will come with

ADAS modules; self-driving models will be released in the next 2-3 years.

Great Wall

Motor 2020

Has demonstrated its assisted driving technologies, and will launch

high-speed fully self-driving cars by 2020.

FAW

Group 2025

Has demonstrated its autonomous driving technologies, and will enable

highly autonomous driving for 50% of its models by 2025.

Source: DBScar and other websites, collated by CITICS Research

ADAS: The first module to be commercialized

Auto safety regulations help accelerate ADAS growth

China will probably follow the example of the US, Europe and Japan to include

ADAS into its automotive safety regulations. The National Highway Traffic Safety

Administration (NHTSA) included forward collision warning (FCW) into its vehicle safety

rating program in 2011 and stipulated that automatic emergency braking (AEB) must be

made a standard feature on all 5-star rated vehicles starting from 2018. In March 2016, the

top 20 automakers, collectively taking up 99% of the US auto market (including GM, Ford,

Fiat Chrysler, Toyota, Honda, Nissan, Mazda, Mitsubishi, Fuji Heavy Industries, Hyundai,



Kia Motors, Audi, BMW, Daimler, Volkswagen, Porsche, Volvo, Maserati, Jaguar Land

Rover and Tesla) agreed to make AEB a standard feature on all new passenger vehicles

starting from 2022. Toyota promised to equip all new cars sold in the US with AEB starting

from 2017. The European New Car Assessment Program (NCAP) also included AEB and

adaptive cruise control (ACC) in its safety rating. The Ministry of Land, Infrastructure,

Transport and Tourism of Japan (MLIT) included AEB in its safety-rating program in 2014.

We expect China to follow the example of advanced economies and incorporate ADAS

technology in its safety regulations starting from 2018.

Table 4: ADAS technology is included into auto safety rules

Region Institution Release date Description

US NHTSA

2011 Adding FCW as a metric in vehicle safety rating

2015 5-star rated vehicles must be equipped with the AEB feature starting from

2018

2016

The top 20 automakers agreed (combined market share >99%) to make

AEB a standard feature on passenger vehicles and light trucks with gross

vehicle weight (GVW) below 3856kg starting from Sep 1, 2022 and on

trucks between 3856kg and 4536kg starting from Sep 1, 2025

Europe NCAP

2013 AEB is a required feature on all large-sized commercial vehicles

2014

To obtain a 5-star rating, passenger vehicles must be equipped with at

least one active safety technology, such as AEB, ACC, LDW (lane

departure warning) and LKA (lane keeping assistant)

Japan MLIT 2014 Adding AEB as a metric in vehicle safety rating

China C-NCAP 2018

(expected)

Adding FCW, AEB, LDW and PDS (pedestrian detection system) into the

safety assessment system

Source: NHTSA, NCAP, MLIT, Collated by CITICS Research

The NHTSA has clearly requested ADAS technology being included in its 5-star

safety rating program. According to the NHTSA, as high as 94% auto accidents are

associated with man-made errors and automakers are strongly recommended to install

in-vehicle ADAS active safety systems including FCW, LDW and RVS (rear view safety)

systems. Other safety systems including pedestrian detection system (PDS), AEB and

blind spot detection (BSD) are also recommended.

Fig. 10: Key active and passive safety technologies

Source: NHTSA



ADAS will likely be the first to be commercialized

ADAS, as an entry-level product for smart driving, will likely become the first

technology to be widely commercialized. Judging from the technology level and

industrialization progress, we are currently transitioning from the stage of aided driving to

partial automation. Vehicles equipped with ADAS modules will become the first to be

popularized as a transitional product, and major ADAS technologies include ACC, LDW,

LKA, FCW, AEB, BSD and AP (automatic parking).

Fig. 11: Key ADAS technologies

Source: ACTOM

Table 5: ADAS technologies and major functions

ADAS Key features Sensing Actuating

ACC

(Adaptive Cruise

Control)

Controlling distance when there are

vehicles around and otherwise

controlling speed

Distance sensors

(millimeter-wave radars, lidars

and cameras)

Accelerator,

gear, braking

LDW

(Lane Departure

Warning)

Alerting drivers when they are drifting

out of the lane

Lane line sensors (Cameras,

stereo cameras, infrared ray and

lidars)

Display system

(console,

navigation

display, HUDs)

LKA

(Lane Keeping

Assistant)

Steering the driver back into lane

when the vehicle begins to leave the

detected lane

Lane line sensors (Cameras,

stereo cameras, infrared ray and

lidars)

Steering

FCW (Forward

Collision Warning)

Alerting drivers of an impending

collision when the distance from

another car is too small

Distance sensors

(millimeter-wave radar, lidars

and Cameras)

Display system

(console,

navigation

display, HUDs)

AEB

(Automatic

Emergency Braking)

Preventing an impending crash

through emergency braking

Distance sensors

(millimeter-wave radar, lidars

and Cameras)

Braking

TSR

(Traffic Sign

Recognition)

Identifying traffic signs and giving

drivers corresponding alerts Cameras

Display system

(console,

navigation

display, HUDs)

IHC (Intelligent

Headlight Control)

Automatically switching between high

and low beam based on the road and

lighting conditions

Cameras Headlight

AP (Automatic

Parking)

Automatically detecting surroundings

and parking the car in the designated

space

Range sensors (ultrasonic radar,

millimeter-wave radar, lidars and

Cameras)

Accelerator,

braking,

steering

PDS (Pedestrian

Detection System)

Detecting pedestrians in front of the

vehicle, giving alerts or automatically

braking when necessary

Cameras

Braking, display

system

(console,

navigation

display, HUDs)



ADAS Key features Sensing Actuating

BSD

(Blind Spot Detection)

Monitoring drivers’ blind spots and

giving corresponding alerts

Range sensors (ultrasonic radar,

millimeter-wave radar, lidars and

Cameras)

Display system

(console,

navigation

display, HUDs)

NVS

(Night Visions

System)

Using active or passive infrared ray to

help drivers gain a clearer vision in

dim light

Infrared sensors

Display system

(console,

navigation

display, HUDs)

DSM

(Driver State

Monitoring)

Assessing drivers’ behavior and

facial/eye movements to judge

whether the drivers are in a fatigue

state and giving alerts when

necessary

Infrared sensors and Cameras

Display system

(console,

navigation

display, HUDs)

SVC (Surround View

Cameras)

Using multiple cameras to help

drivers park the car Cameras

Display system

(console,

navigation

display, HUDs)


With rising penetration, the ADAS technology will likely create a market of

Rmb200bn by 2020E. The penetration ratio of ADAS modules in the OEM-embedded

market could reach 30% while aftermarket penetration ratio could be lifted to 5% on

multiple catalysts including: 1) rules and regulations are now encouraging traditional

OEMs to install safety systems before vehicles are shipped out of factory; 2) the slowdown

in global volume growth requires parts suppliers to improve their product competitiveness;

3) new internet-backed entrants force existing OEMs to upgrade their offerings; and 4)

consumers are requiring upgraded interactive experience.

Table 6: Total available market (TAM) of ADAS in China by 2020E

ADAS modules Unit price

(Rmb)

2015

penetration

2020E

penetration

2015 market

size

(Rmb100mn)

2020E

market size

(Rmb100mn)

Pedestrian Detection

System (PDS) 1,500 3% 30% 10 135

Blind Spot Monitoring

(BSM) 1,500 4% 30% 14 135

Lane Departure

Warning (LDW) 1,500 2% 30% 6 135

Adaptive Cruise Control

(ACC) 2,000 1% 30% 7 180

Forward Collision

Warning (FCW) 1,000 1% 30% 3 90

Night Visions System

(NVS) 2,500 1% 5% 6 38

Automatic Emergency

Braking (AEB) 1,200 5% 50% 15 180

Traffic Sign Recognition

(TSR) 1,200 1% 15% 3 54

Automatic Parking (AP) 1,200 3% 30% 8 108

Surround View

Cameras (SVC) 4,000 1% 30% 10 360

Adaptive Forward

Lighting (AFL) 1,000 1% 30% 3 90

Driver Monitoring

System (DMS) 1,200 0% 10% 0 36

Aftermarket ADAS

systems 2,500 0% 5.0% 10 375

Total 94 1916

Source: CITICS Research estimates

First-movers are likely to be the ultimate winners



Traditional tier-1 suppliers continue to dominate in the ADAS segment. In 2013 the

top five suppliers – Continental Corporation, Delphi, Denso, Autoliv and Bosch took

market share of 17.5%, 13.5%, 12.9%, 11.3% and 10.1% respectively, or more than 65%

collectively, in the ADAS market for passenger vehicles. The rest of the market was shared

among Valeo, TRW Automotive, Magna and Hella.

Fig. 12: Major ADAS system integrators and respective market share in 2013

Source: auto.qq.com, CITICS Research

Table 7: World leading ADAS system integrators

Company Country Industry position Key offerings Key customers

Bosch Germany

One of Germany’s largest

industrial companies and

world’s largest auto supplier

FCW, LDW, LKA, AEB, ACC, TSR,

IHC, PDS, BSD, AP, BMS

Benz, BMW, Audi, Volvo, Citroen, BAIC

Motor, JAC Motors, Geely

Continental Germany

A Germany-based transport

sector manufacturer and one of

the world’s top 5 auto suppliers

LDW, ACC, BSD, AEB, IHC, TSR Benz, BMW, GM, Toyota, Honda,

Renault, Porsche, SAIC Motor

Delphi US A world leading auto electronics

technology supplier

LDW, FCW, LKA, AEB, ACC, AP,

SVC

BMW, Audi, Volvo, Ford, FAW Group,

SAIC Motor

Denso Japan A top-tier auto parts and

systems provider

LDW, FCW, LKA, AEB, ACC, DSM,

PDS Toyota

Autoliv Sweden Global leading auto electronics

safety system supplier

LDW, FCW, BSD, LKA, AEB, ACC,

PDS, NVS

GM, Ford, Nissan, Hyundai,

Volkswagen, Benz, BMW, Honda


Start-ups with core technologies could embrace exponential growth. We suggest

investors keep close tabs on tech start-ups with a strong technology pipeline. Reasons

include: 1) The ADAS technology and the industry are still premature, with traditional

OEMs, tech companies and parts manufacturers all on the same starting line. The gap

between different companies is smaller compared with traditional segments; 2) The core

competitiveness in ADAS depends on iterative algorithm and massive tests on vehicle

models. Enterprises with proven technologies enjoy an unmatched competitive edge. Take

Mobileye for example. The company was established in 1999 but signed its first production

agreement with GM only in 2007. There was an 8-year gap and it made no profit in

between. After more than one decade’s of research and development, Mobileye gained an

unrivaled position in the single-camera ADAS segment around the world. As of Jan 2016,

its products were widely applied on 237 vehicle models of 20 automakers including GM,

BMW, Volvo and Tesla. The company’s operating revenue has been growing rapidly ever

since.

Continental

Denso Autoliv Bosch Others Delphi



Fig. 13: Mobileye’s OEM-embedded

operations grew quickly

Source: Company annual reports, Collated by CITICS

Research

Fig. 14: Mobileye’s operating revenue and net

profit (US$mn)

Source: Company annual reports, Collated by CITICS

Research

Innovators and imitators are both on the stage, but only those fully committed to

innovations will become the ultimate winner. Many start-ups in China have mastered

the core identification algorithms and are moving into the ADAS integration segment.

Some are improving their product performance and user experience through technological

innovations and localizations based on independent R&D. Others simply imitate foreign

companies in order to gain a head start and take advantage of higher selling prices. We

believe the concentration ratio of the smarting driving segment will rise rapidly going

forward and only those companies which focus on building their local competitiveness

stand a chance to be the ultimate winner.

Table 8: ADAS start-ups in China

Company Business description Customers Realization approach

INVO

Automotive

Electronics

Driver assistance systems (LDW/FCW/BSD/PDS/NVS/TSR)

/3D parking systems

GAC Group, BAIC Motor,

Changan Automobile, Geely,

SAIC Motor, Yutong Bus and

King Long

Cameras

Forward

Innovation

ADAS systems (Cameras +core chips +ADAS algorithms

LDW/FCW/DSM/PDS/TSR/NVS/SVC) Aftermarket Cameras

Shenzhen

Vastfly Tech ADAS systems (FCW/LDW/PDS/BSD/SVC) OEM-embedded/Aftermarket Cameras

Zongmu Tech Surround review ADAS (LDW/BSD/SVC) Aftermarket Cameras

SmarterEye ADAS systems (FCW/LDW) Aftermarket Binocular cameras

AIDRIVING Collision warning /Night Visions System/AIDriving App Aftermarket Cameras/ laser sensors

/millimeter-wave radars

MaxiEye ADAS systems (ACC/FCW/AEB/IHC/LKA/PSD/TSR) OEM-embedded/Aftermarket Cameras

Minieye ADAS systems (FCW/LDW/BSD/PDS) Aftermarket Cameras

Mplanet Intelligent driving video recorder (IoV) Aftermarket Cameras

Hangzhou

Nicigo Nicigo (ADAS: FCW, LDW+UBI)

Aftermarket + insurance

companies Cameras

CarPro Carpro HUD (driving video recorder/Gesture sensing

/navigation/on-board diagnostic (OBD)) Aftermarket

Tsingtech

Microvision

Driver fatigue monitoring/ remote monitoring/ integrated fleet

monitoring Aftermarket Cameras

Carstar IoV / remote monitoring (anti-theft) Aftermarket

Hirain

Technologies

Forward Active Safety Cameras/ surround view parking

(based on Mobileye EyeQ3 chips) Aftermarket Cameras

Whetron

Electronics

LDW, Smart Keyless System, Around View Monitoring

System Aftermarket Cameras

Henan Escort

Industrial

Emergency braking system and collision avoidance warning

system OEM-embedded Radars

Tencent DVR ADAS / driving video recorder Aftermarket Cameras

DeepGlint Behavior analysis / vehicle identification (traffic safety and Aftermarket Cameras

No. of chips/ in 10k sets

No. of vehicle models

Revenue growth

Net profit

Operating revenue



Company Business description Customers Realization approach

logistics monitoring)

Jimu

Technology ADAS OEM-embedded Cameras

Roadefend

Vision

Technology

ADAS Aftermarket Mobile phone cameras


Listed companies are making equity investments along the ADAS industry chain.

Vie Science & Technology (002590) has built a presence in the internet of vehicles (IoV)

segment by acquiring Soda Mobility and FutureMove, established a joint venture with the

Sweden-based Haldex to venture into the intelligent electronic braking system, and

acquired a stake in Evatran to tap into inductive charging for electric vehicles. Asia-Pacific

Mechanical& Electronic (002284), as an industry leader in braking systems, invested in

Forward Innovation, Tima Networks, Intibeam, and Suzhou Anzhi Auto Parts to build a

presence along the smart driving and IoV industry chain. It also bought a stake in Elaphe

(an in-wheel electric motor manufacturer) to tap into the new energy vehicle segment.

Zhejiang Jingu (002488) built a presence in the IoV and ADAS segments via equity

investments in Mirrtalk Automotive and INVO Automotive Electronics. ZYNP Corporation

(002448) made an equity investment in Shenzhen Vastfly Tech to access the driving

assistant system market. Taiwan-based TungThih Electronic, the largest backup sensor

manufacturer, possesses 50% market share in mainland China as well as multiple ADAS

technologies, including automatic parking (AP), surround view cameras (SVC), bind spot

detection (BSD) and lane departure warning (LDW). Meanwhile, the company is also in the

process of developing other applications including automatic emergency braking (AEB),

traffic sign recognition (TSR) and pedestrian detection system (PDS).

Table 9: Equity investment in ADAS by listed companies

Company Date Target Investment Approach Key products of the

target company

Vie Science

& Technology

(002590)

Jun 2015 Evatran

Group US$1.60mn Acquired a 7.3% stake

Wireless charging

system

Oct 2015 Soda Mobility Rmb5.128mn Acquired a 22% stake IoV

Nov 2015 FutureMove Rmb45mn Acquired a 22% stake IoV

May 2016

Established a JV named

Haldex VIE with Haldex

Auto electro-mechanical

brake (EMB) system

Asia-Pacific

Mechanical&

Electronic

(002284)

Jun 2015 Forward

Innovation Rmb29mn Acquired a 20% stake ADAS

Jun 2015 Tima

Networks Rmb82mn Acquired an 11.9% stake IoV

Dec 2015 Intibeam Rmb7mn Acquired a 10% stake Millimeter-wave collision

avoidance radar system

Dec 2015 Elaphe Eur10mn

Acquired a 20% stake and

established a JV in China

with a 51%+ stake

In-wheel electric motors

Jan 2016 Suzhou

Anzhi Rmb5mn Acquired a 10% stake ACC, AEB etc.

Zhejiang

Jingu

(002488)

Nov 2014 Mirrtalk

Automotive Rmb25mn

Acquired a 12.5% through

capital injection

Free voice-based IoV

hardware and services

May 2015

INVO

Automotive

Electronics

Rmb40mn Acquired a 20% stake ADAS

ZYNP

Corporation

(002448)

Nov 2015 Shenzhen

Vastfly Tech Rmb38.34mn Acquired a 15.34% stake

3-dimensional driving

assistant system




Components: Domestic companies will likely be

able to produce sensor/map modules in the future

Among smart-driving components, domestic companies will likely be able to

produce sensor and map modules in the future. In contrast, due to its higher

technological barrier, auto OEMs and global leading component producers will continue to

be the sole manufacturers of decision-making modules.

Fig. 15: ADAS components

Source: Compiled by CITICS Research

According to the Made in China 2025 plan, the proportion of domestically-produced

sensors (mostly cameras and radars) and high-resolution map systems should rise rapidly

in the next five years.

Table 10: The target proportion of domestically-produced key components of vehicles, according to

the Made in China 2025 plan

Component Target

Optical system Above 80% by 2020

Radar system Above 40% by 2025

High-resolution

positioning system Above 60% by 2025

Integrated control

system Core controller: 50%; key chips for controllers: 30% by 2025

Source: Made in China 2025, compiled by CITICS Research

Sensor modules: integration of multiple sensors

Mainstream vehicle sensors include ultrasonic radars, lidar (light detection and ranging),

millimeter-wave radars, cameras, and infrared detectors. Considering measurement

capability and adaptability, we expect radars and cameras to be the most popular sensors

in the future, with integration of multiple sensors.

Table 11: Performance of vehicle sensors

Ultrasonic

radar lidar

Millimeter

wave radar Camera

Infrared

detector

Long distance measurement × √ √ √ o

Resolution × o √ √ ×

False alarm rate × o √ o ×

Temperature tolerance × √ √ √ o

Darkness tolerance √ √ √ × √

Sensor Internet of Vehicles

3D high-resolution map

Road Traffic sign Pedestrian

Acceleration Turning Brake

Central control system Navigation HMI HUD

Acceleration Turning Brake

Ultrasonic radar Millimeter-wave radar Laser radar

Single camera Dual-camera Panoramic camera

Infrared detector

Sensors on vehicle Recognition Decision-making

Actuator



Ultrasonic

radar lidar

Millimeter

wave radar Camera

Infrared

detector

Weather adaptability × × √ × ×

Dust/humidity tolerance o × √ × ×

Low-cost hardware √ o √ × √

Low-cost signal processing √ √ √ × √

Source: IEEE, compiled by CITICS Research √: Excellent; o: Good ×: Fair

Sensor modules: Millimeter wave radar

Millimeter wave radar emits millimeter length electromagnetic waves and determines

distance of obstacles by calculating the arrival time of reflected waves. Moreover,

millimeter wave radar can also determine relative speed of obstacles by calculating

changes in the frequency of the reflected waves. Compared with infrared detector, lidar,

and cameras, millimeter wave radar can work well in nearly all weather and environmental

conditions (foggy, smoky, and dusty environments, but not under heavy rain). However,

millimeter wave radar cannot recognize colors, and is not sensitive to reflected waves of

pedestrians. In addition, due to relatively narrow angle of view, millimeter wave radar has

to be used in a group. Millimeter wave radar is widely used to measure distance between

vehicles (autonomous cruise control, collision alarm, and blind zone detection).

Fig. 16: Millimeter wave radar


Among the applicable frequencies (24GHz, 60GHz, 77GHz, and 79GHz), the

mainstream frequencies for millimeter wave radar are 24GHz and 77GHz, which are

used to measure medium/short and long/medium distance, respectively. The higher

the frequency, the higher the precision of distance and speed detection is. As a result,

77GHz is becoming increasingly popular. 1) EU: In 1997, European Telecommunications

Standards Institute (ETSI) assigned 76-77GHz to be the special frequency for collision

avoidance radars. 2) US: 24GHz and 77GHz. 3) Japan: on the transition from 60GHz to

77GHz. 4) On World Radiocommunication Conference (WRC) 2015 held in Geneva, the

frequency range of 77.5-78.0GHz was assigned to radio positioning business, in a bid to

facilitate development of short-distance high-resolution vehicle radars. 5) In 2005, the

Ministry of Information Industry (now a part of the Ministry of Industry and Information

Technology) assigned 77GHz to distance measurement radars for vehicles. In 2012, the

Ministry of Industry and Information Technology assigned 24GHz to short-distance vehicle

radars.



Table 12: Frequencies for millimeter wave radar

Frequency Scope of distance measu

rement Applications

24GHz Medium/short distance: 5-7

0 meter BSD,LDW,LKA,LCA,PA

77GHz Long/medium distance: 100

-250 meter ACC,FCW,AEB


Shipment of millimeter wave radar chips will rise rapidly as ADAS develops. The

global shipment of millimeter wave radar chips will likely reach 72mn by 2020E. Assuming

a 30% penetration rate of ADAS in China, and each ADAS requires four short-distance

millimeter wave radars and one long-distance millimeter wave radar, the shipment will

likely reach 45mn in China, with a market size of over Rmb20bn.

Fig. 17: Global market size of millimeter wave radar

Source: Plunkett Research

Major suppliers of millimeter wave radars are leading traditional car electronics

producers, such as Bosch and Continental. As of 2015, Bosch and Continental had

combined global market share of 22%, followed by Hella, Fujitsu Ten, Denso, TRW

Automotive, Delphi Automotive, Autoliv, and Valeo.

Fig. 18: Global landscape of millimeter wave radar industry in 2015

Source: Okokok.com.cn, compiled by CITICS Research

Going forward, millimeter wave radars will be produced domestically, as some

domestic companies have already achieved major technological breakthroughs. However,

currently, the only mature products are 24GHz medium/short-distance radars

manufactured by Nano Radar and IM Semi, while the production of 77GHz radars is only

at the beginning stage. We recommend Zhejiang Asia-Pacific Mechanical& Electronic

(002284), Anhui Sun-Create Electronics (600990) and Glarun Technology (600562).

Global shipment (10,000)

YoY

Bosch Continental

Fujitsu Ten Denso Delphi Valeo Others Hella TRW Autoliv



Table 13: Major domestic providers of millimeter wave radars

Company Frequency Extent of commercialization

Huayu

Automotive 24GHz 24GHz radars are about to be put on the market

Nano Radar 24GHz 24GHz medium/short-distance radars are on the market

IM Semi 24GHz/77GHz 24GHz radars are on the market; 77GHz radars are expected to

be put on the market in 2016

IntiBeam

Technology 24GHz/77GHz Prototypes for 24GHz radars; 77GHz radars in laboratory

Sensortech 24GHz/77GHz Low-volume production of 24GHz radars; Prototypes for 77GHz

radars

ATS Electronics

Tech 77GHz

77GHz RCC radars exhibited on China International Automotive

Aftermarket Industry and Tuning Trade Fair

Shenyang

Cheng-Tech 77GHz

77GHz radar has experienced indoor testing, and outdoor testing

is scheduled for September

Nanjing E Hawk

Eye 77GHz Prototypes for 77GHz radars to be released in 2H16E

Beijing Autoroad

Tech 77GHz 77GHz radars exhibited on Beijing Auto Show


Zhejiang Asia-Pacific Mechanical& Electronic (002284) acquired a 10% stake of

IntiBeam Technology with a consideration of Rmb7mn, in a bid to gain a presence in the

millimeter wave radar business. Anhui Sun-Create Electronics (600990) controlled by

East China Research Institute of Electronic Engineering, produces millimeter wave radars

for anti-aircraft warfare and weather monitoring. With high-quality assets from the 14th

research institute of China Electronics Technology Group Corporation, Glarun

Technology (600562) produces military airborne radar and weather radar. Located in

Taiwan, Wistron NeWeb Corporation provides 24GHz and 77GHz devices for ADAS

applications.

Sensor modules: lidar (light detection and ranging)

Lidar emits laser beam to detect location and speed of objects. With multiple laser emitters

and receivers, vehicle lidar can generate wide-scope high-precision three-dimensional

cloud points. However, lidar has poor performance in rainy, snowy, and foggy

environments. In addition, it is very costly, and generates overly large data.

Currently, lidars are used in testing self-driving cars: 1) Velodyne 64-line lidars are

used in Google and Baidu’s testing self-driving cars; 2) Velodyne 32-line lidars are used in

Ford Mondeo Hybrid, while the third-generation self-driving car Fusion Hybrid is equipped

with two Velodyne Solid-State Hybrid Ultra PUCK Auto lidars; 3) Nissan LEAF is equipped

with six lbeo 4-line lidars; 4) Audi A7 Piloted Driving is equipped with Scala Solid-State

Hybrid lidars; 5) Delphi’s self-driving car is equipped with four Quanergy solid-state lidars.



Fig. 19: Lidar’s 3D point cloud

Source: Niuche.com

Lidar (with rotating parts) is a mature technology. Velodyne and Ibeo are

mainstream overseas manufacturers. Velodyne produces 16/32/64-line lidars with

rotating laser emitters and receivers. Ibeo produces 4/8-line lidars with a fixed laser emitter.

Beijing OuBaiTuo Information Technology is Ibeo’s agent in China.

Table 14: Rotating lidar products

Manufacturer Product Price (USD) Number of lines Dimension Frequency of

rotation Range of measurement Resolution Precision

Ibeo

Lux 4 2.5D 12.5/25/50Hz

Horizontal: 85°

Vertical: 3.2°

Range:200 meter

Horizontal:

0.125°

Vertical: 0.8°

10cm

Lux 8L 8 2.5D 6.25/12.5/25Hz

Horizontal: 110°

Vertical: 6.4°

Range:200 meter

Horizontal:

0.125°

Vertical: 0.8°

4cm

Velodyne

VLP-16 7,999 16 3D 5-20Hz

Horizontal: 360°

Vertical: 30°

Range:100 meter

Horizontal:

0.1-0.4°

Vertical: 2°

3cm

HDL-32E 20,000 32 3D 5-20Hz

Horizontal: 360°

Vertical: 40°

Range:100 meter

Horizontal:

0.1-0.4°

Vertical: 1.33°

2cm

HDL-64E 70,000 64 3D 5-20Hz

Horizontal: 360°

Vertical: 26.8°

Range:120 meter

Horizontal: 0.08°

Vertical: 0.4° ＜2cm

Source: OuBaiTuo’s official website, Velodyne’s official website, compiled by CITICS Research

With small size and low cost, fixed lidar is the future. Without rotating parts, fixed lidar

is smaller, and thus can be embedded in vehicles, leading to higher reliability and much

lower cost. Quanergy, a start-up, has developed a fixed lidar in cooperation with Delphi,

and plans to launch mass production by the end of 2017E. With phased array technology,

the fixed lidar does not have any rotating parts. Velodyne and Ibeo also introduced hybrid

fixed lidars, which have rotating parts inside, rather than outside.



Fig. 20: Rotating lidar vs. fixed lidar

Source: Autohome, compiled by CITICS Research

In 2015, Scala Solid-State Hybrid lidars (developed by Ibeo and Valeo) were equipped on

Audi A7 Piloted Driving. Scala is also equipped on a Volkswagen semi self-driving car.

Embedded in bumper bars, Scala replaces millimeter wave radar as distance

measurement modules. Two fixed/hybrid fixed lidars were exhibited on CES2016: 1)

Quanergy’s business-card-box-sized fixed lidar S3, with preliminary price of US$250,

which can be reduced to US$100 after mass production; 2) Hybrid fixed lidar Ultra Puck

Auto, introduced by Velodyne and Ford, whose price may reach US$500 after mass

production by 2020E and lower than US$200 by 2025E.

Table 15: Fixed lidar vs. hybrid fixed lidar

Company Partner Product Price Line

Quanergy Delphi Solid S3 US$250; US$100 for mass production 8

Ibeo Valeo Hybrid solid Scala

4

Velodyne Ford Hybrid solid Ultra Puck Auto US$500 for mass production, US200 by 2025E 32

Source: Autohome, Cheyun.com, compiled by CITICS Research

We expect lidar market size at more than Rmb10bn by 2020E. Driven by technological

improvement and capacity growth, we estimate the lidar cost at c.Rmb400 by 2020E,

implying a cost of Rmb800-1,600 for each vehicle (assuming 2-4 lidars to be installed on a

vehicle). Assuming 25% vehicles are equipped with lidars before being sold and 5% after

sold, China’s Lidar market size will likely reach Rmb20bn in 2020E.

Table 16: Estimated lidar market size in 2020E

Price (Rmb)

Number p

er vehicle

Penetratio

n rate

Number of vehicles (1

00mn)

Market size (Rmb100

mn)

Before sale 400 4 25% 0.3 120

After-sale 400 1 5.0% 3 60

Total

180

Source: CITICS Research estimates

Several domestic companies are involved in development and production of lidars used in

air pollution detection, 3D measurement, and vehicles. We recommend Hangzhou Great

Star Industrial (002444).

Table 17: Domestic companies related to lidar business

Company Founded in

Products Usage

Wuxi CAS

Photoelectric 2011

Founded by Focused Photonics

(300203), Institute of Optics and

Precision Mechanics of CAS, and

CAS IOT

Lidar, and sonic

radar

Monitoring of

combined air

pollution (dust,

haze)

Tec Dawn 2009

Integration of lidar Surveying and



Company Founded in

Products Usage

system mapping by

vehicles or drones

Escort

Industrial 2014

Lidar system for

vehicles Vehicle

LeiShen

Intelligent

System

2015

Four single-line 2D lidar products

have been released and a 16-line 3D

lidar will likely be introduced by the

end of 2016E

Lidar system for

vehicles Vehicle

Shanghai

Slamtec 2013

Self positioning and navigational

algorithms for robots, laser sensor

and robot system, with two

generations of 2D lidar products

Lidar system for

vehicles Vehicle

Stonex 2011

A 51% stake held by Beijing

UnistrongScience & Technology

(002383)

Lidar 3D surveying and

mapping

Geo Vision 1989 Affiliated to Chinese Academy of

Surveying & Mapping

Lidar and remote

sensing systems

3D and road

surveying and

mapping

Green Valley 2012 A round financing in 2015

Lidar, aerial

imaging platforms

for drones

Surveying and

mapping by drones

Beike

Technology 2005

Lidar and laser

scanner

Surveying and

mapping by drones

Huada Kejie

Opto-Electro

Instrument

1992 A 65% stake held by Hangzhou

Great Star Industrial (002444)

Laser measuring

devices and laser

projector

Engineering


In 2015, Hangzhou Great Star Industrial acquired a 65% stake of Huada Kejie

Opto-Electro Instrumen, which is focusing on improvement of laser application

technologies (such as service robots and mobile smart equipment, including self-driving

cars, AGV forklift, and inspection robot). In March 2016, Hangzhou Great Star founded a

subsidiary to develop lidar and smart equipment.

Sensor modules: camera

How vehicle camera works: 1) Converting images into 2D data; 2) Recognizing vehicles,

pedestrians, lane markings and traffic signs by matching images; 3) Estimating relative

distance and speed between objects and the vehicle. Compared with other sensors,

cameras work in a way most similar to how human eye acquire information. Cameras

boast the following advantages: 1) Mature technology with low costs; 2) Acquiring most

complete information by processing a relatively small amount of data. However, cameras

also have drawbacks: 1) Subject to light and weather conditions; 2) Requiring a large

training sample and a long training process to recognize objects, and having trouble in

recognizing non-standard objects; 3) Low precision in distance measurement, due to

marginal distortion of wide angle lens.

Applications: 1) Single camera: usually installed on front windshield to detect the

environment in front of the vehicle by recognizing road, vehicles, and pedestrians, widely

used in adaptive cruise control (ACC), lane departure warning (LDW), forward collision

warning (FCW), and pedestrian monitoring; 2) Rear-view camera: usually installed on the

rear to detect the environment in back of the vehicle, used in rearview systems; 3)

Dual-camera, with higher resolution and longer detection range; 4) Surround view

cameras: usually consist of four cameras, installed in the front, rear, left side, and right side

of the vehicle, used in automatic parking (AP) and surround view parking assistance.



Table 18: Applications of cameras

Applications Difficulty

Single camera

ACC,LDW,LKA (lane-keeping assist),FCW,AEB

(automatic emergency braking),TSR (traffic safety

rejection),AP,PDS (precision drive system),DMS

(driver monitoring system)

Machine learning, model

recognition

Rear-view camera AP Poor performance under bad

environment

Dual-camera ACC, LDW, LKA, FCW, AEB, TSR, AP, PDS, DMS Dual-camera positioning

Surround view

camera AP, SVC Marginal distortion


As the penetration rate of ADAS rises, the camera market will likely grow rapidly.

According to IHS Automotive, the annual global shipment of vehicle camera system will

likely reach 74mn units in 2021E (vs. c.15mn units in 2014). China’s camera lens

producers are leading in the global market. According to Zhiyan.org, China’s vehicle

camera industry logged output of c.8.62mn, 60% of which are exported. Under a

conservative scenario, assuming an ADAS system uses four cameras (actually 1-10

cameras can be used in an ADAS system), China’s annual shipment of vehicle camera will

likely reach 100mn units by 2020E, implying a market size of over Rmb12bn and CAGR of

over 70%.

Fig. 21: China’s vehicle camera capacity in

2011-2015

400 575

860

1,200

1,880

0

500

1000

1500

2000

2011年 2012年 2013年 2014年 2015年

产能（万个）

Source: Zhiyan.org, compiled by CITICS Research

Fig. 22: China’s vehicle camera market size

(Rmb100mn)

3

122

0

20

40

60

80

100

120

140

2015年E 2020年E

市场规模（亿元）

Source: CITICS Research forecasts

Camera module: China’s camera lens producers are leading in the global market.

Optical lens are widely used in cell phone, vehicle cameras, and cameras. As the growth

of cell phone and other digital products decelerates, camera lens producers are

increasingly focusing on vehicle cameras. China’s camera lens producers are leading in

the global market. For example, Sunny Optical Technology boasts the largest global

shipment of vehicle rear-view cameras, with a market share of c. 30% and in cooperation

with major auto manufacturers such as BMW, Benz, and Audi. In our view, the vehicle

camera business will likely boost earnings of leading domestic camera lens producers. We

recommend Shenzhen O-Film Tech (002456), Sunny Optical (2382.HK) and Kingpak

Technology.

Market size (Rmb100mn) Capacity (10,000)

2011 2012 2013 2014 2015 2015 2020



Fig. 23: Global market share of camera lens in 2014

31%

12%

7%6%5%

5%

5%3%

27%

大立光电玉晶 SekonIx Kantatsu 舜宇光学 Kolen DIOSTECH SEMCO 其他

Source: Techno Systems Research, compiled by CITICS Research

Shenzhen O-Film Tech is a traditional leading producer of camera modules, with a

presence in the supply chain of intelligent vehicles. O-Film Tech not only has the highest

shipment of camera modules, but also has a presence in dual-camera modules ahead of

its competitors. 1) In June 2015, O-Film Tech established a wholly-owned subsidiary to tap

into intelligent drive, intelligent control, “Internet+” hardware, and car electronics

businesses; 2) As a tier-one supplier of intelligent control components of BAIC BJEV,

O-Film Tech exhibited jointly-developed ADAS vehicles on the CES, and plans to expand

its presence along the new energy vehicle supply chain by acquiring shares of BAIC BJEV

with a consideration of Rmb200mn; 3) O-Film Tech plans to raise Rmb1.5bn via a private

placement for its intelligent vehicle electronics project. Sunny Optical has the largest

global shipment in the vehicle camera lens market, with a market share of c.30%. In the

market of front cameras for ADAS, which have a higher requirement for safety, Sunny

Optical has a market share of over 50%.

Sensor modules - infrared night vision: Huge growth potential; focus on domestic leaders

Infrared night vision system has huge growth potential amid growing awareness of

auto safety. According to data provided by the USNHTS, although driving at night only

accounts for one-fourth of total road traffic, the number of night driving accidents accounts

for 50%. Among others, 70% of the accidents were caused by poor view at night. With

rising auto safety awareness and growing attention to ADAS, we expect the infrared night

vision system to be popularized quickly. In 2015 the penetration ratio of night vision system

was only around 1%. Assuming a 5% penetration ratio in the OEM-embedded market by

2020E and selling at a unit price of Rmb2500, we estimate the size of the OEM-embedded

market at Rmb3.8bn. We recommend Jiangsu Protruly Vision Technology (600074).

Largan Precision

GSEO Sunny Others Sekonlx Kantatsu Kolen DIOSTECH SEMCO



Fig. 24: Working principle of Infrared Night Vision System

Source: Jiangsu Protruly Vision Technology

As a leading night vision system provider, Jiangsu Protruly Vision Technology has been

proactive in building its presence in the active safety segment. In September 2015, the

company released a private placement proposal to raise up to Rmb1.99bn, of which

Rmb840mn will be used to develop smart hardware and active safety systems. Additionally,

the company also planned to build an active safety system testing center to cement its

technological know-how and market position in the smart driving segment.

High resolution maps: The oligopoly competitive landscape will likely continue

Maps are an important part of driverless cars, and industry leaders possess unique

competitive advantages. One of the fundamental features of driverless cars is navigation.

High resolution maps are a required feature to provide the precise location and driving

routes. Compared with conventional vehicles, driverless cars have a higher requirement

on maps. GPS should achieve centimeter-level precision (currently beyond 1 meter), and

more accurate three-dimensional data are required to deal with complicated driving

conditions. Auto suppliers like Mobileye have started to offer tailor-made maps.

Conventional OEMs such as Toyota are also launching brand new mapping technology. In

our view, leading domestic map data providers will enjoy their monopoly position for a long

time to come. Reasons include: 1) surveying and mapping require long-term investment

that looks too costly for new entrants; and 2) qualification application is required for

companies engaged in the mapping segment. We expect existing industry leaders to

maintain their dominant position and embrace fast growth ahead. Our top pick is Navinfo

(002405).

Working principle of active safety systems

Visual range between 150m

and 400m

Range of image sensors

Night vision 400m

Range of lane departure sensor

Projected area of infrared ray

Range of pedestrian detector

High beam 60-80mn

Low beam 30-50m

Range of luminance sensor

Night vision 300m

Night vision 200m

Night vision 150m



Fig. 25: Shipment of OEM-embedded navigation

systems continued to grow in 2015

Source: Analysys International, Collated by CITICS

Research

Fig. 26: OEM-embedded navigation system

market share in 2015

Source: Analysys International, Collated by CITICS

Research

Navinfo possesses a leading market share in the OEM-embedded navigation market. The

company acquired map data providers Mapbar, SmartAuto and AutoChips in succession

and owns a full array of technology ranging from maps to chips, operating system, voice

recognition and on-board diagnostics (OBD).

Actuators

We suggest investors watch companies engaged in actuators including the electronic

brake systems (EBS) and in-wheel electric motors. We recommend Vie Science &

Technology (002590), Asia-Pacific Mechanical& Electronic (002284) and Ningbo

Tuopu Group (601689).

Table 19: Recommended actuator manufacturers

Company Initiatives Products

Vie Science

&

Technology

(002590)

Established a joint venture with the Sweden-based Haldex AB Electro-mechanical brake

(EMB) systems

Asia-Pacific

Mechanical

& Electronic

(002284)

Acquired a 20% stake in Elaphe and established a China-based

joint venture with the company In-wheel electric motors

Ningbo

Tuopu

Group

(601689)

Proposed to raise Rmb2.8bn through a private placement to fund

its Intelligent brake systems (IBS) and electric vacuum pump

projects

Intelligent brake systems (IBS)


Intelligent electronics system

Watch vehicle-mounted intelligent electronics components such as smart automotive

lighting, human-machine interaction (HMI) and head-up displays (HUDs). We recommend

Xingyu Automotive Lighting Systems (601799), Dongfeng Electronic Technology

(600081), Joyson Electronic (600699) and Crystal-Optech (002273).

Table 20: Recommended vehicle-mounted intelligent electronics system vendors


Xingyu Automotive

Lighting Systems

(601799)

Acquired a 70% stake in neueI&T for Eur4.60mn; and

invested Rmb150mn to establish a smart auto electronics

subsidiary

Intelligent lighting

Dongfeng Electronic

Technology (600081)

Took a 40% controlling stake in Visteon Shanghai and an

indirect controlling stake in Johnson Controls HUDs

Shipment (in 10k units)

QoQ growth (%) Navinfo AutoNavi eMapgo Others




Joyson Electronic

(600699)

Acquired the German-based Quinta, Vcyber.com, KSS and

TechniSat

HMI and active safety

systems

Crystal-Optech

(002273) Established a subsidiary specialized in HUDs HUDs


The Internet of Vehicles (IoV)

As an indispensable link to achieve fully automated driving, the IoV involves

vehicle-to-vehicle (V2V) communication, vehicle-to-roadside (V2R) communication and

vehicle-to-infrastructure (V2I) communication. We suggest investors keep tabs on

first-movers like Vie Science & Technology (002590), Asia-Pacific Mechanical&

Electronic (002284), Shuanglin Auto Parts (300100), Joyson Electronic (600699),

United Electronics (002642), Xingmin Wheel (002355), VITI Electronics (603023) and

Shenglu Telecommunication (002446) on the A-share market, as well as Taiwan-listed

companies like Wistron NeWeb Corporation (6285), Alpha Networks Inc. (3380) and

Sercomm (5388).

Table 21: Recommended IoV names


Vie Science & Technology

(002590) Acquired Soda Mobility Technologies and FutureMove IoV

Asia-Pacific Mechanical&

Electronic (002284) Acquired Tima Networks IoV

Shuanglin Auto Parts

(300100)

Established a network technology joint venture with TYD Electr

onic Technology IoV

Joyson Electronic (600699) Acquired vcyber, an HMI (human-machine interaction) solutio

ns provider IoV

United Electronics (002642) Rmb1bn private placement, of which Rmb440mn was invested

in the IoV IoV

Xingmin Wheel (002355) Acquired inTEST, a provider of temperature management prod

ucts IoV

VITI Electronics (603023)

The company aims to develop an IoV e-bus system and will li

kely finish product development and testing by the end of the

year

IoV

Shenglu Telecommunication

(002446) Acquired two IoV players IoV


After reviewing the status quo and market landscape of two product categories (the

ADAS system integration and core components), we think:

1) As an elementary product for smart driving, ADAS will be the first to be commercialized.

Tech start-ups could be the ultimate winner given their heavy investment in innovations.

Listed companies are entering the ADAS industry chain by investing in or acquiring ADAS

start-ups;

2) The “Made in China 2025” initiatives could drive the localization of perception

recognition (mainly cameras and radars) and high-definition maps. Among others, the

millimeter-wave radars are now being commercialized in China. Lidars, which are

becoming smaller, cheaper and more solid, will likely become the mainstay products. In

terms of cameras, domestic leaders enjoy solid market leadership and may deliver

significant growth. We think infrared night vision could have huge growth potential and

suggest investors keep close tabs on leading names. Companies with an edge in

high-definition maps will continue to enjoy their monopoly position given the high entry

barrier and qualification threshold.



Potential risks

1) Most listed companies entered the smart driving segment via either equity investment

or M&A activities. They need time to prove their operational capabilities and potential

to consolidate/integrate the newly-acquired business;

2) Profit contribution from smart driving could be restricted given the limited number of

new product offerings in the coming 1-2 years;

3) The high valuation levels of some target companies provide minimal safety margins;

and

4) Potential sell-downs by the senior executives of listed companies.

Investment strategy and recommendations

In our view, unmanned driving represents the ultimate direction of the auto industry, but

may only deliver a small profit over the next 1-2 years due to the lack of new product

offerings in the near term. We think the smart driving segment will likely maintain high

valuation levels driven by thematic opportunities. Therefore, the market position of the

target company will become an important valuation benchmark in a potential acquisition

deal. We reiterate our OUTPERFORM call on the sector, and advise investors to watch the

following names: Zhejiang Vie Science & Technology (002590), Tuopu Group (601689),

Asia-Pacific Mechanical & Electronic (002284), Xingyu Automotive Lighting Systems

(601799), Joyson Electronic (600699) and Shuanglin Auto Parts (300100).

Table 22: Earnings forecast

Company

Share

price

(Rmb)

EPS (Rmb) PE (x) PB

(x) Rating

15 16E 17E 18E 15 16E 17E 18E

Vie Science & Technology (002590) 28.94 0.19 0.24 0.31 0.37 152 121 93 78 8.5 O/W

Ningbo Tuopu Group (601689) 26.54 0.63 0.76 0.88 1.04 42 35 30 26 5.3 O/W

Asia-Pacific Mechanical& Electronic (002284) 18.18 0.19 0.25 0.29 0.34 94 73 63 53 5.3 O/W

Xingyu Automotive Lighting Systems (601799) 45.59 1.22 1.46 1.69 1.95 90 46 27 23 6.6 O/W

Joyson Electronic (600699) 36.73 0.41 0.79 1.34 1.60 70 48 39 33 7.8 O/W

Shuanglin Auto Parts (300100) 42.57 0.61 0.84 1.00 1.18 70 51 43 36 7.8 O/W

Source: Wind, CITICS Research forecast Note: Closing price as of 14 Jun 2016



Key companies

Vie Science & Technology (002590): Growing presence in smart driving

A leading automotive brake system supplier in China. The Company’s major products

include air/hydraulic brake systems, suspensions and clutch operating systems. Among

others, the air brake systems contributed operating revenue and profit of 33.6% and 52.3%,

respectively. The Company mainly serves downstream commercial vehicle (CV) and

passenger vehicle (PV) manufacturers including FAW Group, Guangzhou Automobile

Group, Beiqi Foton Motor, Shaanxi Heavy Duty Truck, Great Wall Motor, Jianghuai

Automobile, BYD, Chery Automobile and Geely Auto. It reported operating revenue of

Rmb1,700mn (+28.9% YoY) and net profit of Rmb92.86mn (+24.1% YoY) for 2015.

Teaming up with Haldex provides the access to active safety solutions. The

Sweden-based Haldex AB is a world-leading supplier of brake systems for commercial

vehicles. Its key products include brake adjusters, disc brakes and anti-lock braking

systems/electronic braking systems (ABS/EBS). The Company has established a joint

venture with Haldex AB to engage in the R&D and production of electro-mechanical

braking (EMB) systems. Compared with traditional air brake or hydraulic brake systems,

the EMB system is more superior in terms of response time, stopping distance and comfort

level. Considering the brake system is an important part of smart driving, we believe the

EMB systems could become a key actuator of active safety technologies, including the

electronic stability control (ESC) and adaptive cruise control (ACC). As a potential

early-mover, the Company will likely benefit from the fast growth of the driverless

technology.

Increased presence in electrification and smart driving underpins sustainable

growth. The Company has ventured into the new energy vehicles and smart driving

segments through a series of equity investments, including US$3.2mn for an 11.72% stake

in Evatran, a US-based wireless charging solutions provider, Rmb20mn for a 22% stake in

FutureMove, an OEM-embedded telematics supplier, and Rmb16.92mn for a 22% stake in

Soda Mobility Technologies. Additionally, it plans to raise Rmb850mn at Rmb12.6 per

share in a private placement to replenish working capital and fund its EBS project, a

modular chassis production base, and a R&D center for the internet of vehicles (IoV),

wireless charging and ADAS solutions. After reaching their designed capacity, the EBS

and chassis projects will add incremental output of 200k units of ABS, 50k units of EBS

and 500k units of PV chassis modules and contribute additional operating revenue of

Rmb1.2bn and net profit of Rmb100mn. This will significantly boost the Company’s

earnings.

EBS and chassis operations to create new earnings drivers. The Company has

achieved mass production for its proprietary ABS products. Other value-added offerings

including EBS, ESC and electric park brakes (EPB) will also be launched in succession.

Given the gradual mass production of new offerings and China’s tougher commercial

vehicle safety regulations, (light trucks must be equipped with ABS starting from July 1 this

year), we expect the Company’s traditional brake system to maintain 25% growth over the

next three years. Additionally, as automakers are increasingly outsourcing their chassis

production, the Company’s chassis segment maintained fast growth in the past few years

(2015 top-line growth at 143% YoY) and will likely continue to grow at 30% over the next

three years.



Potential risks: 1) Disappointing new product promotion; 2) Slower-than-expected

progress with new projects funded by the private placement; and 3) Inorganic growth

missing expectations.

Earnings forecast and investment recommendation: OVERWEIGHT reiterated. We

maintain our 2016/17/18E EPS estimates at Rmb0.24/0.31/0.37 (vs. Rmb0.19 in 2015),

implying three-year PEs of 121x/93x/78x based on its current share price of Rmb28.94.

We are upbeat about the Company’s long-term growth prospects considering its solid

traditional operations, impressive performance of the EBS and chassis segments,

aggressive expansion into electrification and smart driving, and potential accretive M&A

deals.

Table 23: Earnings forecast and valuation

Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 1,322 1,690 2,127 2,508 2,964

Growth YoY % 3.05 27.84 25.84 17.91 18.17

Net profit (Rmb mn) 74 92 116 148 177

Growth YoY % 112.28 23.24 26.23 27.71 19.79

Gross margin % 25.32 22.58 22.56 22.63 22.59

EPS (Rmb) 0.16 0.19 0.24 0.31 0.37

BVPS (Rmb) 1.5 1.7 1.9 2.1 2.3

PE (x) 181 152 121 93 78

PB (x) 19.3 17.0 15.2 13.8 12.6

Source: CITIC Quantitative Investment Analysis System Note: Closing price as of June 14, 2016.



Ningbo Tuopu Group (601689): Focusing on actuators for driverless cars

A leading NVH (noise, vibration and harness) solutions provider. The Company is

mainly engaged in the production of rubber shock absorbers and insulation products in the

NVH segment. By sales volume, its rubber shock absorbers are a national best-seller

while insulation products are ranked No. 6 in China. Domestic customers include SAIC

General Motors, SGMW, Geely Auto and Changan Ford. Overseas customers include

Chrysler, GM, Audi and BMW. The Company reported revenue of Rmb3.01bn (+9.9% YoY)

and net profit of Rmb410mn (+2.4% YoY) for 2015. Among others, shock absorbers

contributed 53% of total revenue and 64% gross profit, whilst interior accessories

contributed 38% and 27% respectively. Additionally, the Company plans to raise up to

Rmb2.8bn to invest in its intelligent brake system (IBS) and electric vacuum pump project.

New businesses including lightweight suspensions and IBS fared well amid solid

performance of main operations. The Company has outstanding synchronous R&D and

system integration capabilities. Currently its synchronous R&D orders account for c.80% of

total orders. The Company signed an Rmb1bn 8-year NVH hydraulic shock absorber

supply contract with GM, indicating its strong technological capabilities. Additionally, it is

extending into new operations along the industry chain, including auto lightweighting

solutions and auto electronics. In 2015, its lightweight suspensions and electric vacuum

pumps delivered revenue growth of 33% and 77%, respectively. Given the global trend of

energy-saving and smart driving, we expect the Company to maintain fast growth for its

new businesses.

The smart driving initiatives funded by the Rmb2.8bn private placement should

drive a valuation re-rating. The Company plans to raise up to Rmb2.8bn at no less than

Rmb21.47 per share through a private placement to support its initiatives in the smart

driving segment. Specifically: 1) Rmb2.2bn will be used to fund the IBS project with annual

designed capacity of 1.50mn units. IBS is a key actuator for active safety technologies like

automatic emergency braking (AEB) systems, electronic stability control (ESC) systems

and adaptive cruise control (ACC) systems. An international comparable product is

Bosch's iBooster launched in 2013. The Company followed the international giant closely

and gained first-mover advantage in this segment. 2) Rmb600mn will be invested into the

electric vacuum pump project with designed annual capacity of 2.6mn units. Electric

vacuum pumps are mainly used onto turbochargers and medium to high-end vehicle

models. The product is also a standard component for new energy vehicles (NEVs) and

has been used by local and JV car brands including Geely, Zotye, SAIC and GM. The

project will take two years to complete and contribute net profit of Rmb770mn once

reaching its designed capacity. This will significantly boost the Company’s earnings.

The Company has established an investment unit to strengthen its presence along

the industry chain. The Company is well-capitalized, with liability-to-asset ratio only at

21%. Cash and cash equivalents amount to Rmb580mn. In 2015 the Company

established an investment company to engage in industrial and equity investment. This

will likely help it to expand market share and extend presence along the industry chain.

Considering the development path of comparable companies like Zhongding Sealing Parts

(000887) and Zhuzhou Times New Material Technology (600458), we expect the

Company to deliver extraordinary growth through inorganic expansion.

Potential risks: 1) Disappointing new product promotion; 2) Slower-than-expected

progress with new projects funded by the private placement; and 3) Inorganic growth

missing expectations.



Earnings forecast, valuation and rating: We estimate the Company’s 2016/17/18E EPS

at Rmb0.76/0.88/1.04 (vs. Rmb0.63 in 2015). Its current share price of Rmb26.54 implies

three-year PEs of 35x/30x/26x. We are upbeat on the Company’s long-term growth

prospects and believe a 40x 2016E PE is fair for the Company based on the average

valuation level of the industry. We initiate our coverage of the Company with an

OVERWEIGHT rating and a target price of Rmb31.


Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 2,737 3,007 3,472 4,023 4,723

Growth YoY % 18.54 9.88 15.45 15.86 17.41

Net profit (Rmb mn) 399 409 491 572 675

Growth YoY % 17.53 2.39 20.07 16.68 17.93

Gross margin % 29.51 28.81 29.83 29.91 30.13

EPS (Rmb) 0.61 0.63 0.76 0.88 1.04

BVPS (Rmb) 2.3 4.9 5.4 6.0 6.7

PE (x) 44 42 35 30 26

PB (x) 11.7 5.5 4.9 4.4 3.9

Source: Company announcements, CITICS Research estimates. Note: Closing price as of June 14, 2016.



Asia-Pacific Mechanical & Electronic (002284): Market leadership cemented

by a full presence along the driverless industry chain

A full presence along the driverless industry chain following a series of equity

investments. Target companies include Forward Innovation, Tima Networks and Intibeam

Technology. Forward Innovation provides a complete set of in-vehicle ADAS products and

a full package of safety solutions. As its aftermarket products are doing well, the target

company is now steadily pushing ahead with its OEM-embedded ADAS solutions. Tima

Networks positions itself as a vehicle-mounted mobile internet carrier capable of offering

the Internet of Vehicles (IoV) solutions and operation outsourcing services by leveraging

advanced big data cloud-computing platforms and multiple smart terminal products.

Intibeam Technology is mainly engaged in the production of millimeter-wave collision

avoidance radar systems. Through these equity investments, the Company has cemented

its technological foothold in terms of environmental perception, active safety control and

interconnection for driverless cars. Such a strong pipeline of technology should create

enormous growth potential for the Company in the future. Meanwhile, the Company’s

existing operations, including anti-lock brake systems (ABS) and electronic stability control

(ESC), both of which serve as the ultimate actuators of driverless cars, could form a

complete closed-loop ecosystem with its acquired businesses, i.e. the sensor systems (of

Forward Innovation and Intibeam Technology) and the IoV solutions (Tima Networks).

A 20% stake in Elaphe adds to the Company’s driverless strength. The Company

plans to acquire a 20% stake in Elaphe (In-wheel electric motor) for Eur10mn via capital

injection. Elaphe is a world leading researcher and developer specializing in electric

motors for electric and other types of vehicles. We believe the latest investment, plus

earlier equity investment initiatives, could help solidify the Company’s strengths in the

driverless segment.

Domestic market expansion through JVs. As a core component to new energy vehicles,

in-wheel electric motors could consolidate the power units, transmission gears and brake

systems all into the wheel, rather than leaving transmission parts like the clutches,

gearboxes, transmission shafts, differential gears and transfer cases scattered. Apart from

a streamlined structure, vehicles fitted with in-wheel electric motors present better space

utilization and transmission efficiency. The Company also plans to establish a joint venture

with Elaphe in China to localize production of in-wheel electric motors and expand the

domestic market. The JV will be created with funds from the Company and core

technological expertise from Elaphe. We expect the Company to have more than 51%

stake of the JV.

Auto electronics products to become the new growth drivers. The Company has

acquired the necessary qualification to provide electric park brakes (EPB) to major

automakers including Jiangling Motors (000550), Faw Car (000800) and SAIC Motor

Commercial Vehicle, and supply electronic stability control (ESC) systems to Dongfeng

Automobile’s M19 project. Its EPB and EABS products were put into production in 2015.

Production of ESC systems will commence in 2016 and will likely contribute to stable

earnings growth.

Potential risks: 1) New business (e.g. driverless cars) expansion missing expectations; 2)

Macroeconomic slowdown resulting in weak downstream demand; and 3) Lower market

share of major downstream customers leading to lower demand.



Earnings forecast and investment recommendation: We maintain our 2016/17/18E

EPS estimates at Rmb0.25/0.29/0.34. The Company’s current share price of Rmb18.18

implies three-year PEs of 73x/63x/53x. As a leading brake system provider in China, the

Company is overtaking its foreign peers gradually and maintains solid growth for its main

operations. Its auto electronics operations are becoming new growth drivers. We see

enormous growth potential for the Company as it deepens its presence along the smart

driving industry chain. OVERWEIGHT reiterated.


Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 3,279 3,059 4,700 5,500 6,383

Growth YoY % 20.61 -6.69 53.62 17.02 16.05

Net profit (Rmb mn) 176 142 184 214 251

Growth YoY % 28.11 -19.17 29.94 16.00 17.24

Gross margin % 16.70 16.61 16.89 16.94 16.98

EPS (Rmb) 0.24 0.19 0.25 0.29 0.34

BVPS (Rmb) 3.36 3.50 3.55 3.61 3.68

PE (x) 76 94 73 63 53

PB (x) 5.4 5.2 5.1 5.0 4.9




Xingyu Automotive Lighting Systems (601799): Private placement secures

safety margin

New AFS (adaptive front-lighting system) and ADB (adaptive driving beam)

offerings will be launched soon. As driverless technology advances, intelligent lighting

systems including the AFS, ADB, RGB (red, green, blue) lights and bus-based rear light

control systems will become an important part of smart driving. The Company launched an

AFS product at the end of last year and achieved mass production for GAC Group’s

high-end sport utility vehicle (SUV) model – the Trumpchi GS4. In addition, the Company

will likely launch a prototype of an ADB product around the middle of the year, reflecting its

strong technological capability in the intelligent lighting segment. We believe the Company

will arise as a scarce name among peers as it expands.

Transitioning from a specialized automotive lighting supplier towards an integrated

lighting solutions provider. The Company plans to raise up to Rmb1.5bn via a private

placement at no less than Rmb22.84 per share. Among others, Rmb700mn will be used to

fund its “auto electronics and lighting R&D center” project. The R&D center will focus on

automotive lighting and electronics products, smart driving, vehicle-mounted wireless

chargers, head-up displays (HUDs), sensor technology and intelligent production lines. In

our view, the establishment of the R&D center indicates the Company’s resolution in

transforming towards an integrated intelligent lighting solutions provider to capture the

smart driving trend.

Consistent product mix upgrades ensures long-term business growth. The Company

has a high-profile customer base and is offering products to major JV automakers of

Volkswagen, GM, Nissan, Toyota, Ford and Honda. In 2016, the Company will likely break

the blockade of international lighting giants like Hella Technology and Valeo and enter into

the supply chain for large family vehicles. This will further boost the Company’s customer

base and improve its product mix. Currently the Company is supplying LED automotive

lighting (a high value-added product) to a number of vehicle models including the

Volkswagen Golf A7, the VW Sagitar and the Dongfeng Nissan Venucia, with a revenue

contribution of 15% (up 2-3ppts) in 2015. With the additional LED capacity of 500k units

per annum, we expect the LED revenue contribution to approximate 20% and become a

solid growth driver.

Long-term incentive mechanism in place to boost morale. The Company has

implemented a three-phased employee stock ownership plan (ESOP) from 2015 to 2017.

Ms. ZHOU Xiaoping, the controlling shareholder of the Company, will voluntarily vest up to

3.60mn shares to the ESOP scheme in three phases. The remainder part of the scheme

will be purchased through secondary market trading. Currently, phase 1 and 2 vestings

have been implemented with subscription prices at Rmb26.39 and Rmb27.19 respectively.

We think the ESOP scheme shows the Company’s strong conviction in its growth

prospects. Such a long-term incentive mechanism should be able to boost morale and

facilitate the long-term development of the Company.

Potential risks: 1) Growth in demand from downstream automakers misses expectations;

2) The market position of major customers is undermined; 3) Disappointing LED expansion;

and 4) Slower-than-expected inorganic growth.

Earnings forecast, valuation and investment rating: We maintain our 2016/17/18E

EPS estimates at Rmb1.46/1.69/1.95. The Company’s current share price of Rmb45.59

implies three-year PEs of 31x/27x/23x. On the one hand, its traditional automotive lighting



business is growing steadily and high value-added products are being launched

continuously. On the other hand, its presence in the intelligent lighting segment makes the

Company well-positioned to benefit from the industrial upgrading of the smart driving

sector. As such, we reiterate our OVERWEIGHTING rating on the Company.


Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 2,016 2,468 2,926 3,371 3,881

Growth YoY % 23.51 22.40 18.60 15.20 15.12

Net profit (Rmb mn) 273 293 350 405 467

Growth YoY % 25.20 7.62 19.26 15.63 15.31

Gross margin % 24.05 23.46 24.10 24.24 24.37

EPS (Rmb) 1.14 1.22 1.46 1.69 1.95

BVPS (Rmb) 8.29 8.74 9.33 10.00 10.78

PE (x) 40 37 31 27 23

PB (x) 5.5 5.2 4.9 4.6 4.2




Joyson Electronic (600699): M&A strategy to continue

The acquisition of Evana proves a good fit with the Company’s existing industrial

robots business. Major customers of the US-based Evana Automation include leading

multinationals across the automotive, industrial, medical and health segments, such as

TRW Automotive, Magna, Alere and ALCON. Evana reported total revenue of

US$23.43mn and EBITDA of US$2.80mn for 2015. Joyson Electronic’s major industrial

robotics operations include Preh, IMA Automation (acquired in 2014) and Preh IMA

Automation (a China-based subsidiary). Upon the completion of the acquisition, the

Company’s geographical footprint in the industrial robotics segment will be extended from

Europe and Asia to the North America. Its strength in the medical and health segments will

also be further enhanced. As one of the Company’s three pillar products, industrial robots

should be a segment to watch in terms of both organic and inorganic growth.

Equity investment in Car Joy cements the Company’s presence in the automotive

service segment. Car Joy owns China’s first specialized aftermarket ecommerce platform

for 4S store networks – the “lechebang”. Currently it has connected to the online platforms

of the BAT (Baidu, Alibaba and Tencent), JD, Dianping, AutoNavi and China’s top 5

state-owned banks and serves as the exclusive 4S store maintenance service provider

designated by Baidu Map, Baidu Nuomi and QQAuto. Key investors include Sequoia

Capital and Baidu. The Company’s latest equity investment in Car Joy echoes its earlier

investment in vcyber.com and Anhui Auto Service, and is aimed at expanding its presence

in auto services/aftermarket services. We expect the Company to leverage its software

and hardware strength and build an IoV ecosystem that covers every aspect in end-users’

day-to-day use of cars.

A scarce top-performing smart driving name backed by the trends of intelligent cars

and intelligent road transportation. The Company proposed to acquire KSS, the world’s

fourth largest safety system supplier, for US$920mn to deepen its presence along the

smart car industry chain. Recently, KSS said that it had taken a controlling stake in Image

Next, Korea’s leading visual system developer. We believe this will further strengthen the

Company’s active safety technology. Additionally, the Company proposed to acquire the

auto information unit of the German-based auto supplier TechniSat Digital for Eur180mn in

a bid to venture into the intelligent road transportation segment. The Company is now the

best smart driving player in the A-share market and will likely enjoy a long-term valuation

premium as an industry leader.

Well-positioned to benefit from the industry upgrading in the longer run. According to

the Company, the two proposed acquisition deals (KSS and the auto information unit of

TechniSat) will be funded by a private placement priced at no less than Rmb29.85 per

share. Looking ahead, we expect the Company to build a competitive product matrix

covering driving control, auto safety, the internet of vehicles (IoV), new energy and

industrial robots, paving the way for its transformation from an auto electronics specialist

to a tech-driven innovative service provider. We think the Company is well-positioned to

benefit from the trend of smart driving, electrification and industry automation in the auto

industry.

Potential risks: 1) Margin erosion as a result of foreign exchange rate and overseas

market fluctuations; 2) Disappointing progress in acquiring new customers; and 3) New

business integration missing expectations.

Earnings forecast, valuation and investment rating: We maintain our 2016/17/18E

EPS estimates at Rmb0.79/1.34/1.60. Its current share price of Rmb36.73 implies



three-year PEs of 46x/27x/23x. The Company is transforming from an auto electronics

specialist into a tech-driven innovative platform service provider. Given the historical

valuation levels of the industry and the Company, we think a 30-32x 2017E PE is fair. We

like the Company’s long-term growth prospects and reiterate our OVERWEIGHT rating on

the Company with a target price of Rmb42.


Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 7,077 8,083 16,960 27,476 32,647

Growth YoY % 15.95 14.21 109.84 62.00 18.82

Net profit (Rmb mn) 347 400 776 1,306 1,566

Growth YoY % 20.03 15.27 94.16 68.18 19.96

Gross margin % 19.57 21.65 21.60 21.60 21.60

EPS (Rmb) 0.35 0.41 0.79 1.34 1.60

BVPS (Rmb) 2.5 3.9 4.4 5.4 6.5

PE (x) 105 90 46 27 23

PB (x) 14.7 9.4 8.3 6.8 5.7




Shuanglin Auto Parts (300100): Smart driving projects to support growth

Execution of smart driving projects should generate some excitement. After

establishing a network technology joint venture with TYD Electronic Technology early last

year, the Company is now planning to extend its presence to the automated driving

segment. It proposed to invest a total of Rmb100mn cash on hand into a smart driving

technology project. Rmb60mn will be invested in the first phase. According to a recent

announcement, the Company’s parent company, Shuanglin Group, proposed to sell down

no more than 16mn shares in the Company. The proceeds from the sell-down will be used

to fund the group’s investment in innovative projects including shared-lease of electric

vehicle and the internet of vehicles (IoV). In our view, once these projects turn profitable,

the group company may inject them into the listco. Considering the group’s experience in

exploring new businesses/models and integrating industry resources, we think the

execution of these projects could bring some excitement.

Potential DSI injection (a 90% stake) should be earnings accretive. Currently

Shuanglin Group owns a 61% stake in the Australia’s DSI Holdings. Given the prevailing

exit mechanism of venture capital investors, we reckon that the 29% stake owned by GSR

Ventures (a partner of the group company) could also be transferred to the listco along

with the 61% owned by the Group. DSI’s products are widely applied to the GEELY GC9, a

popular sedan launched in April 2015 with monthly sales volume now standing at 6,000

units, and will also be fitted to the soon-to-market Geely NL3, an SUV priced at

Rmb98.8k-157.8k but actually sold at only Rmb94.8k-151.8k (with purchase tax subsidy

by the automaker). The SUV will be equipped with ADAS products including the 3D

panorama image, ACC and EPB. The high performance vs. the low price could help boost

sales of the new SUV model. Apart from Geely’s vehicle models, we expect the DSI

products to cover more customers, including Lifan Group and BAIC Motor. Based on our

estimates, the sales volumes of DSI’s automatic gearboxes could reach 150k and 250k

sets in 2016 and 2017, respectively, with profit per set at more than Rmb1,000. The asset

injection, once realized, could boost the Company’s earnings by a big margin.

Presence in core electric vehicle parts advances the cooperation with automakers.

Currently the Company has a 5% stake in the Geely-Xindayang JV, which is focused on

the production of new energy vehicles (NEVs). By acquiring a 51% interest in Deyang

Electronics Technology (an electric motor supplier of Xindayang’s best-selling vehicle

model–the Zhidou series), the Company has ventured into the NEV core

parts/components supply chain. The target company is capable of producing 300k sets of

electric motors and 300k sets of controlling units per annum and committed net profit

contribution of Rmb80mn/Rmb120mn for 2016E/17E. The acquisition could generate

synergies with the Company’s earlier moves along the NEV industry chain and will likely

strengthen its partnership with Xindayang and Geely by supplying core parts for Geely’s

electric vehicles.

Commissioning of the Hangzhou Bay project brings incremental profits. The

Company’s HQ saw a revenue decline of nearly 30% in 2015, dragged by the downbeat

business climate and the postponement of the car seats project, but will likely resume

growth this year. The Hangzhou Bay Project, which commenced production in mid-2015

and mainly focuses on the production of seats and interior/exterior accessories for Geely,

Changan Ford and Zotye, may start to deliver net profit this year. In 2015, the Company’s

wholly-owned subsidiary Hubei New Torch Science and Technology (a high-tech company

focusing on the production of wheels and bearings) contributed net profit of Rmb160mn,

far above the committed amount of Rmb110mn. We expect the subsidiary to maintain



more than 20% growth in the future with the growing share of the third generation of

bearings and wider application on more vehicles models.

Potential risks: 1) Disappointing M&A and integration progress; 2) Acquisition of new

customers and new product promotions missing expectations; and 3)

Slower-than-expected progress in expanding new businesses.

Earnings forecast and investment recommendation: We maintain our 2016/17/18E

EPS estimates at Rmb0.84/1.00/1.18. Its current share price of Rmb42.57 implies

three-year PEs of 51x/43x/36x. Pro forma for an 8x 2016E PE of DSI in a potential asset

injection deal at Rmb36 per share (assuming 25% of the consideration is funded through

fundraising), we estimate its 2016/17E pro forma EPS at Rmb1.08/1.44, implying 37x/28x

PE. We are positive about the Company’s long-term growth prospects given its proactive

initiatives in the smart driving and NEV segments as well as the consequent earnings

accretion following the potential injection of DSI. OVERWEIGHT reiterated.


Item/year 2014 2015 2016E 2017E 2018E

Turnover (Rmb mn) 1,497 2,472 3,514 4,186 4,976

Growth YoY % 24.18 65.12 42.15 19.12 18.86

Net profit (Rmb mn) 133 243 333 395 468

Growth YoY % 29.54 83.03 36.72 18.82 18.51

Gross margin % 26.99 26.88 27.55 27.16 27.22

EPS (Rmb) 0.34 0.61 0.84 1.00 1.18

BVPS (Rmb) 4.8 5.3 5.9 6.6 7.5

PE (x) 125 70 51 43 36

PB (x) 8.9 8.0 7.2 6.5 5.7


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