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FAW Group revs up group listing plan to counter slower growth
By Shao Shijie |
February 20, 2012, Monday
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Print Edition
Print Edition
FAW Group Corp, the nation's second largest auto group, is speeding up its long-postponed listing plan amid slower vehicle sales in China.
The auto group has recently won the government approval to inject the 53 percent stake it owns in FAW Car into a new company, according to FAW Car's statement filed to the Shenzhen Stock Exchange. The move would help FAW move a step closer toward its group listing.
Among China's top three auto conglomerates, FAW Group, based in Shenyang, Liaoning Province, is the only one that hasn't gone public. Last July, the company announced plans to set up a new company, capitalized at 78 billion yuan (US$12.4 billion), which will acquire its major car manufacturing assets and serve as the platform for its initial public offering.
Besides its stake in FAW Car, FAW Group has also gained the regulatory green light to transfer its 47.7 percent holding in Tianjin FAW Xiali Automobile Co Ltd into the new company.
FAW Group's IPO plan has been postponed repeatedly because of its complicated shareholding structure and approval procedures. If the plan goes ahead, it would make FAW Group to float its shares as a whole, following SAIC Motor Corp Ltd and Dongfeng Motor Group Co Ltd.
FAW Group controls 60 percent of FAW Volkswagen, which makes Volkswagen and Audi models. FAW Xiali holds 30 percent of its parent's venture with Toyota Motor Corp, whose portfolios include Corolla, Reiz and Crown sedans.
FAW Group is banking on the stock market to fund its future expansion after the central government list the development of China's home grown carmakers as one of its top priorities.
In 2010, FAW Group announced it would invest 3.1 billion yuan to develop new Hongqi, or Reg Flag, models. It wants to start making a premium C131 model this year with an annual production of 30,000 units by 2013, with the aim to compete with Audi, BMW and Mercedes-Benz in official fleets.
"FAW is putting valuable assets into the unit to be listed," said Zhang Lei, an analyst from Citic Securities Co Ltd. "Its valuation is also at a lower level with strong potential" to rise.
Though FAW is keen on the listing, it may have missed the best timing, analysts said.
Last year, China's vehicle sales rose 2.5 percent to 18.5 million units, the slowest pace in 13 years, after the central government ended purchase incentives and slower economy growth dented market demand. Domestic car brands got hit hardest amid the slowdown.
FAW Group has said full-year sales in 2011 edged up 1.7 percent to 2.6 million units. FAW Car warned its 2011 net profit would slump 80 to 98 percent. Xiali cautioned net profit for last year would dive 45 to 75 percent.
Wang warned the sluggish auto market demand might pose risks for FAW's listing. But he also noted "as the overall market condition improves and more government purchases are reserved for China's domestic brand vehicles, future profitability might get stronger."
The auto group has recently won the government approval to inject the 53 percent stake it owns in FAW Car into a new company, according to FAW Car's statement filed to the Shenzhen Stock Exchange. The move would help FAW move a step closer toward its group listing.
Among China's top three auto conglomerates, FAW Group, based in Shenyang, Liaoning Province, is the only one that hasn't gone public. Last July, the company announced plans to set up a new company, capitalized at 78 billion yuan (US$12.4 billion), which will acquire its major car manufacturing assets and serve as the platform for its initial public offering.
Besides its stake in FAW Car, FAW Group has also gained the regulatory green light to transfer its 47.7 percent holding in Tianjin FAW Xiali Automobile Co Ltd into the new company.
FAW Group's IPO plan has been postponed repeatedly because of its complicated shareholding structure and approval procedures. If the plan goes ahead, it would make FAW Group to float its shares as a whole, following SAIC Motor Corp Ltd and Dongfeng Motor Group Co Ltd.
FAW Group controls 60 percent of FAW Volkswagen, which makes Volkswagen and Audi models. FAW Xiali holds 30 percent of its parent's venture with Toyota Motor Corp, whose portfolios include Corolla, Reiz and Crown sedans.
FAW Group is banking on the stock market to fund its future expansion after the central government list the development of China's home grown carmakers as one of its top priorities.
In 2010, FAW Group announced it would invest 3.1 billion yuan to develop new Hongqi, or Reg Flag, models. It wants to start making a premium C131 model this year with an annual production of 30,000 units by 2013, with the aim to compete with Audi, BMW and Mercedes-Benz in official fleets.
"FAW is putting valuable assets into the unit to be listed," said Zhang Lei, an analyst from Citic Securities Co Ltd. "Its valuation is also at a lower level with strong potential" to rise.
Though FAW is keen on the listing, it may have missed the best timing, analysts said.
Last year, China's vehicle sales rose 2.5 percent to 18.5 million units, the slowest pace in 13 years, after the central government ended purchase incentives and slower economy growth dented market demand. Domestic car brands got hit hardest amid the slowdown.
FAW Group has said full-year sales in 2011 edged up 1.7 percent to 2.6 million units. FAW Car warned its 2011 net profit would slump 80 to 98 percent. Xiali cautioned net profit for last year would dive 45 to 75 percent.
Wang warned the sluggish auto market demand might pose risks for FAW's listing. But he also noted "as the overall market condition improves and more government purchases are reserved for China's domestic brand vehicles, future profitability might get stronger."
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