June vehicle sales was 210,217 units, basically flat. June passenger vehicles （PV） sales showed improvement,which recorded flat growth rate （+0.2% yoy） rather than decline seen in the past 16 months. Nonetheless, PV salesfor 1H19 declined 11.3% yoy. Meanwhile, the commercial vehicles （CV） segment slightly dropped by 2.2% yoy inJun. 2019. Only heavy duty trucks （HDT） recorded improvement of 4.1% yoy growth in Jun. 2019. In 1H19, overallsales was 1,374,440 units, down by 9.0% yoy.
Dongfeng Honda lead sales; Nissan sales slightly declined. In June, Dongfeng Honda sales advanced 20.3%yoy due to the low base. In the same period last year, the Dongfeng Honda CR-V and other 1.5T engines had issueswhich halted sales for a number of months. Therefore, Dongfeng Honda 2Q19 sales was up by 15.8% yoy. Theissues only recovered in Sep. 2018, and we expect sales from the Honda JV to remain strong in 3Q19. Meanwhile,Dongfeng Nissan recorded sales of 97,496 units, slightly down by 3.0% yoy. In June, the X-Trail and Qashqairemained as popular SUV models as per downstream data, up 8% yoy and 12.5% yoy, respectively. Overall Nissancompleted 44.1% of the management's target, and we believe such target is still attainable given expectedimprovement in 2H19.
French brands continued to decline but self-owned brands returned to growth. Dongfeng Renault andDongfeng PSA vehicle sales declined by 67.2% yoy and 54.3% yoy, respectively. In contrast, Dongfeng Liuqi （PV）and Fengshen was up by 107.9% yoy and 38.0% yoy, respectively. Improvement was mainly due to new modelslaunched, such as the T5 SUV and S50EV for Liuqi.
The only difference in June sales was the improvement in self-owned brands, but we remain cautious onproduct sustainability. We do not foresee strong rebound from self-owned brands despite positive performance inJune as product life is generally short-lived based on historical performance. Low base effect from Honda will fadeout in 3Q19. Despite low valuation, currently trading at 4.0x 12M forward PER, we do not expect a re-rating in thefuture. We maintain investment rating is "Reduce", with TP of HK$5.95, representing 4.0x 2019 PER and 3.8x 2020PER.