CV sales upbeat. DFG’s April 2020 sales up by 8.3% yoy as driven by CVsegment. CV sales increased 28.2% yoy with HDT sales up 45.1% yoy. Weexpect sales momentum to be maintained as infrastructure investment hasbecome a key area for the Chinese government to remedy the economicimpact from the COVID-19 pandemic. We expect both DF CV and DF LiuqiCV’s to achieve its sales target, which represents yoy growth of 18.3% and11.5%, respectively.
We have increased shareholders’ profit by 5.6%/ 4.4%/ 2.3% in 2020 to2022, respectively. After adjustment, we expect shareholders’ profit todecrease 15.2% yoy in 2020, but increase 9.8% and 4.8% yoy in 2021 to2022, respectively.
Due to the strong sales growth and expectation of CVs, the Company’s stockprice has rallied, generating 7.3% 1-month relative return. The strongerreliance on CV sales will benefit the Company’s fundamentals, therefore wehave adjusted upwards on earnings forecast in our forecasted period. Weupgrade investment rating to "Accumulate" for DFG, and revise up TPto HK$6.10, representing 4.4x 2020 PER, 4.0x 2021 PER. We have alsogiven a higher PER due to better industry sentiment and a more positiveoutlook for the Company. Our valuation is approximately 1 S.D. below itsmean; we think this is fair.