Chery interprets high-priced peddling miracles or legends

The self-owned brand car enterprises fell into a strange circle. Despite the downturn in the auto market and the decline in sales of self-owned brands, the selling prices of auto brands have remained high.

In August, on the website of the Beijing Financial Asset Exchange, there was a message on the listing of Chery Automobile. The selling price of 0.838% was as high as 187 million yuan. The shares to be transferred were 33,366,000 shares, and the registered capital of Chery Automobile was 3.98 billion yuan, and the price per share was as high as 5.6 yuan. If successful, Chery’s P/E ratio will be as high as 93 times in 2010 earnings per share.

If you compare Chery Automobile with other domestic car companies, you will more intuitively understand how high the price of Chery cars is. According to the calculation of 5.6 yuan per share, Chery’s car price is as high as 22.28 billion yuan. Among the A-share listed companies, there are only two companies with a market value of more than 22 billion - Shanghai Automotive and BYD Automobile. It can be seen that Changan Automobile, which is larger in scale and competitiveness than Chery Automobile, is not as valuable as Chery Automobile.

Regardless of whether Chery Automobile is still an unlisted automobile company, the price of Chery should be so high just because of its valuation. What is its morale? Is it because of the general prosperity of the auto industry, or is Chery Automobile entering a high growth stage? neither!

In the first half of 2011, the Chinese auto market turned cold and independent brands represented by Chery Automobile all fell into the ice hole, or profits fell or sales fell. A careful observation of Chery’s operating conditions in recent years is still in the stage where the main business does not make money and relies on government subsidies to maintain book profits.

From 2007 to 2009, Chery Automobile's net profit was 1.01 billion yuan, 440 million yuan and 66 million yuan, respectively, from government subsidies of 285 million yuan, 470 million yuan and 633 million yuan; Chery Automobile's 2010 net profit was 2.399257 Billion yuan, only the first three quarters of subsidies reached as high as 995 million yuan. How long does it take for Chery to get out of the quagmire of losses in the main business? How long does it take before Chery Automobile can no longer rely on the government to subsidize the hands?

According to the normal logic, a company with a loss-making main business cannot support such a high valuation in an increasingly competitive market environment. However, Chery Automobile seems to have a miracle. It just doesn't know that this is a short-lived miracle or a legend.