Is China Motor's Stock Price Hurt by Yulon? Expert Reveals Stable Profits: A Fresh Flower in the Mud

Yulon Group in the Taiwanese domestic car market is often criticized by consumers for product performance, but its subsidiary China Motor has relatively stable operations. Financial writer Ye Yu-Shio today (20th) bluntly stated that China Motor is a 'fresh flower in the mud of Yulon' and its core business is stable and profitable. 'The biggest problem for China Motor now is not its core business, but the market's overly negative evaluation of the four characters 'Yulon Group.'' Ye Yu-Shio posted on Facebook, stating that he has purchased a China Motor vehicle but did not share it specially. 'Not because it's bad, but because it has the four characters 'Yulon Group' attached to it.' In recent years, Yulon Group's overall stock performance has not been ideal. Its transformation, OEM business, and brand development have kept the market's evaluation of Yulon Group consistently low. How does China Motor achieve stable profits? Ye Yu-Shio points out that while China Motor's core business is actually quite stable, its stock price is somewhat dragged down by the large 'Yulon' label. However, if you look at the financial statements alone, you will find that China Motor is actually a bit different from the Yulon Group that everyone imagines. Ye Yu-Shio mentions that China Motor's cumulative EPS for this year has already reached 3.19 yuan, while the same period last year was 2.44 yuan. The single quarter EPS for the second quarter even reached 2.02 yuan, setting a new high for the past 8 quarters. Moreover, even after deducting some one-time non-operating gains, the first half-year core business EPS is still around 2.5 yuan. In other words, this company is not making its financial statements look good by selling assets, but is making stable profits through its core commercial vehicle business. Ye Yu-Shio analyzes, 'I believe the biggest moat for China Motor is the Taiwanese commercial vehicle market.' Models like J SPACE, Veryca, and Delica all have a strong presence in the Taiwanese commercial vehicle market. Commercial vehicles are different from general passenger cars. For many small businesses, engineering, and logistics operators, this is not just a car for enjoying life, but also a tool for making money every day. Ye Yu-Shio emphasizes that in bad economic times, people can delay upgrading their phones or buy fewer new cars. But for those doing business, if their car breaks down, they still have to fix it, and when it's time to replace it, they still have to replace it. This is where commercial vehicle demand has more defensive power. In addition, China Motor also has the ability to develop and modify independently, combined with brands like Mitsubishi and MG, its business model is actually much simpler than other businesses under Yulon Group. Ye Yu-Shio bluntly states, 'So I actually think that the biggest problem for China Motor now is not its core business, but the market's overly negative evaluation of the four characters 'Yulon Group.'' China Motor's current stock price is 55 yuan, and using the cumulative EPS of 3.19 yuan to calculate, the P/E ratio is approximately 8 to 10 times. If calculated more conservatively, using the core business EPS of 2.5 yuan, the P/E ratio is approximately 10 to 12 times. Is a China Motor turnaround possible? Ye Yu-Shio: Quite likely to be revalued by the market Ye Yu-Shio states that this valuation cannot be said to be cheap enough to buy with your eyes closed, but if Yulon's stock price starts to show signs of turning around, 'this will be where China Motor really becomes interesting.' Because the market's overall evaluation of Yulon Group is low, China Motor is also suppressed. But if Yulon shows a little improvement in the future, as long as the market looks back, companies like China Motor, which have stable core businesses and beautiful profits, will actually be the first to enjoy being revalued. Ye Yu-Shio points out that therefore, China Motor's advantage lies here. Below, there is stable core business profit to support it, and above, there is an option for Yulon Group to turn around. 'That's why I say that China Motor is really a bit like a fresh flower quietly blooming in the mud of Yulon Group. It's just that the market hasn't seriously looked at it yet.'