Auto stocks in China's A-share market have performed well this year, but SAIC Group, the largest local car company, has lagged behind, forcing the company to come up with a new share buyback plan.
SAIC announced Thursday that it plans to spend RMB 1.5 billion ($233 million) to RMB 3 billion to buy back shares within the next year at a price not exceeding RMB 28.91 per share. The company's closing price on Thursday was RMB 20.96.
Based on the expected repurchase upper limit, the company will buy back up to 100 million shares, accounting for about 0.89 percent of its total share capital.
SAIC said the move is based on confidence in the company's continued future growth and recognition of its value, safeguarding shareholders' interests and strengthening investor confidence.
The repurchased shares will be used for employee stock ownership plans or equity incentives, the company said.
As of June 30 this year, SAIC had total assets of RMB 883.5 billion and net assets attributable to shareholders of RMB 276 billion. The repurchase used a maximum of 0.34 percent of the company's total assets and 1.09 percent of its net assets attributable to the company's shareholders, it said.
SAIC disclosed a buyback round in July last year. That buyback period expired in January this year, and it spent a total of 2.247 billion yuan to buy back about 100 million shares, accounting for 0.93 percent of the company's total share capital, at an average price of 20.78 yuan per share.
SAIC's sales in August were 453,000 units, down 10.08 percent year-on-year. Among them, the sales of new energy vehicles were 70,800 units, up 171.17 percent year-on-year.
From January to August this year, SAIC's cumulative sales volume was 3.103 million units, up 3.07 percent year-on-year. Among them, the sales of new energy vehicles were 414,700 units, up 295.85 percent year-on-year.
By Thursday's close, the company's shares were down 12 percent this year. BYD, by comparison, rose 40 percent in the same period.
BYD sold 68,531 units of all vehicles in August, up 86 percent from a year earlier. It sold 61,409 new energy vehicles in August, up 302 percent from a year earlier, the company said last week.
Early last month, as BYD's deliveries rose in tandem with its share price, there were rumors that the company might buy SAIC's passenger car business. The latter denied this.
China Securities Journal at the time quoted SAIC investor relations sources as saying such a thing was not possible and that the trend was to have its own new energy brand.
As for SAIC's production progress in the new energy vehicle sector, the source said the company's high-end electric vehicle brand IM Motors will deliver its first product, the L7, by the end of this year, and another electric brand, the R brand, will have two more models next year.
In addition, early last month another investor asked SAIC how BYD's market capitalization is close to RMB 1 trillion but SAIC's market capitalization is only RMB 200 billion.
SAIC said that the share price fluctuations of listed companies are influenced by multiple factors, and the current market value of the company does not fully reflect its proper value.
SAIC will sharply improve the operating performance while strengthening communication with the capital market so that more investors recognize the value of the company, it said.