HONG KONG, Sept 22 (Reuters) - Brilliance China Automotive Holdings , China's biggest maker of minivans, on Monday said its first half net profit soared 98 percent as rising sales volumes offset price cuts in the surging but increasingly competitive mainland auto market.
The company, which will soon begin selling BMW luxury sedans made in China under a new joint venture with the German firm, posted net profit of 574 million yuan (US$69.3 million) for the six months through June, compared with 289.55 million yuan earned in the same period a year ago.
The results easily beat the average profit of 452.5 million yuan forecast by four analysts polled by Reuters.
While company watchers say the BMW tie-up is a welcome enhancement to Brilliance's cash-spinning minivan business, they are less enthusiastic about its Zhonghua sedan, which Brilliance began making last August in a bid to enter the booming market for family cars.
"They are up against people like Honda, Toyota, Volkswagen -- basically everybody," said S&P Equity analyst Chris Lee, who has a "sell" rating on the stock.
Merrill Lynch analyst Grace Mak said that at US$20,000, the home-grown Zhonghua sedan was battling in a tough, mid-range niche dominated by foreign name plates.
"It's rather difficult for Brilliance to compete with these guys unless the price is really competitive," said Mak, who has "neutral" ratings on both Brilliance and Hong Kong-listed rival Denway Motors Ltd , the Chinese joint venture partner of Japan's No 2 carmaker Honda Motor Co .
In the first six months of the year Brilliance sold 38,000 minivans and 18,000 Zhonghua, or "China" sedans, according to CLSA. The brokerage said it expects Brilliance, controlled by the government of Liaoning province in northeast China, to sell 72,000 minivans and 35,000 Zhonghua sedans for the full year.
Brilliance said last month that its 51 percent-owned joint venture with Shenyang Jinbei Automotive controlled more than 50 percent of the China minivan market and about 70 percent of the seven-to-12 seat segment.
It also said then that it would cut prices by between 8,000 and 22,500 yuan in different minivan models -- its second price cut in as many months.
Foreign vehicle makers are investing billion of dollars to produce cars in China in the hope of cashing in on the fastest-growing big economy in the world and its similarly turbo-charged car sector.
Shares in Brilliance had risen 131 percent in the 52 weeks through Friday, although they fell 4.9 percent on Monday to HK$2.425 ahead of the results. Denway shares rose 84 percent in the 52 weeks through Friday.
Brilliance trades at 11 times its forward earnings, slightly cheaper than the 11.7 times profits commanded by Denway.
Brilliance has been locked in an ownership wrangle with its former chairman, Yang Rong.
(US$=8.28 yuan)