UPDATE 1-Denway expects 2009 car sales to top FY target

(Adds executive comments, share price)

By Alison Leung

HONG KONG, June 2 (Reuters) - Denway Motors Ltd (0203.HK), a Chinese carmaking partner of Japan's Honda Motor (7267.T), on Tuesday said it expects sales to exceed its full-year 2009 target as consumer sentiment has improved on Beijing's stimulus measures.

Denway's 49 percent-held Guangzhou Honda sold more than 128,000 cars in the first five months, up 3.6 percent year on year, against a first-half target of 130,000, Chairman Zhang Fang You told reporters.

Guangzhou Honda expected its car sales to exceed a target of 330,000 units for 2009 following a recovery in China's auto market, said Yao Yi Ming, a Denway director.

The venture, which makes Honda's Accord, Odyssey, City and Fit models in China's southern city of Guangzhou, sold 306,242 cars in 2008, up 3.7 percent from a year earlier.

Shares of Denway have risen about 56 percent this year to close at HK$3.76 on Tuesday, outperforming a 28 percent gain on the blue-chip Hang Seng Index .HSI.

But Zhang said sales growth at Guangzhou Honda was lower than overall market growth in China, which rose around 9 percent in the January to May period, as its main Accord model was a bigger car and not a prime beneficiary of government tax incentives and subsidies.

"The global financial crisis has not bottomedout yet," Zhang said. "The (car) market has improved but there are still a lot of uncertainties," he said.

Passenger car sales in China rose 37 percent in April to a record high, mostly in compact models that had done little to boost the bottom lines of carmakers, analysts said.

They remained cautious on the earnings outlook for car manufacturers in China, the world's largest auto market.

Domestic competitors, including SAIC Motor Corp (600104.SS) and Chongqing Changan Automobile Co (000625.SZ), reported steep falls in first-quarter earnings despite brisk vehicle sales.

Denway, which posted a 3.5 percent decline in net profit for 2008, did not report quarterly results.

Despite more than 4 billion yuan ($586 million) in cash on hand, Zhang said Denway had no plans to acquire foreign assets, even though the bankruptcy of the U.S. carmaker General Motors Corp GM.N provided good a opportunity for acquisitions.

"It may cost relatively little money for assets now, but it is not easy to develop them as culture, legal environment and consumer behaviour are all very different from China," Zhang said.

Zhang also said Guangzhou Automobile, the parent company of Denway, was still looking at a public listing, but this was not the right time as the valuations of stock markets had been battered by the financial crisis.