SHANGHAI China's Dongfeng Motor Group Co Ltd (0489.HK) reported a better-than-expected 16 percent rise in 2013 profit due to a rebound in sales at its Japanese partners.
The country's second biggest carmaker, which on Wednesday agreed to buy a stake in struggling French peer PSA Peugeot Citroen (PEUP.PA), said net profit was 10.53 billion yuan ($1.70 billion), according to a statement through the Hong Kong Stock Exchange.
That beat a forecast of 10.24 billion yuan from 28 analysts polled by Thomson Reuters, and compared with 9 billion yuan a year earlier.
Dongfeng's growth was largely driven by a sales rebound at its two Japanese ventures - which combined accounted for nearly half of vehicle sales by volume in 2013 - as anti-Japan sentiment inside China triggered by a 2012 territorial dispute eased.
Dongfeng's ventures with Honda Motor Co Ltd (7267.T) and Nissan Motor Co (7201.T) last year reported sales increases of 113.9 percent and 19.9 percent by volume respectively, rebounding from a low base.
In 2012, a dispute between Beijing and Tokyo over a group of uninhabited islands in the South China Sea hurt sales of Japanese brands in China.
"Reputation of Japanese car brands is still falling in China due to political tensions," said Liang Yonghuo, analyst at Haitong International Research Ltd.
"Relying too much on Japanese brands is a risk for Dongfeng."
The agreement to buy 14 percent of PSA for 800 million euros ($1.10 billion) is part of a 3 billion euro capital tie-up that will see Dongfeng become one of PSA's biggest shareholders, matching holdings by the French government and the Peugeot family. <ID:L5N0MN4NX>
Dongfeng formed a joint venture with another French carmaker, Renault SA, last year (RENA.PA), when they started building a factory in the central city of Wuhan that will manufacture 150,000 cars a year upon completion.
State-owned Guangzhou Automobile Group, which owns ventures with Honda, Toyota Motor Corp (7203.T), Isuzu Motors Ltd (7202.T) and Mitsubishi Motors Corp (7211.T), is also heavily reliant on sales of Japanese brands. Guangzhou Auto (601238.SS) (2238.HK) reported a 135 percent surge in 2013 earnings.
($1 = 0.7256 Euros)
($1 = 6.2122 Chinese Yuan)
(Reporting by Samuel Shen and Kazunori Takada; Editing by John Stonestreet)