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On Wednesday, Greenridge Capital adjusted its stance on China Yuchai International Limited (NYSE: NYSE:CYD), downgrading the stock rating from Buy to Hold, while simultaneously raising the price target from $15.00 to $22.00. The revision in the price target comes on the heels of updated revenue estimates for 2025 and a reduced share count following a recent buyback initiative. The stock has shown remarkable momentum, with InvestingPro data revealing a 155% year-to-date return and a current market capitalization of $857 million.
According to Greenridge Capital, the increase in the price target is a reflection of the improved financial outlook for China Yuchai. The revised target price is derived from a combination of a price-to-earnings (P/E) multiple of approximately 10 times the forward twelve-month diluted earnings per share (EPS) estimate of RMB 11.33 and an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of around 5 times the forward twelve-month EBITDA estimate of RMB 1,357.52 million. InvestingPro analysis indicates the stock currently trades at a P/E ratio of 20.94 and an EV/EBITDA of 5.08, with Fair Value calculations suggesting the stock may be approaching overvalued territory.
Despite the raised price target, Greenridge Capital’s analyst cited the stock’s significant rise since the announcement from Kim Long as the reason for the rating downgrade. The stock’s current valuation has surpassed what Greenridge considers to be fair for China Yuchai, prompting the shift from a Buy to a Hold recommendation. This aligns with InvestingPro indicators showing the stock is in overbought territory, with a remarkable 185% return over the past year. For deeper insights into CYD’s valuation and 13 additional ProTips, investors can access the comprehensive Pro Research Report available on InvestingPro.
The analyst’s commentary highlighted the balancing act between the positive financial projections and the stock’s recent performance. "Downgrading Rating & Raising Target (NYSE:TGT). The increase in Revenue estimates for 2025 coupled with the lower sharecount after the buyback has resulted in an increase in our target price, from $15.00 to $22.00," stated the analyst from Greenridge Capital. "However, the stock has run significantly since the Kim Long announcement, beyond what we see as a fair valuation for CYD. As a result, we are downgrading China Yuchai from Buy to Hold, despite the higher target price."
China Yuchai’s updated valuation metrics serve as the foundation for the new price target, reflecting a more optimistic financial forecast for the company in the coming years. However, the market’s reaction to the Kim Long announcement has led to a reassessment of the stock’s immediate investment potential.
In other recent news, China Yuchai International Limited has entered into a strategic cooperation agreement with Vietnam’s Kim Long Motor to establish an engine factory in Vietnam. This deal involves technology licensing, component supply, and construction support for the new facility. Under the agreement, Yuchai will license certain engine models to Kim Long Motor, which will manufacture these engines primarily for commercial vehicles in Vietnam. Kim Long Motor will have exclusive rights to sell these engines in Vietnam and priority rights in other ASEAN countries and South Korea. The licensing agreement, valid for 15 years, involves fees totaling $28 million. Yuchai will also provide technical services for equipment installation and commissioning, with Kim Long Motor covering the costs. Additionally, Yuchai will supply all necessary assembly parts and service kits for the engines produced in Vietnam. This cooperation is seen as a significant step in Yuchai’s strategy to penetrate the ASEAN-Korean trade areas and supports its global growth strategy.
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