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On Thursday, HSBC analyst Yuqian Ding upgraded Great Wall Motor Co Ltd. shares, moving the rating from ’Reduce’ to ’Hold’. This change comes with a revised price target set at HK$11.90, up from the previous HK$8.80. The adjustment in rating and price target reflects an increased optimism regarding the company’s future performance. According to InvestingPro data, the company currently appears undervalued, with a strong financial health score of 2.97 (GOOD) and maintains more cash than debt on its balance sheet.
The upgrade was primarily attributed to revised earnings estimates for the years 2025 to 2026, which are now 7-14% higher. This increase is based on the anticipation of a stronger domestic new model cycle that is expected to boost vehicle volumes by 4% and 7% for the respective years, compared to earlier forecasts. The company’s current performance supports this optimism, with revenue growth of 6.59% in the last twelve months and an impressive projected revenue growth of 18% for FY2025, as revealed by InvestingPro analysis.
Additionally, HSBC introduced a 2027 earnings estimate for Great Wall Motor in their report. Despite the uplift in earnings expectations, HSBC’s net profit forecasts for 2025 to 2027 remain below the Bloomberg consensus by 24%, 19%, and 16%, respectively. The analyst cited a conservative stance on the company’s overall volume and profitability outlook, considering potential challenges related to overseas volume and mix pressure anticipated beyond 2024. Current financial metrics show the company maintaining healthy profitability with a gross margin of 18.91% and generating $1.36 billion in levered free cash flow over the last twelve months.
Ding’s commentary highlighted that while there are conservative views on Great Wall Motor’s volume and profitability, the current share prices are thought to have already incorporated these factors. This suggests that the perceived risks may be reflected in the market valuation, leading to the decision to raise the rating to ’Hold’.
The revised price target and upgraded rating indicate a shift in HSBC’s perspective on Great Wall Motor’s stock, suggesting a neutral stance on the shares as opposed to the previous recommendation to reduce holdings.
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