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Investing.com - UBS upgraded Zhongsheng Group Holdings (HK:881) (OTC:ZSHGY) from Sell to Buy and raised its price target to HK$24.00 from HK$10.40, representing a 50% upside from current levels. This aligns with InvestingPro analysis showing the stock as undervalued, with impressive gains of 87% over the past year and 27% in the last six months.
The upgrade comes as UBS expects Zhongsheng’s net profit has reached its lowest point and anticipates improvement beginning in the second half of 2025.
UBS cited expectations that the company’s premium brand new-car margin will improve after hitting a historical low in the first half of 2025.
The firm also noted Zhongsheng is currently in an electric vehicle transition phase, with contributions from Huawei expected to become meaningful to both volume and new car gross profit starting in 2026.
The stock is currently trading at a 45% discount to its five-year average price-to-earnings ratio of 12x, with UBS raising its 2026/2027 earnings estimates by 51% and 79% respectively. The company maintains strong financials with a current ratio of 1.64 and has consistently paid dividends for 15 consecutive years.
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