Great Wall Motor: Credit Suisse Upgrades H-Shares To Outperform, Lifts Price Target by 56%
Credit Suisse has upgraded the Hong Kong-listed shares of Great Wall Motor (2333.HK) to outperform and raised its price target by 56% on a bullish outlook for its new WEY premium SUV brand.
The broker reckons the stock will rally on the roll-out of the new brand, which enjoys a fatter margin than its Haval SUV, while the Haval brand is set to enjoy a strong product cycle with a couple of new launches in the second half of this year.
Credit Suisse likes many things about the new WEY, including the advanced driver assistance system (ADAS):
The main thesis for our upgrade is derived from our confidence on the new WEY accessible luxury brand's success, which offers premium products at cheaper prices. Leveraging a group of experienced global talent and global components' supply system, the brand enjoys impressive interior and exterior designs, rich ADAS features and superior safety. Given its latest ambition to penetrate the mid-range price segment (Rmb150-200k), Great Wall strategically launched WEY's first product, the VV7 large-size SUV in April, which had received pretty positive feedback (with a two months' waiting list).
Credit Suisse forecast the WEY brand to sell 60,000 cars this year, 190,000 in 2018, and then 310,000 units in 2019. The broker also sees cost savings through vertical integration, with Great Motor now producing its own 7-speed dual clutch transmission. Producing the transmission in-house saves around CNY3,000.
The broker upgraded its earnings forecasts by 19% and 36% in 2018 and 2019. The price target on the Hong Kong-listed shares was lifted to HKD12.50 from HKD8 a share. However, the A-shares (601633.CN) remain rated as underweight given its rich valuation.
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