BofA Merrill Lynch lowered its target price for Great Wall Motor (GWM)(02333) to HK$28.88 from HK$42.21, and downgraded the stock to "neutral" from "buy".
The research house said GWM's 1H revenue and net profit both posted double-digit increases on the back of higher sales volume, but operating margin actually fell 0.8pp to 16.3%.
BofAML believes this was due to (1) weaker 1H sales of H5 SUVs (-55% YoY), sedans (-51% YoY) and pickup trucks (-19% YoY); (2) the inability of new SUV models H8 and H9 to achieve the higher selling price; and (3) a 22% MoM decline in sales of the highly profitable H6 SUV in June.
To factor in these decreases, it reduced its 2015-16 operating margin forecasts to 15/13.2%.
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