DBS analyst Rachel Miu maintained a Buy rating on Guangzhou Automobile Group Co (GNZUF – Research Report) yesterday and set a price target of HK$4.10.
Rachel Miu’s rating is based on the optimistic sales targets and expansion plans of Guangzhou Automobile Group Co. With a target of approximately 2.75 million vehicle sales in 2024, reflecting a 10% year-on-year growth, and the self-brand aiming for about 1.1 million units, indicating a 22% increase, the company demonstrates strong growth potential. The focus on production optimization and a favorable cost environment is expected to significantly enhance the profitability of the New Energy Vehicle (NEV) business, which includes the Trumpchi and AION brands. The impressive growth in NEV sales, with a 125% increase to around 480,000 units in 2023, positions GAC as a leading player in the NEV industry.
Furthermore, GAC’s strategic initiatives to enter the RMB 200-300k price segment through its HYPER brand are anticipated to support its margins in the medium term. The Japanese joint ventures, despite experiencing sales declines in 2023, are rapidly moving towards electrification, with new EV models set to launch in 2024. These joint ventures’ focus on cost reduction and after-sales service enhancement is expected to bolster the growth of their EV businesses. Coupled with the stock’s trading at 2 standard deviations below the historical average P/E ratio, Miu’s analysis suggests that the company is undervalued, providing a compelling reason for the Buy rating.
In another report released yesterday, CMB International Securities also maintained a Buy rating on the stock with a HK$5.50 price target.
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Guangzhou Automobile Group Co (GNZUF) Company Description:
Guangzhou Automobile Group Co. Ltd. engages in the research and development, manufacturing, sales and after-sales services of passenger vehicles, commercial vehicles, motorcycles and auto parts. The company’s business activities include the import and export of automobile-related products, automobile leasing, disassembling, and automobile credit. It also engages in the provision of logistics services, finance leasing, commercial factoring, renewable resources, insurance, insurance brokerage services, and equity investment. The company operates in five segments: Research & Development, Manufacture of Vehicles & Motorcycles, Parts & Components, Commercial Services and Financial Services. The Research & Development segment is mainly responsible for the groups general development plan of new products and new technology, as well as implementation of material R&D projects. The Manufacturer of Vehicles and Motorcycles segment products include GAC Mitsubishi ASX, Pajero, Outlander, Toyota Camry, Highlander, Yaris L, E’Z, Levin, standard motorcycles, sport bikes and scooters. The Parts and Components segment operates through its subsidiary and its controlling, investee companies and associated companies and Tong Fang Logistics in the upstream and downstream of the automobile industrial chain. The Parts and components segment includes engines, gearboxes, car seats, HVAC systems, auto lamps, automation accessories, redirectors, shock absorbers and accessories. The Financial segment provides financial investment, insurance, insurance broker, financial lease, automobile credit, and other related services. The company was founded on June 6, 1997 and is headquartered in Guangzhou, China.
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