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02238 GAC GROUP
RTNominal up3.250 +0.080 (+2.524%)
Research Report

02/05/2019 18:01

[I-bank focus]Morgan downgrades GAC Group (02238) to HK$9

[ET Net News Agency, 2 May 2019] Morgan Stanley trimmed its target price for Guangzhou
Automobile Group (GAC)(02238) to HK$9 from HK$12 and downgraded its rating to
"equal-weight" from "overweight".
The research house noted that GAC's domestic brand recorded a 41% sales decline in 1Q,
and Morgan expects continued weak sales growth in 2019 as GAC's Trumpchi brand faces
severe competition from other domestic brands like Great Wall Motor (02333), which offer
aggressive discounts.
Morgan lowered GAC's revenue by 7% and 12% in 2019/20 and cut its gross margin
assumptions by a respective 1.9ppts and 1.4ppts to reflect domestic brand weakness. It
also cut its net profit assumptions for GAC by 25%/28% mainly due to large gross profit
cuts from its domestic brand. (KL)

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