[ET Net News Agency, 10 May 2019] Daiwa Research lowered its target price for Guangzhou
Automobile Group (GAC)(02238) to HK$11.5 from HK$12 and maintained its "buy" rating.
The research house said the sales volume of Trumpchi, GAC's own brand, declined by 41%
in 1Q. However, Daiwa sees an increasing possibility of a turnaround for Trumpchi in 2H,
due to (1) a rich product pipeline (14 new or upgraded models slated to be launched this
year), (2) additional capacity of 200k units in Yichang in 2019, and (3) likely stimulus
policy to be launched in mid-2019.
Despite the short-term market slowdown, Daiwa remains positive on Toyota and Honda's
long-term outlook in China. Daiwa revised down its 2019-20 earnings by 12-16% to reflect
the company's worse-than-expected gross margin in 2018 and sales volume in 1Q. (KL)