[ET Net News Agency, 3 October 2019] Morgan Stanley lowered its target price for China
Zhengtong Auto Services (01728) to HK$2.9 from HK$3.6 and maintained its "overweight"
rating.
The research house sees signs of an early volume recovery for JLR, with retail sales
growth recovering to 17% growth in August, mainly on a low base.
Although the sales discount remains deep at the retail end, Morgan expects JLR to narrow
the overall discount level gradually through model cycle refresh. Its channel checks
indicate that existing products such as the Land Rover Discovery Sport SUV still offer a
>20% discount, while the newly launched Range Rover Evoque SUV offers a little discount
but does offer an MSRP (manufacturer's suggested retail price) cut.
Morgan lowered Zhengtong's 2019-21 earnings estimates by 17-19% to reflect lower new car
sales and slower auto finance expansion. (KL)