[ET Net News Agency, 17 July 2018] HSBC Global Research lowered its target price for
Brilliance China Automotive (01114) to HK$12.6 from HK$15.6, and reiterated its "hold"
rating.
Following media report that BMW may increase its share in its Brilliance JV (BBA) to at
least 75%, BMW confirmed it is in talks with Brilliance and the government.
The research house said the news does suggest more uncertainty and risk for Brilliance's
outlook given the JV's importance to its earnings and operations. Any potential BBA stake
reduction would represent a longer-term challenge for the company.
HSBC estimated Brilliance's 50% JV stake at RMB80bn or HK$19.8/share. As such, the 25%
stake sale could raise around RMB40bn or HK$10/share in proceeds. But the BBA JV accounts
for all of Brilliance's earnings and HSBC does not expect the proceeds to be returned to
shareholders but reinvested to improve the performance of the remaining businesses. (KL)