[ET Net News Agency, 8 January 2020] Daiwa Research lifted its target price for
Guangzhou Automobile Group (GAC)(02238) to HK$11.6 from HK$9.8 and maintained its "buy"
rating.
The research house looks for GAC to post a strong net profit growth recovery of 26% in
2020, on the back of gross-margin improvement for its own brand and solid earnings growth
for the Japanese JVs.
Daiwa expects a significant gross margin improvement in 2020 to 12% (versus 7.6% for
2019) after the clearing out of National 5 vehicles in 4Q 2019. Furthermore, the new GS4
launched in November and other upgraded Trumpchi models are potential sales drivers in
2020 that should support Trumpchi's sales recovery (+8% YoY).
Daiwa lifted its 2020 gross-margin assumption to 12% versus 11% previously and factor in
higher-than-expected sales growth for GAC Toyota. (KL)