HSBC Global Research cut its target price for Great Wall Motor (02333) to HK$31.5 from HK$33.2, and maintained a "neutral" rating based on lower forecasts and unchanged 9.3x 2014e PE.
The house said Great Wall Motor's GP margin declined from 29.1% in 2Q14 to 27.7% in 3Q14 (3Q13: 29.0%) which it believes was driven by the weak profitability of H2 during ramp up stage and lower utilisation of Baoding sedan plant (which produces SUV M4 and sedan C30) due to lower volume of M4.
HSBC Global Research cuts its volume forecasts by 6%/7% to 738k/810k units in 2014/15 to reflect the weaker M4, sedan and pick up segments. It also lowers its GP margin assumption to reflect the lower GP margin of the above mentioned models in 2014e/15e. Its earnings forecasts are 7%/17% below consensus and it expects earnings cuts from consensus post 3Q14 results.
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