Jefferies Research lowered its target price for Brilliance China Automotive (01114) to HK$9.4 from HK$9.5 and downgraded its rating to "hold" from "buy" given limited upside from a peaking BMW cycle.
The research house said the stock has risen 29% and hit its target since Aug. Also, the July special dividend is from BBA's 2019 dividend, which management confirmed needs to be
deducted from the proceeds of the 25% BBA stake sale. Any future BBA dividends will be similarly deducted.
Jefferies believes BBA will continue to be a normal JV in the long term, even though Brilliance will only have 25% stake after 2022. It added that the market has ignored the likely huge investment in iX3 to be launched in 2020, which will pressure the JV's margins. Jefferies forecast low single digit earnings growth for BBA in 2H.
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