Goldman Sachs raised its target price for China MeiDong Auto Holdings (01268) to HK$37 from HK$34.1 and maintained its "buy" rating.
The research house expects the accelerating premiumization in the Chinese auto industry to benefit the financial performance of luxury dealerships. It raised its luxury vehicle market industry forecasts by +1%/+1%/+3%/+5% in 2020/21/22/23 to reflect stronger than expected premiumization.
Consequently, Goldman raised its 2020-23 net profit forecasts for Meidong by 2-9% to reflect its new market expectations. It said key risks for Meidong are: increasing pricing pressure due to intensifying competition among luxury brands and potential impact from Tesla's price cut, potential supply bottlenecks for imported cars as the overseas auto supply chain is still gradually ramping up, slowing inventory turnover given Meidong's inventory days is already the lowest among luxury dealers, lower luxury car industry volumes on macro/trade headwinds.
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