Great Wall's Q2 Results in Line; Rising Expenses Offset Margin Gain; FVE Unchanged

Great Wall Motor, or GWM, reported in-line second-quarter results with core net profit down 50% year on year, which is at the midpoint of its recent guidance. We attribute the core earnings decline to weak sales volume in the quarter. In addition, the higher operating expenses, due to the company’s step-up in research and development, or R&D, efforts toward vehicle electrification, offset the gains in average selling price and gross profit margin on sales mix improvement (Tank and ORA brands) for the period. We slightly cut 2022-2024 revenue by 1%-3% but lift net profit forecast by 1%-4%.