Company Reports

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

No-moat Great Wall Motor, or GWM, reported in-line revenue for the first quarter but a much stronger-than-expected net profit. We attribute the 18-times year-over-year earnings growth to the company’s 79% surge in export sales in the quarter, which helped to uplift unit revenue and mitigate margin pressure from price competition in the China market. We raise our fair value estimate to HKD 10.80 per share from HKD 9.80, which implies 2024 forward price/earnings ratio of 8 times, in line with its 10-year historical average of 9 times. At the current price level, GWM’s H-shares remain fairly valued in 3-star territory.

No-moat Great Wall Motor, or GWM, reported fourth-quarter net profit declining 44% quarter over quarter, in line with its preliminary announcement. The earnings decline was mostly due to gross margin contraction and a surge in selling expenses as industry competition put extra pressure to have price discounts and dealer rebates. We expect the elevated level of expenses to linger, given the company’s step-up in retail promotions. We reduce our fair value estimate to HKD 9.80 per share from HKD 10.30, which implies a 2024 forward price/earnings ratio of 11 times, compared with its 10-year historical average of 9 times. At the current price level, GWM’s H-shares remain fairly valued in 3-star territory.

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

No-moat Great Wall Motor, or GWM, reported a 15.2% year-over-year decline in its preliminary net profit for 2023 to CNY 7.0 billion, which was in line with our estimate of CNY 7.1 billion. Management attributed the earnings decline to an increase in sales expenses and accelerated investment in new energy vehicles, or NEVs.

No-moat Great Wall Motor, or GWM, reported a 42% year-over-year jump in third-quarter net profit, leaving cumulative nine-month net profit on track to meet our full-year forecast. The earnings growth was mostly due to operating expenses control as operating margin was ahead of our expectation. We increase our fair value estimate to HKD 10.30 from HKD 9.60, which implies a 2024 forward price/earnings ratio of 11 times, compared with its 10-year historical average of 9 times. At the current price level, GWM’s H-shares remain fairly valued in Morningstar 3-star territory.

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

No-moat Great Wall Motor reported second-quarter net profit plunging 70% year over year, at the midpoint of earlier guidance. The earnings decline was mostly due to margin contraction as new energy vehicle, or NEV, sales ramped up contribution. We increase our fair value estimate to HKD 9.60 from HKD 9.20, which implies a 2024 forward price/earnings ratio of 12 times, compared with its 10-year historical average of 9 times. At the current price level, Great Wall's H-shares remain fairly valued in Morningstar 3-star territory.

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

No-moat Great Wall Motor's first-quarter 2023 recurring bottom line plunged 89% year over year to a net loss. Excluding the first quarter of 2020 when the pandemic broke out, this would be the first recurring net loss the company recorded in the past decade. We attribute the earnings decline to sluggish vehicle sales and mounting expenses in the quarter. The heightened operating expenses, due to price promotions, dealer rebates, and the company’s step-up in efforts toward vehicle electrification, offset the gains in average selling price on sales mix improvement (Tank brand) for the period. Our cautious view on the company’s profitability trend and new energy vehicle, or NEV, strategy is unchanged. We expect the elevated level of expenses are here to stay given the company’s step-up in research and development efforts toward vehicle electrification.

No-moat Great Wall Motor reported fourth-quarter net profit down 94% year over year, in line with its preliminary announcement. We attribute its core earnings decline to weak sales volume in the quarter. In addition, heightened operating expenses, due to price promotions, dealer rebates, and the company’s step-up in efforts towards vehicle electrification, offset the gains in average selling prices and gross profit margin on sales mix improvement (Tank brand) for the period. We expect the elevated level of expenses to linger given the company’s step-up in research and development for vehicle electrification.

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

No-moat-rated Great Wall Motor’s 81% year-over-year jump in third-quarter net profit leaves cumulative nine months net profit on track to meet our full-year forecast. Although revenue indicators improved in the third quarter, the top line remains short of our expectations. We cut 2022-2024 revenue by 9%-10%, and lift 2022 net profit forecast by 1%, but cut 2023-2024 profit estimates by 1%-4%.

Great Wall Motor is China’s largest sport utility vehicle, or SUV, and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

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%.

Great Wall Motor is China’s largest sport utility vehicle, or SUV, and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

We keep our fair value estimate for no-moat Great Wall Motor at HKD 10.50. The company’s preliminary core net profit for the first half, down 19%-37% year over year, was a miss and our cautious view on its margin trend and the company’s new energy vehicle strategy is unchanged. While we raise our 2022 net profit forecast by 26% to factor in the noncash foreign exchange gains in the second quarter, we maintain our 2023-24 net profit estimates. We also keep our 2022-24 revenue forecasts unchanged. Our fair value implies a 2023 forward price/earnings ratio of 9.8 times, compared to its 10-year historical average of 9 times.

Great Wall Motor is China’s largest sport utility vehicle, or SUV, and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.

The State Council announced on May 23 that the government plans to set aside CNY 60 billion to support the consumption of passenger vehicles, or PVs, in the form of vehicle purchase tax exemption without elaborating on vehicle types and how the subsidy works. We expect detailed policy to be released soon. Meanwhile, we note that since April, many local governments, such as Shandong, Sichuan, Jilin, Guangdong, and Jiangxi, have announced various supportive policies to stimulate auto purchase.

We raised our fair value estimate for no-moat Great Wall Motor to HKD 10.50 from HKD 10.10 after the company delivered stronger-than-expected first-quarter results. However, our cautious view on margin trends and the company’s new energy vehicle strategy is unchanged. We trimmed our volume forecast by 7% to reflect the year-to-date sales run-rate and we now expect Great Wall Motor to sell 1.4 million units in 2022, 26% below management's target. As a result of higher average selling price, our 2022-24 revenue estimates are lifted by 1%-3%. While we raised or 2022 net profit forecast by 2%, we expect the company to face increasing margin pressure, and we reduced our 2023-24 net profit by 2%-4%. Our fair value estimate implies 2022 forward price/earnings ratio of 9.5 times, which is in line with its 10-year historical average of 9 times.