Citigroup: Chery Auto (09973) Target Price Reduced to HK$42, Reiterating “Buy” Rating

The Zhitong Finance App learned that Citibank released a research report saying that after the analyst briefing, Chery Auto (09973) adjusted its revenue and profit forecast, and the target price was slightly reduced from HK$43 to HK$42 based on the 2027 price-earnings ratio of 8.8 times, reaffirming the “buy” rating.

Chery Auto reported net profit of 5.4 billion yuan for the third quarter, up 16% year on year and 23% quarterly; management proposed core net profit of 5.8 billion yuan for the third quarter (plus 1.1 billion yuan in foreign exchange losses and 650 million yuan after deducting income of 650 million yuan in fair value), an increase of 5% over the quarter.

Management expects gross margin for the fourth quarter to be similar to that of the third quarter, and aims to maintain a gross margin of about 16% in 2027; net profit of 19.5 billion to 20 billion yuan is expected in 2026, with total sales volume of 2.95 million to 3 million vehicles; and maintain the target of a 20% year-on-year increase in sales and profit in 2027. In October, wholesale sales reached 282,000 units, up 7% year on year and 2% month on month, including 132,000 new energy vehicles and 195,000 overseas sales, accounting for 68.9% of total sales.

The bank adjusted revenue forecasts for 2026 to 2028 by 8%, 15% and 16%, respectively, with total sales estimated at 2.99 million, 3.52 million and 3.99 million vehicles; also lowered gross margin forecasts for the same period by 0.3, 0.5 and 0.6 percentage points, respectively, due to ongoing cost inflation (memory/PCB/MLCC, etc.), and reduced net profit forecasts by 2%, 3% and 7% to 19.9 billion yuan, respectively.