China Specialist, Auto and Industrial Specialist

Victoria Li

20 years experience as sell side analyst focusing on China's Industrial and Auto sectors

Great Wall Motor: Too Early to Get Excited

Equity Bottom-Up

Great Wall has a new strategy of  establishing new brands (WEY (luxury SUV), ORA (BEV), and new product line (Haval F series)) but none of them alleviates our concern on this company's long term growth prospects.  SUV sales remain the key driver of its earnings recovery in the next two years.WEY and Haval F series (which still operate in the SUV market), would marginally increase Great Wall's revenue and earnings in 2019E, but would not become a solid long term earnings driver.ORA has potential to be a long term earnings driver. However its recent focus on A00 BEV segment is disappointing, due to limit market upside in this segment. We hope Great Wall to focus on expanding its NEV product line into larger size sedans and SUVs rather than exploring BEV, PHEV and FCV models at the same time.Its JV with BMW (Spotlight Automotive Ltd) is expected to come onstream in 2021, which plans to produce an A-class SUV model as its first product and then an NEV model of BMW Mini. Spotlight might be another new earnings driver of Great Wall, pending on the success of its first two models.We estimate Great Wall's net profit stay flattish in 2019E with lower margins due to NEV ramp-up. Current valuation is not attractive given the expected weak earnings trend. Only a short term trading opportunity is expected with its SUV sales volume recovery and ORA sales ramping up.

Great Wall has a new strategy of  establishing new brands (WEY (luxury SUV), ORA (BEV), and new product line (Haval F series)) but none of them alleviates our concern on this company's long term growth prospects.  SUV sales remain the key driver of its earnings recovery in the next two years.WEY and Haval F series (which still operate in the SUV market), would marginally increase Great Wall's revenue and earnings in 2019E, but would not become a solid long term earnings driver.ORA has potential to be a long term earnings driver. However its recent focus on A00 BEV segment is disappointing, due to limit market upside in this segment. We hope Great Wall to focus on expanding its NEV product line into larger size sedans and SUVs rather than exploring BEV, PHEV and FCV models at the same time.Its JV with BMW (Spotlight Automotive Ltd) is expected to come onstream in 2021, which plans to produce an A-class SUV model as its first product and then an NEV model of BMW Mini. Spotlight might be another new earnings driver of Great Wall, pending on the success of its first two models.We estimate Great Wall's net profit stay flattish in 2019E with lower margins due to NEV ramp-up. Current valuation is not attractive given the expected weak earnings trend. Only a short term trading opportunity is expected with its SUV sales volume recovery and ORA sales ramping up.

Great Wall Motor: Still Searching for Reliable Diversification Beyond SUVs