The Zhitong Finance App learned that Citi released a research report stating that it lowered the target price of Brilliance China (01114) from HK$2.55 to HK$1.94, believing that BMW Brilliance's profit margin decline is manageable and maintains a “neutral/high risk” rating.
The bank pointed out that BMW's third quarter results were mixed. BMW sales in Brilliance fell 30% year on year, dealer incentives and support continued, and capital expenditure increased or depreciation expenses increased. The bank estimates that according to Hong Kong accounting standards (excluding purchasing power allocation of 300 million euros), BMW Brilliance's profit margin before tax for the third quarter was about 7.3%, down 1.8 percentage points year on year and up 3.3 percentage points from quarter to quarter; net profit for the third quarter may fall 46% year on year, a slight improvement from the 53% year on year in the first half of the year.
Citi believes that Brilliance China's cost saving strategy can mitigate the impact of the joint venture's revenue falling by about 30% year on year. The profit margin before tax fell only 1.8 percentage points year on year, which is generally in line with market expectations. Looking ahead to the fourth quarter, the bank expects the business environment to remain challenging. Assuming that peak sales season revenue will increase by 7%, profit margin before tax, and adjust the 2027 and 2028 BMW sales forecasts to 356,000 vehicles each, the net profit forecast for 2026 to 2028 will be lowered by 5% to 9% to 1.307 billion, 1.04 billion and 1,055 billion yuan.