Citi Revises Brilliance China Target Down to HK$2.7, Citing Weak BMW JV Performance

Stock News08-03

Citi has released a research report estimating that the joint venture between BMW and Brilliance China (01114), Brilliance BMW, will see a 52% year-on-year decline in first-half net profit, underperforming market expectations. Based on BMW's second-quarter results, the venture is expected to record a net loss of RMB 1 billion under IFRS, marking a reversal from both the previous quarter and the same period last year.

Citi has lowered its sales forecasts for Brilliance BMW for the next two years from 491,000 and 463,000 units to 420,000 and 380,000 units, respectively. Additionally, the net profit margin projections have been cut from 6.2% and 6% to 4.1% and 3.6%. This adjustment has led to a 45% to 49% reduction in Brilliance China's net profit estimates for the next two years, now set at RMB 1.26 billion and RMB 1.1 billion.

The firm maintains a "Buy/High Risk" rating on Brilliance China, but has lowered the target price from HK$3.9 to HK$2.7.

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