Citigroup: Great Wall Motor (02333) profit in the first half of the year falls far short of expectations, rating downgraded to "sell"

Citigroup released a research report stating that Great Wall Motor (02333) announced a preliminary net profit of 2.35 billion to 2.6 billion yuan in the first half of 2026, a year-on-year decrease of 59% to 63%, indicating a second quarter net profit of 1.41 billion to 1.66 billion yuan, a year-on-year decrease of 64% to 69%, a quarterly increase of 49% to 75%, far below the market's expectation of 2.99 billion yuan. The rating was downgraded from "buy" to "sell" with the target price slashed from 14.8 Hong Kong dollars to 7.3 Hong Kong dollars. Citigroup believes that the significant profit shortfall was mainly due to the delayed recognition of approximately 1.9 billion yuan in tax refunds from scrapping taxes in Russia in the fourth quarter of 2025 and the first quarter of 2026, as well as a forex loss of about 200 million yuan. Management expects to receive the tax refund by December 2026, but considering the multiple delays, Citigroup believes it is unlikely for the group to receive the refund. In response to strong export sales momentum, management has raised its 2026 export sales target from 600,000 units to 700,000 units, expecting monthly export sales of 70,000 units in October or November. Citigroup maintains its sales forecasts of 1.43 million, 1.56 million, and 1.64 million units for 2026 to 2028, but raises its export sales forecasts to 700,000, 773,000, and 829,000 units, driving revenue forecasts up by 4% to 5% to 241 billion, 258 billion, and 270 billion yuan. Taking into account inflation in raw material costs, the bank lowers gross margin forecasts by 0.3 to 1 percentage points to 15%, 15.1%, and 15.2%. Net profit forecasts for 2026 to 2028 are significantly slashed by 40% to 43% to 6.072 billion, 7.837 billion, and 9.365 billion yuan.