Citigroup: Cuts the target price for Brilliance China (01114) to HK$2.70; Brilliance BMW's second-quarter performance disappoints expectations.

Citi has released a research report stating that based on BMW's second-quarter performance, it is estimated that Brilliance BMW, the joint venture between BMW and Brilliance China Automotive (01114), will see its net profit in the first half of the year decrease by 52% year-on-year, which is below market expectations. According to International Financial Reporting Standards, Brilliance BMW is expected to incur a net loss of 1 billion yuan in the second quarter, turning from profit both year-on-year and quarter-on-quarter. Citi has lowered its sales forecast for Brilliance BMW for this year and next from 491,000 and 463,000 vehicles to 420,000 and 380,000 vehicles, and reduced its net profit margin forecast from 6.2% and 6% to 4.1% and 3.6%, dragging down Brilliance China's net profit forecast for this year and next by 45% to 49%, to 1.26 billion and 1.1 billion yuan. Citi maintains its "Buy/High Risk" rating on Brilliance China, lowering the target price from HKD 3.9 to HKD 2.7.