26 September 2018

Great Wall SUV run running out of gas?

For years, Chinese sport utility vehicle (SUV) leader Great Wall Motor Co. Ltd. (02333.HK, 601633.CN) has been a favorite with institutional investors because of its heady sales and impressive margins.

The counter’s Hong Kong-listed shares have soared 128 percent this year but it has not always been smooth going. 

On Oct. 25, the stock tanked close to its daily trading limit after losing 9.95 percent. The fall came a day after the company announced its third-quarter results and just weeks after the stock had climbed to a historic high of 52.85 yuan.

Interestingly, the third-quarter numbers were not that bad. Profit attributable to shareholders increased more than 60 percent to 6.2 billion yuan in the nine months to September. Operating revenue rose 38 percent to 40.8 billion yuan, and although the growth was 6.45 percent lower than the first-half figure, it was still robust and fairly commendable. 

During the first three quarters, 114 institutional investors cut their shareholding in Great Wall’s mainland-listed shares, taking their share ownership to its lowest in a year, the Economic Observer reports. 

As a result, market analysts are split over its outlook.

Merrill Lynch believes Great Wall’s days of heady numbers are at an end as domestic and foreign competitors barrel in, drawn by attractive margins, challenging its dominance in the SUV market.

Everbright Securities (601788.CN) thinks that for Great Wall to increase its sales growth of 40 percent or more is something of a mission impossible.

However, analysts at UBS, Guotai Junan and China Investment Securities say there’s enough room for everyone. SUVs usually account for 40 percent of passenger vehicle sales in a mature market but the corresponding figure in China is less than 20 percent.

That should be good news for Great Wall chairman Wei Jianjun {魏建軍} who remains focused on SUVs. He is reported to be planning smaller, more fuel-efficient SUVs in order to maintain Great Wall’s lock on the market.

– Contact the writer at [email protected]



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