UBS lowers YONGDA AUTO's target price to 1.26 yuan, rating "Sell"

UBS published a research report indicating that YONGDA AUTO (03669.HK) recorded a non-International Financial Reporting Standards adjusted net loss of RMB 304 million in the second half of last year, compared to an adjusted net profit of RMB 275 million in the previous fiscal year. During this period, new car sales volume fell by 10.7% year-on-year, and luxury car sales dropped by 13.3%. In the second half of last year, new car sales revenue decreased by 13.3%. The bank believes that in addition to the decline in sales volume, intensified market competition leading to a decrease in average selling prices is also an important factor suppressing the growth of new car sales revenue. After-sales service revenue fell by 5.7% year-on-year, partly affected by store closures and macroeconomic weakness.

Looking ahead to 2026, UBS believes that the three major German automotive brands, BMW, Mercedes-Benz, and Audi, have lowered the suggested retail prices of most popular models in the first quarter of this year, which may help narrow retail discounts and reduce the financing pressure on dealers. Additionally, the increased contribution from new energy vehicle brands should support the recovery of new car gross margins. However, new models based on BMW's next-generation electric vehicle platform will not debut in Chinese showrooms until the fourth quarter of 2026, which is expected to have limited contribution this year, while tightening automotive finance rebate policies will continue to impact YONGDA's commission income.

Based on last year's second-half performance, the bank has lowered its profit forecasts for YONGDA AUTO for 2026 to 2028 by 13% to 14%, reducing the target price from HKD 1.45 to HKD 1.26, and maintaining a "Sell" rating