GAC Group once rose by 10%, reaching a two-year high; Morgan Stanley believes the valuation is still underestimated

GAC Group (02238.HK) opened 0.76% higher this morning (2nd) and the gains expanded, rising as much as 10.6% to a high of HKD 4.38, marking a more than two-year high since August 2023. It is currently reported at HKD 4.23, up 6.82%, with a trading volume of 132 million shares, involving HKD 562 million.

Morgan Stanley recently stated that GAC's recent stock price increase is mainly attributed to three recent positive factors, including the management's latest statement that they will mass-produce models equipped with all-solid-state batteries by 2026; significantly increasing information disclosure regarding the partnership brand "Aito" with Huawei; and announcing a marketing collaboration with JD-SW (09618.HK). The firm has given GAC's H shares an "Overweight" rating, with a target price of HKD 3.9.

Morgan Stanley noted that although the above three initiatives will still take time to scale up, their short-term contribution to profitability is limited. However, considering the latest business developments and GAC's retention of a 5.7% market share this year, the firm believes GAC's valuation remains undervalued. The firm expects GAC to report a loss of RMB 0.24 per share in 2025, with earnings forecasts of RMB 0.11 and RMB 0.39 per share for 2026 and 2027, respectively