UBS raises GAC Group's target price to 4.2 yuan, maintains "Neutral" rating

UBS published a research report stating that it reaffirms a "Neutral" rating on GAC Group (02238.HK), raising the target price from HKD 3.2 to HKD 4.2. The report believes that the recent risks and rewards for GAC Group are becoming balanced. Although the company has made progress in organizational reform and cost control, it will still take time for its own brands to achieve breakeven, and the likelihood of a significant sales rebound for joint venture brands in 2026 is low.

The report points out that GAC Group officially established the GAC Trumpchi Division in January 2026, which is another important organizational restructuring move following the establishment of the Aion - Haobo Division in December 2025. The management plans to further reduce costs by 15% in 2026, building on the 10% cost reduction achieved in 2025 through vertical integration, localization substitution, and platform-based component sharing. UBS expects that accelerating cost optimization will help the company improve profitability in 2026 and reduce operating losses for its own brands.

In terms of new products, GAC's deeply cooperative "Qijing" brand with Huawei will launch two new models in 2026. However, UBS believes that the brand's contribution to sales will mainly be reflected in 2027 and beyond, with relatively limited sales increment in 2026.

The report notes that under the backdrop of weak domestic demand and business restructuring, GAC's current stock price is equivalent to 0.3 times the forecasted price-to-book ratio for 2026, which is below one standard deviation of its historical average. Considering the accelerated launch of new models and the effectiveness of cost control, UBS has raised its sales forecast for 2026 to 2027 by 20% to 31%, and significantly increased its profit forecast for the same period to RMB 1.454 billion to RMB 2.991 billion