Bank of America Securities: Guangzhou Automobile Group (02238) incurred a full-year loss far exceeding expectations, maintaining a "underperform" rating compared to the wider market.

Bank of America Securities released a research report stating that it maintains an "underperform" rating on Guangzhou Automobile Group's H shares (02238) and A shares (601238.SH) as they believe intense competition will continue to squeeze the profit margins of the group's self-owned brands, keeping the profitability in 2026 and 2027 at a meager level. The target prices are respectively 3.1 Hong Kong dollars and 5.9 Chinese yuan. Guangzhou Automobile Group issued a profit warning, estimating a net loss attributable to shareholders in 2025 to be between 8 billion and 9 billion Chinese yuan, far exceeding the bank's expectation of 3.9 billion yuan. Excluding one-time items, the core net loss is expected to be between 8.9 billion and 9.9 billion yuan. Based on this calculation, the net loss in the fourth quarter of 2025 is estimated to be between 3.7 billion and 4.7 billion yuan, compared to a net profit of 704 million yuan in the same period in 2024. The management believes that the weak performance last year was due to intense market competition, resulting in lower-than-expected sales growth, rising marketing expenses, and an increase in impairment losses on intangible assets and inventory on a year-on-year basis. Additionally, with a shift in brand focus towards new energy vehicles, the impairment losses on joint venture brands increased, leading to a decrease in profits from joint ventures.