Great Wall Motors

Great Wall Motor’s shares fall by the most in 4 months after plunge in first-half net profit

PUBLISHED : Monday, 24 July, 2017, 10:50am
UPDATED : Monday, 24 July, 2017, 10:50am

Shares of Great Wall Motor Co., China’s biggest maker of sports utility vehicles (SUVs), made their biggest intraday decline in four months, after the company’s first-half net profit fell by 49.4 per cent.

The stock fell as much as 7.1 per cent to an intraday low of HK$9.33 in Hong Kong, their lowest level since March 17, and changed hands recently at HK$9.74.

Great Wall’s net income fell to 2.5 billion yuan (US$369.6 million) in the first six months of the year, due to rising expenses and consumer price deflation.

It’s a decline that had been foreseen by Morgan Stanley’s analysts Jack Yeung and Eddy Wang, who had an “Overweight/Cautious” recommendation on the stock.

“Great Wall will likely announce relatively weak results at its interim report, owing to rising expenses and consumer price deflation,” they said in early July.

To attract buyers, the Hebei-based carmaker spent 1 billion yuan in March offering discounts to promote its Haval brand of SUVs.

“We promoted the sales of our products through red packets, lucky draws and other special offers,” said Great Wall’s board secretary Xu Hui. That “resulted in a change in income and profit margin,” Xu said.

The carmaker is counting on a new model called the Haval H6, as well as its premium SUV brand WEY, whose first design the VV7 was launched in the first half, to be the growth drivers for the rest of the year, Xu said.

“The sales of the Wey brand would likely ramp up quickly in the second half and emerge as a growth driver for Great Wall in the next five to 10 years,” said Yeung. “We expect the increasing contribution from the Wey brand will help to improve overall profitability of Great Wall.”

Automotive stocks were leading declines on Monday in Hong Kong, down 0.3 per cent amid a rising market. Guangzhou Automobile Group fell 1.4 per cent to HK$9.70 while BYD eased 1.3 per cent o HK$50.50.