Brilliance Auto shares accelerate as Goldman Sachs doubles target price

Shares of Brilliance China Auto surged on Thursday morning in Hong Kong after Goldman Sachs more than doubled its target price for the stock, citing a growing appetite among mainlanders for luxury cars.

The firm, which partners with BMW to build BMW Brilliance cars in China, shot up as much as 8.2 per cent to HK$23, before paring gains to trade at HK$21.85 at noon, still up 2.8 per cent.

Goldman Sachs raised the target price for Brilliance to HK$28.8 from HK$13.9, and upgraded it to buy from neutral. It said it expects BMW Brilliance cars to record double-digit growth in gross profit margin between 2019 and 2020, benefiting from rising demand among Chinese motorists for luxury cars.

Meanwhile, JP Morgan reiterated its overweight rating for Brilliance and set its target price at HK$32. The investment bank said this was because BMW and Brilliance Auto had agreed three years ago to extend their joint venture to 2028 and expected manufacturing capacity to reach 800,000 vehicles in the next few years.

Foreign carmakers need to partner with local companies to operate in China.

On Wednesday, media reports said BMW is looking to establish a separate joint venture with Great Wall Motor, China’s largest maker of SUVs. The partnership could focus on electric vehicles.