CICC: Keeping Chery (09973) outperforming the industry rating target price of HK$35

The Zhitong Finance App learned that CICC released a research report stating that it will maintain Chery Auto (09973)'s 2026/2027 profit forecast of 2021/25.1 billion yuan. The current stock price corresponds to 6.3x/4.9x 26/27E P/E, maintaining an outperforming industry rating and a target price of HK$35, corresponding to 9x/7x 26/27E P/E, with 37% upside compared to the current stock price.

CICC's main views are as follows:

1H26 results are in line with this forecast

In 2Q26, the company achieved operating income of 77.41 billion yuan, +5.5% year-on-year, +17.5% month-on-month; net profit to mother of 4.4 billion yuan, -13.0% year-on-year and +5.4% month-on-month.

1H26 overseas revenue surged, and the gross margin of the passenger car business bucked the trend and improved

1H26's overseas revenue increased 51.0% year-on-year to 98.97 billion yuan, and its share of total revenue increased from 46.3% of 1H25 to 69.1%. The overall gross profit margin for 1H26 passenger cars was 15.6%, +3.2ppt year on year. Among them, the gross profit margin for fuel vehicles was 18.1%, +2.9ppt year on year, and the gross profit margin for new energy vehicles was 12.8%, +7.6ppt year on year. The bank believes that it mainly benefits from exports. The 2Q26 company's gross profit margin was 16.1%, which was basically the same as +2.55ppt/month over month. The bank believes that scale growth and structural optimization are better offsetting the pressure of rising costs.

Investment in R&D and management increased, and core profit increased significantly after excluding foreign exchange losses

2Q26 management and R&D expenses both increased month-on-month, mainly due to the company's global business expansion and increased investment in the fields of intelligence and electrification; sales expenses declined year-on-year, with a total of 11.4% of the three rates, +0.21pp/ month-on-month +0.92ppt. 1H26 exchange revenue decreased by 5.5 billion yuan year on year. Excluding exchange and one-time disposal revenue, the bank estimates that core profit achieved a high double-digit year-on-year increase.

Optimistic about the company's overseas sales trend and pay attention to the sales performance of new smart cars

The company lays out overseas production capacity through KD, joint ventures, acquisitions, etc. The bank believes that it is relatively efficient, has light assets, and is expected to respond flexibly to trade policy adjustment risks; at the same time, the company's overseas products are rich in power types, HEVs, PHEVs, and BEVs, which are expected to better meet differentiated market needs. The bank raised the company's export forecast for 2026 to 2 million vehicles. On the domestic side, dealers removed overall inventory in the first half of the year, and the second half of the year put on the market young, and domestic sales may gradually pick up. The Zhijie V9 won the top sales in the MPV market in July, with an average vehicle transaction price of 500,000 yuan. The Zhijie RX began pre-orders, with pre-sale prices starting at 29.98/359,800 yuan. The bank believes that the sales volume of Zhijie is expected to improve markedly in the second half of the year, leading the Group's high-end path.

Risk warning: Domestic demand continues to be pressured; trade policies in overseas markets have changed.