On Monday, Citi maintained its Sell rating on Bayerische Motoren Werke AG (BMW (ETR:BMWG):GR) (OTC: BMWYY (OTC:BMWYY)), while reducing the price target from EUR91.00 to EUR85.00 for the shares. The adjustment reflects concerns about the German automaker's significant exposure to the Chinese market.
Despite the recent localization of the X5 model, which has mitigated the impact of China import tariffs, BMW's substantial stake in its China joint venture, BMW Brilliance Auto, continues to be a focal point.
The financial institution highlighted that BMW consolidates the full revenues and EBIT of its 75% owned joint venture, which are projected to reach €33 billion and €4.4 billion respectively for the fiscal year 2023, according to Citi's estimates.
Additionally, the earnings before interest and taxes (EBIT) generated by China imports and parts also contribute to the company's financials. With an approximate 35% of profit before taxes (PBT) attributed to China, based on a 20% margin on imports, the reliance on the Chinese market is substantial.
The analyst expressed concerns that despite the common knowledge of BMW's China exposure among investors and the consensus of apprehension regarding the Chinese market, there is a belief that the automaker's stock is unlikely to be re-rated favorably in the near future. This sentiment is expected to keep the pressure on BMW's share prices.
In response to these factors, Citi has revised its sales and EBIT forecasts for BMW in China downward, prompting the reduction in the price target. This move by Citi signals caution to investors regarding BMW's performance, particularly in relation to its Chinese operations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.