On Wednesday, JPMorgan (NYSE:JPM) adjusted its stance on BAIC Motor Corp Ltd. (1958:HK) (OTC: BCCMY) stock, downgrading it from Overweight to Neutral. The firm also revised its price target for the automaker's shares to HK$2.00 from the previous HK$2.80. The adjustment follows a less-than-anticipated performance in the first half of 2024, with implications that could extend into the second half of the year and beyond.
In a statement, JPMorgan cited earlier expectations that BAIC Motor would offer a consistently attractive yield of about 10% based on sustained or improving earnings across its business lines.
However, these expectations have not been met, as evidenced by the company's weak financial results in the first half of 2024. The analyst noted that year-to-date, BAIC's share price has declined by 18%, contrasting with a 9% increase in the Hang Seng China Enterprises Index (HSCEI).
BAIC Motor's three primary business lines are expected to face challenges. The joint venture with Benz is predicted to see a 7% dip in earnings for 2024, with no significant growth anticipated for 2025. The partnership with Hyundai (OTC:HYMTF) is likely to continue incurring losses for the years 2024 and 2025, due to only a moderate expected improvement in capacity utilization. Additionally, the company's own-brand business is projected to sustain a considerable loss, estimated at about Rmb5 billion for both 2024 and 2025.
Despite these setbacks, BAIC Motor still aims to uphold a significant dividend payout, approximately 34% of its earnings. However, JPMorgan warns that the absolute level of dividends could be at risk if the visibility of underlying earnings decreases further. This outlook reflects the firm's cautious stance on the automaker's financial prospects in the near term.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.