Morgan Stanley has issued a research report stating that the operational pressures faced by BRILLIANCE CHI's (01114) joint venture, BMW Brilliance, last year significantly exceeded expectations. This resulted in the company's forecasted post-tax annual net profit for last year being approximately 25% lower than the bank's previous projections. To account for these pressures, Morgan Stanley has reduced its net profit forecasts for BRILLIANCE CHI for 2026 and 2027 by 7% and 8%, respectively. This adjustment reflects the margin pressures on BMW Brilliance's sales, with its sales volume declining by 10% during the first four months of 2026. Based on a sum-of-the-parts (SoTP) valuation, Morgan Stanley has lowered its target price for BRILLIANCE CHI from HK$3.4 to HK$2.9, a reduction of 15%, while maintaining an "In-Line with Market" rating. The bank noted that despite the downward revision in profit forecasts, it has increased the target price-to-earnings (P/E) ratio for valuing the BMW Brilliance joint venture from 3x to 4x. Morgan Stanley believes that some of the profit pressures are already reflected in the profit decline for the 2025 fiscal year and anticipates that these pressures will ease. Furthermore, the bank expects only limited revisions to the operational forecasts for BRILLIANCE CHI's own-brand business.