CICC has initiated coverage on CHERY AUTO (09973) with an Outperform rating and a target price of HK$42.00. The current stock price implies a 26E 7x P/E multiple, while the target valuation stands at 26E 10x P/E based on comparable valuation methods, suggesting 35% upside potential.
As a leading Chinese independent automaker, CHERY AUTO is accelerating its export growth and new energy vehicle (NEV) transition. The firm forecasts 2025-26 EPS at RMB3.32/RMB3.88 respectively, with a 24-26E CAGR of 22%. Market attention remains on its export performance, though the bank notes balanced progress across NEV transition, traditional fuel vehicles, and overseas operations.
Key investment highlights: 1. **Leading Domestic Player with Multi-Power/Brand Strategy**: Ranking among China's top automakers by 2024 sales volume, CHERY maintains diversified powertrain development (with growing fuel vehicle market share) and operates five brands addressing different market segments. Its core CHERY brand produces global bestsellers, JETOUR targets off-road markets with rapid growth, while EXEED, LUXEED and iCAR drive its NEV transformation.
2. **Export Champion with First-Mover Advantages**: As China's top passenger vehicle exporter for 22 consecutive years (excluding acquisitions), CHERY has built moats through extensive overseas channels, global R&D synergy, and complete production networks. Recent expansions into Europe and Asia-Pacific markets are expected to fuel long-term volume and profit growth.
3. **Self-Developed Tech Driving NEV Transition**: With its multi-layered R&D system, proprietary Kunpeng powertrain and Falcon autonomous driving platform, CHERY is establishing technological foundations for electrification and smart transformation. The bank anticipates strengthened NEV product cycles, including multiple new model launches by 2026, leveraging late-mover advantages in this segment.
Potential catalysts include sustained improvements in NEV and export sales. Risks involve overseas uncertainties, domestic demand volatility, intensifying competition, and potential NEV underperformance.