GREAT WALL MOTOR(2333.HK)：4Q25 EARNINGS MISSED; DOWNGRADE TO SELL ON EARNINGS DOWNSIDE RISK AND VALUATION OVERSTRETCH

Core Viewpoint - GWM's 4Q25 revenue increased by 13% QoQ to RMB69.2 billion, but net profit fell sharply by 44% QoQ to RMB1.3 billion, missing expectations due to various operational challenges and market conditions [1][2] Financial Performance - 4Q25 revenue rose by 15.5% YoY and 13.0% QoQ, with per-vehicle revenue stable at approximately RMB173,000 [2] - Attributable net profit dropped by 50.9% YoY and 63.9% QoQ to RMB683 million, with core earnings per vehicle collapsing from RMB5,356 in 3Q25 to RMB1,706 [2] - Profitability was impacted by seasonal bonus accruals (RMB3 billion), low sales efficiency from the direct-sales network, and lower-than-expected Russian scrap tax rebates [2][4] Sales Targets and Market Strategy - For 2026, GWM set a sales target of 1.8 million units (1.2 million domestic, 600,000 overseas), implying a 45%+ YoY increase in domestic sales [3] - The domestic growth is expected to be driven by the rollout of the EC and DE platforms, with at least 10 new models planned [3] - However, the target is deemed challenging due to industry demand softness and increased competition [3] Operational Challenges - The extensive direct-sales network, with over 420 WEY outlets, poses risks to earnings due to operational inefficiencies and modest sales volumes [4] - Comparatively, Li Auto operates a similar network but achieves significantly higher sales volumes, indicating potential challenges for GWM [4] Market Position and Valuation - GWM's NEV penetration rate was 35.4% in 2025, significantly lower than leading brands like Geely (11%) and Chery (5.4%) [6] - The company’s retail sales in the domestic market were only half of Chery's and less than one-third of Geely's, highlighting a substantial scale gap [6] - Current valuation at 12.5x 2026E P/E is above peers Geely (8x) and Chery (9x), indicating a stretched valuation [8] Future Outlook - The shift in strategy from profit prioritization to aggressive scale expansion is expected to pressure net profits through 2026-27 [7] - Target price has been reduced to HK$9.50, with a downgrade to SELL due to fundamental headwinds and stretched premiums [9]