Core Viewpoint - Dongfeng Group is undergoing a capital restructuring through a combination of "introduction listing + privatization," with its high-end electric vehicle brand, Lantu Motors, set to list on the Hong Kong Stock Exchange while Dongfeng Group itself will delist [1][3]. Group 1: Capital Restructuring - The capital operation is characterized as a "share distribution + absorption merger" model, where Dongfeng Group will distribute 79.67% of its stake in Lantu Motors to all shareholders, followed by Lantu's introduction listing on the exchange [3]. - The privatization process involves Dongfeng's wholly-owned subsidiary in mainland China paying equity compensation to the controlling shareholder and cash compensation to minority shareholders, achieving 100% control of Dongfeng Group [3]. - The "introduction listing" method allows for a quicker process without new share issuance, thus avoiding dilution of existing shareholders' equity [3]. Group 2: Valuation Challenges - Dongfeng Group's privatization is primarily due to long-term valuation imbalances in the Hong Kong stock market, with a market capitalization of only HKD 39.12 billion and a price-to-book (PB) ratio of 0.25, indicating severe undervaluation [4]. - The company has not conducted any equity refinancing since its listing, losing the financing function of its H-share platform, which has not reflected its transition to new energy and high-growth sectors like Lantu [4][5]. Group 3: Industry Context - Many traditional automakers listed in Hong Kong face similar valuation challenges, with a stark contrast between market perceptions of traditional manufacturing and recognition of new production capabilities in China [5]. - Dongfeng's profit structure has been significantly impacted by industry changes, with a reported profit from joint ventures dropping from approximately CNY 11.88 billion in 2022 to CNY 513 million in 2023 [5][6]. Group 4: Lantu Motors' Growth - In contrast to Dongfeng Group's struggles, Lantu Motors has shown strong growth, delivering 85,000 vehicles in 2024, a 70% increase year-on-year, and achieving a cumulative sales volume of 68,263 vehicles in the first seven months of 2025, an 88% increase [8][9]. - Lantu's financial performance is improving, with a reduction in net losses from CNY 1.472 billion in 2023 to CNY 18 million in 2024, nearing profitability [8][9]. - The CEO of Lantu has expressed a goal to achieve profitability by the end of 2025, supported by a robust patent portfolio and strategic partnerships with technology giants like Huawei [9]. Group 5: Strategic Implications - Dongfeng's capital operation serves as a model for large automotive groups navigating the new energy transition, allowing for a more flexible and efficient resource integration post-privatization [10]. - Following its listing, Lantu will have a clearer positioning in the global market, with plans to launch three new models in the second half of 2025 and expand into the Middle East [10]. - Lantu's independent listing will provide a dedicated financing platform to support high R&D investments and global expansion efforts [10].