Core Viewpoint - Brilliance's net income increased by 15.5% YoY in 1H25, primarily due to a lower comparative base from substantial withholding tax in 1H24, while BBA's earnings declined by 25% YoY, indicating challenges in sustaining high ordinary dividend payouts in the mid-to-long run [1][5]. Financial Performance - In 1H25, Brilliance's net income rose to RMB1.7 billion, reflecting a 15.5% increase YoY [1] - BBA's sales volume decreased by 19.8% YoY to 262,005 units, with revenue falling by 23.1% YoY to RMB85.8 billion [2] - BBA's net profit dropped by 25% YoY to RMB8.2 billion, with earnings per vehicle remaining steady at RMB31,321 and a net margin of 9.6% [2] Operational Challenges - The headquarters business reported an operating loss of RMB131 million in 1H25, a decline from an operating profit of RMB203 million in 1H24, primarily due to increased expenses from the resumption of production at Jinbei Shenyang [3] - The joint venture Yuxin with TCL incurred an investment loss of RMB12 million in 1H25 [3] Dividend Policy and Cash Flow - The company resumed its interim regular dividend, declaring HK$0.8 per share, which exceeded expectations, but cash reserves are diminishing [4] - Cash outflows in 1H25 included special dividend payments of RMB4.7 billion and investments totaling RMB1.2 billion, while cash inflows were driven by BBA regular dividends of EUR510 million (approximately RMB4.2 billion) [4] - As of the end of 1H25, net cash declined to RMB7 billion from RMB10.8 billion at the end of 2024, with projections indicating further decline to RMB5.3 billion by year-end [4] Valuation Adjustments - The 2025-26 net profit forecasts have been revised upward by 2-5% to RMB2.9 billion and RMB2.7 billion, respectively, reflecting BBA's stronger-than-expected profitability [5] - The target price has been adjusted to HK$3.70 based on a 6x 2025 P/E ratio, while maintaining a HOLD rating due to concerns over the sustainability of regular dividends and ongoing losses from new business ventures [5]