Great Wall Motor (2333 HK/601633 CH) Overseas localization as key after 3Q26 miss

Maintain BUY. Great Wall's 3Q26 net profit missed our estimate by 36% as gross margin fell 1.0ppts QoQ. Great Wall has higher international exposure than some of its peers, as its YTD overseas sales volume exceeded half of total deliveries. It has been expanding global footprint outside Russia in both sales and production in a bid to mitigate trade risks.

3Q26 miss on GPM. Great Wall’s 3Q26 revenue fell 5.7% YoY to RMB57.8bn, trailing our forecast by 3.0%. GPM fell 1.1ppts YoY and 1.0ppts QoQ to 17.3%, coming in 1.1ppts lower than our prior forecast. Management attributed it to launch-stage incentives and ramp-up costs for newly introduced models in China, while reiterating a healthy overseas GPM. Combined SG&A and R&D ratio fell 1.0ppt QoQ to 10.9%, 0.2ppts better than our forecast. Net profit fell 40.7% YoY and 10.4% QoQ to RMB1,362mn, missing our estimate by 36%.

 Overseas localization expansion to mitigate tariffs and supports longterm upside. Overseas markets accounted for about 52% of Great Wall’s total wholesale volume in the first nine months this year, with locally produced vehicles comprising 35%-45% of total overseas deliveries. Management projects overseas capacity to reach 250,000-300,000 units in FY26E (including 220,000 units in full-process manufacturing facilities across Russia, Brazil and Thailand), with further expansion targeted for FY27E. Its KD plant in Bulgaria provides strategic positioning to mitigate upcoming EU tariffs on Chinese hybrid vehicles. Management still sees substantial overseas growth potential and expects locally produced vehicles to achieve superior profitability over CBUs (Complete Built Units) over time, potentially exceeding consensus expectations.

Earnings forecasts. We expect 4Q26E sales volume to rise 9.3% QoQ to about 0.37mn units, supported by new models (the H10, new Lanshan and Ora models). We expect year-end bonus accruals to drive down GPM by 1.1ppts QoQ and increase the combined SG&A and R&D ratio by 2.7ppts QoQ in 4Q26E. We forecast 4Q26E net profit to rise 7.8% YoY to RMB1.3bn, assuming the receipt of RMB2.0bn in Russia’s recycling-fee reimbursements. We cut both FY26-27E net profit forecasts by 30% to RMB5.3bn and RMB6.4bn, respectively, reflecting structural policy headwinds (export VAT rebate reduction and battery consumption tax increase) and uncertainties surrounding Russia’s recycling-fee refunds.

 Valuation/Risks. We maintain our BUY rating and cut our H-share target price from HK\14.00 to HK8.50, still based on 10x FY27E P/E. Our Ashare target price is adjusted to RMB18.20, based on a 150% A/H premium. Key risks to our rating and target prices include lower sales volume and margins than we expect, as well as a sector de-rating.

Earnings Summary -2333 HK

Source: Company data, Bloomberg, CMBIGM estimates

2333 HK 601633 CH

BUY BUY

Maintain Maintain

China Auto Ji SHI, CFA (852) 3761 8728 shiji@cmbi.com.hk

Wenjing DOU, CFA (852) 6939 4751 douwenjing@cmbi.com.hk

Austin Liang (852) 3900 0856 austinliang@cmbi.com.hk 12-mth Price Performance

Stock Performance

Source: FactSet

Stock Data

Source: FactSet

Figure 1: Quarterly results

Source: Company data, CMBIGM

Figure 2: Earnings revision

Source: CMBIGM estimates

Figure 3: CMBI estimates vs consensus

Source: Bloomberg, CMBIGM estimates

Financial Summary

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.

Disclosures & Disclaimers

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CMBIGM Ratings

BUY

: Stock with potential return of over 15% over next 12 months

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SELL

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NOT RATED

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OUTPERFORM OUTPERFORM MARKET-PERFORM UNDERPERFORM UNDERPERFORM

: Industry expected to outperform the relevant broad market benchmark over next 12 months

: Industry expected to perform in-line with the relevant broad market benchmark over next 12 months

: Industry expected to underperform the relevant broad market benchmark over next 12 months

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