Morgan Stanley: Cutting Great Wall Motor’s profit forecasts for 2026–2028 by 28%–30%; premiumization has yet to translate into earnings growth

Why has premiumization yet to translate into profit growth?

Morgan Stanley sees potential incremental volume from new models, but sales momentum at Haval and Tank, the two main volume brands, is weaker than expected. WEY’s premiumization has not yet made a meaningful contribution to earnings, and its limited scale continues to push back breakeven. ORA’s sales momentum is relatively strong, but the bank believes it will be difficult to fully offset weakness in the core brands.
Competition may also make it harder for premiumization to translate into profit: domestic rivals have already introduced Level L2 assisted-driving features in mass-market models. Great Wall Motor may need to accelerate the rollout of these features to more models or cut prices to remain competitive. Either choice could affect model appeal or pricing and profit headroom.

Morgan Stanley cut its sales forecasts for 2026–2028 by 3% to about 1.29 million–1.31 million vehicles, citing weaker-than-expected sales and a product mix shift toward mainstream models; its revenue forecast was cut by 3.5%. The bank also lowered its gross margin forecast by 0.1–0.2 percentage points to 17.9%–18.0%, attributing the change to the mix rather than to lower gross-margin assumptions for individual brands.
At the same time, the bank raised its operating expense forecasts for the next three years by 0.8%–0.9%, incorporating the year-to-date expense run rate and spending related to overseas expansion. With lower revenue forecasts, pressure on gross margin, and higher expenses combined, net profit forecasts for 2026, 2027, and 2028 were cut to RMB 6.5 billion, 7 billion, and 7.5 billion, respectively, about 28%–30% below the previous forecasts. Forecast profit per vehicle was RMB 5,078, RMB 5,388, and RMB 5,708, respectively. The bank specifically noted that scale makes earnings more sensitive to operating leverage.

Great Wall Motor’s exports rose 38% year to date, but Morgan Stanley says some peers have already achieved high-double-digit growth or even exceeded 100%. Export growth momentum is beginning to slow relative to peers. Haval accounts for most of the company’s overseas sales, while competition is intensifying in markets including Russia, Brazil, and Australia; expansion does not mean market share and profits will rise in tandem.
Overseas expansion also involves costs and execution requirements. The bank notes that, particularly in Europe, market entry, marketing, and localization may require additional spending. Great Wall Motor remains at an early stage in terms of scale across multiple countries and local production footprint, so related investments need to meet a higher efficiency threshold. The timing and amount of Russia’s scrappage-tax rebates are also unclear, making potential gains difficult to value.

Morgan Stanley believes sales and earnings may have passed their lows, but premiumization has yet to deliver stronger sales and profit growth, while overseas expansion is becoming more crowded and may cost more. The market therefore still lacks a clear catalyst to support a sustained valuation re-rating.
The bank cut its Hong Kong-listed share target price from HKD 13 by 44% to HKD 7.30 and maintained an “Equal-weight” rating. It estimates that the Hong Kong-listed shares trade at about 8 times 2026 forecast earnings, providing some downside support, but not enough to prompt an upgrade. It cut its A-share target price from RMB 14 by 40% to RMB 8.40 and maintained an “Underweight” rating. The bank considers the A-shares’ current valuation of about 20 times 2026 forecast earnings high; the target price retains a 25% premium to its Hong Kong-listed share target price.