Chery's June sales rose 10% YoY, with record overseas sales supporting the Buy rating

Overview

This report is a company update on Chery 09973.HK from Deutsche Bank. The core conclusion is that June sales growth was primarily driven by record overseas sales, and that the rising proportion of higher-margin overseas sales is expected to improve second-quarter and 2026 profitability. The report therefore assigns a Buy rating and a 12-month target price of HKD 43.00.

Core views

Chery's total June wholesale volume increased 10% YoY and 4% MoM to 240,585 units. Overseas sales surged 81% YoY to 185,220 units, serving as the primary growth driver and offsetting pressure from a 53% YoY decline in domestic sales. The report believes that expansion in regions such as Europe and the launches of new brands and products, including Lepas and Jaecoo J5, drove overseas performance. As the overseas sales mix rises to 75%, gross margin is expected to improve, while second-quarter net profit is forecast to increase 20% sequentially to RMB 5 billion.

Analysis framework

The report primarily assesses earnings trends through monthly wholesale sales, sequential changes in brand sales, the overseas and domestic sales mix, differences in profit per vehicle, and second-quarter revenue and gross margin forecasts, supporting the Buy rating through a 12-month total shareholder return framework.

Methodology notes

• Company fundamentalsSales volume and sales mix analysis

  Use changes in total wholesale volume, overseas sales, domestic sales, and brand sales to assess growth quality.

  The report breaks down June total sales growth into strong overseas growth and weak domestic performance, emphasizing that record overseas sales were key to offsetting the domestic decline and driving earnings improvement.

• Earnings forecastsRevenue, gross margin, and net profit forecasts

  Derive quarterly earnings based on changes in sales volume, sales mix, and gross margin.

  The report forecasts second-quarter revenue of RMB 87 billion, a gross margin of 16.4%, and net profit of RMB 5 billion, primarily based on the rising proportion of higher-margin overseas sales.

• Rating framework12-month TSR framework

  Form an investment rating based on the target price, current price, and expected shareholder return.

  Deutsche Bank defines Buy as recommending that investors purchase the stock based on the current 12-month total shareholder return outlook.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Chery 09973.HK

  Research subject stock

  Strengths

  Record overseas sales, a rising overseas sales mix, sequential growth across multiple brands in June, and substantial upside from the target price relative to the current price.

  Weaknesses

  Domestic sales declined sharply YoY, and earnings improvement depends on continued overseas market expansion.

  Comparison

  Overseas profit per vehicle of RMB 10,000-11,000 is close to twice the RMB 5,000-6,000 level in the domestic market.

  Risks

  Overseas market expansion falling short of expectations, intensifying domestic competition, gross margin improvement below expectations, foreign-exchange risk, and regional regulatory risk.

Key data

• June total wholesale sales240,585 unitsUp 10% YoY and 4% MoM.
• June overseas sales185,220 unitsUp 81% YoY and 4% MoM, reaching a monthly record.
• June domestic sales55,365 unitsDown 53% YoY but up 2% MoM.
• Second-quarter wholesale sales708,956 unitsUp 19% YoY and 25% sequentially.
• Second-quarter revenue forecastRMB 87 billionExpected to increase 19% YoY and 32% sequentially.
• Second-quarter gross margin forecast16.4%Expected to increase 2.8 percentage points YoY and 0.4 percentage points sequentially.
• Second-quarter net profit forecastRMB 5 billionExpected to increase 20% sequentially and remain flat YoY.
• 2026 sales target3 million units1.8 million overseas units and 1.2 million domestic units.
• Overseas profit per vehicleRMB 10,000-11,000Management stated that this is close to twice the domestic-market profit per vehicle of RMB 5,000-6,000.

Impact & implications

If overseas sales expansion continues, Chery's profit elasticity could be stronger than indicated by sales growth alone, because profit per vehicle in overseas markets is significantly higher than in the domestic market. The investment implication is that valuation and earnings expectations will become increasingly dependent on the execution of overseas expansion, regional demand, product launches, and gross margin realization.

Risks

• Domestic sales declined 53% YoY, indicating that local competition and demand pressure remain significant.
• Earnings improvement is highly dependent on the overseas sales mix and overseas profit per vehicle; if overseas demand or channel expansion slows, profit forecasts could come under pressure.
• The continued ramp-up of new brands and products such as Lepas, Jaecoo J5, and Luxeed V9 remains to be validated.
• Cross-regional sales may face foreign-exchange, tariff, regulatory, logistics, and geopolitical risks.
• Deutsche Bank disclosed that it or its affiliates received compensation from the company for non-investment banking services during the past year and that related service agreements were disclosed.

What to watch

• Whether reported second-quarter results deliver the forecasts of RMB 87 billion in revenue, a 16.4% gross margin, and RMB 5 billion in net profit.
• Whether monthly overseas sales can sustain strong growth and maintain a sales mix of approximately 75%.
• Progress in overseas expansion in regions such as Europe and the performance of new brands and models such as Lepas and Jaecoo J5.
• Whether domestic sales recover from low levels, particularly the sustained contribution following the launch of Luxeed V9.
• Progress toward the breakdown of the 2026 sales target of 3 million units, comprising 1.8 million overseas units and 1.2 million domestic units.