Maintain Neutral: Export and self-owned brand improvements support recovery, but domestic competition and JV drag limit elasticity

Overview

This report covers SAIC Motor's A shares. It notes that 4Q25 results came in slightly below J.P. Morgan and market expectations, mainly due to higher costs ahead of SAIC-VW's new model launches and loss provisions booked by SAIC-GM. On the positive side, the self-owned passenger vehicle business is close to or already at break-even, while overseas business growth and better overseas margins are the most important revenue and profit drivers for 2026.

Core views

The key view is that SAIC Motor should see a modest recovery in 2026, but it is unlikely to materially outperform the Chinese auto industry. The report is positive on export growth and self-owned brand improvement, but believes the company remains a proxy for the China auto market, where domestic passenger vehicle demand is expected to fall 4% and price competition and margin pressure will continue to weigh on performance. As a result, J.P. Morgan prefers pure new energy vehicle companies over names with higher JV exposure and expects SAIC Motor's share price to largely trade sideways.

Analysis framework

The report evaluates investment value through 4Q25 earnings misses, management sales guidance, overseas expansion, self-owned brand profitability improvement, JV NEV transformation, financial forecasts, and a P/B valuation framework. The analysis focuses on export growth offsetting domestic weakness, one-off JV drags and future NEV model cycles, as well as domestic competition compressing margins.

Methodology notes

• Valuation methodsPB valuation

  0.6x FY26 P/B

  The target price of Rmb16.00 is based on 0.6x FY26 P/B, slightly above the historical low of 0.5x, because the report expects earnings to improve sequentially in 2026.

• Earnings forecastEarnings revision

  Gradual earnings recovery

  After incorporating earnings estimate revisions, the report expects FY26 net profit to grow about 19%, with net margin rising modestly to 1.8%.

• Industry comparisonNEV preference

  Preference for pure NEV companies

  Given oil prices and NEV penetration trends that are shifting consumers toward NEVs, the report believes pure NEV companies may grow faster than traditional JV-heavy and diversified automakers.

Asset mapping & comparison

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

• SAIC Motor Corp - A (600104.SS)

  Research target

  Strengths

  Clear overseas sales targets, improving self-owned brand profitability, and earnings are expected to gradually recover in 2026.

  Weaknesses

  Weakening domestic passenger vehicle demand, price competition compressing margins, and a slower pace of recovery in JV businesses.

  Comparison

  Compared with pure NEV companies, growth elasticity may be weaker; compared with traditional automakers, export business and self-owned brand improvement provide some support.

  Risks

  Domestic auto market growth falls short of expectations, competition intensifies, dividends are cut, and the NEV model cycle execution of the JVs falls short of expectations.

• SAIC-VW JV

  Important JV business

  Strengths

  Plans to launch seven NEV models in 2026, which could narrow the competitive gap with domestic brands.

  Weaknesses

  Costs are being front-loaded ahead of new model launches in 2025, weighing on near-term profits.

  Comparison

  If execution goes well, long-term upside could come from the Volkswagen JV business.

  Risks

  Weak model-cycle execution, a wider competitive gap, and a profit recovery later than expected.

• SAIC-GM JV

  Important JV business

  Strengths

  Targeting an NEV penetration rate of around 50%, it has the potential to become one of the first JV brands in China to achieve NEV profitability.

  Weaknesses

  Loss provisions were booked in 2025, putting short-term pressure on profits.

  Comparison

  The report believes the GM JV business should stabilize, but a significant recovery will still take time.

  Risks

  Failure to deliver NEV penetration and profitability targets.

• Self-owned passenger vehicle business

  Source of growth and profitability improvement

  Strengths

  Excluding one-off impairments, incremental R&D, and year-end supplier compensation, management says it has already broken even; new models from MG, Shangjie, and IM may sustain momentum.

  Weaknesses

  Disclosure on the domestic market is limited, and it is still affected by price competition and margin pressure.

  Comparison

  The report considers the improvement noteworthy, but pure NEV companies may grow faster.

  Risks

  New model performance falls short of expectations, and domestic price wars worsen.

Key data

• Current share priceRmb14.31As of 2026-04-02.
• Target priceRmb16.00Dec-26 target price, unchanged.
• Implied upsideAbout 11.8%Estimated from the target price of Rmb16.00 and the current price of Rmb14.31.
• 2026 group sales target5 million unitsManagement guidance.
• 2026 overseas sales target1.3 million unitsManagement guidance; overseas expansion is a structural growth driver.
• FY25 revenue growthAbout 5% y/yDriven by about 12% y/y sales growth.
• Gross margin11.3%Above FY24's 11.0%, supported by product mix improvement, but constrained by domestic pricing pressure.
• Expense ratio9%Reflects stable cost management.
• Net profitRmb10bnOverall net profit recovery.
• FY26 net profit growth forecastAbout 19%J.P. Morgan expects earnings to gradually recover.
• FY26 net margin forecast1.8%Expected to improve modestly.
• Domestic passenger vehicle sales forecast-4%The report expects domestic PV demand to decline.

Impact & implications

For investors, SAIC Motor's main appeal comes from export expansion, improvement in self-owned brands, and a potential recovery in the JV NEV cycle; however, weakening domestic auto demand, price competition, uncertainty around JV transformation, and the relative growth advantage of pure NEV companies make its risk-return profile closer to a hold than an aggressive overweight.

Risks

• Growth in the Chinese auto market is weaker than expected.
• Growth in the Chinese auto market is stronger than expected, which could create upside risk.
• Competition among Chinese self-owned brands and price pressure exceed expectations, compressing SAIC passenger vehicle margins.
• Dividend cuts due to M&A or unexpected investments would weaken the investment case.
• Execution of SAIC-VW and SAIC-GM NEV model cycles falls short of expectations.
• Domestic passenger vehicle demand declines more than the report's forecast of 4%.

What to watch

• Whether 2026 group sales approach the 5 million unit target.
• Whether overseas sales approach the 1.3 million unit target, and the progress of local assembly in Southeast Asia, the EU, and Latin America.
• Whether the self-owned passenger vehicle business can sustain break-even and improve gross margin.
• Sales and profitability of MG, Shangjie, and IM new models.
• The launch pace and market response of SAIC-VW's seven NEV models.
• Whether SAIC-GM's NEV penetration can approach around 50%.
• The impact of domestic price competition on gross margin and net margin.
• Whether the dividend policy remains stable.