Changan Auto's 2025 results missed expectations, and JPMorgan maintains Neutral and cuts target price

Overview

This report is JPMorgan's earnings review of Chongqing Changan Automobile. It notes that the company's 2025 results missed expectations, with net profit down about 44% YoY and net margin at about 2.5%. Revenue reached RMB164bn, up about 3%, and sales volume rose about 9%, while gross margin also improved slightly to about 16%; however, a higher expense ratio, wider Avatar losses, margin compression at the Changan-Ford and Changan-Mazda joint ventures, and lower subsidy income all weighed on profit.

Core views

The core view is that the long-term strategic direction is attractive, but near-term earnings pressure remains heavy. JPMorgan recognizes Changan's strategic breadth in globalization, own brands, smart driving, and robotics, especially its cooperation with Huawei on the Avatar brand and autonomous-driving/connectivity solutions. However, the report believes the Chinese auto market is highly competitive and slowing, aggregate losses at the own-brand businesses remain a near-term drag, and the timing of Avatar break-even is still unclear. Therefore, it keeps a Neutral rating and prefers names such as BYD, NIO, XPeng, Leapmotor, and Geely that are pure-EV or otherwise more technologically differentiated, and where operating leverage can be released faster.

Analysis framework

The report forms its investment view mainly by breaking down the 2025 results, management's 2026 sales and export targets, the path to brand profitability improvement, progress on smart-driving and robotics strategies, and a comparison of A/B-share valuation multiples. On valuation, the A-share target price is based on 19x 2026E P/E, the B-share target price on 6x 2026E P/E, while also taking into account the lower liquidity of the B-share market and competitive pressure.

Methodology notes

• Valuation methodsp/e multiple valuation

  2026E P/E valuation

  The A-share target price of Rmb9.50 is based on 19x 2026E P/E; the B-share target price of HK$3.50 is based on 6x 2026E P/E. The higher multiple for A-shares versus B-shares reflects the historical premium of A-shares over B-shares.

• earnings_reviewearnings revision

  Earnings forecast revision

  JPMorgan lowered its FY26/27 earnings forecasts by 14%/12% based on year-to-date operating momentum.

• strategy_assessmentstrategic initiatives review

  Assessment of globalization, own brands, smart driving, and robotics strategies

  The report evaluates management's proposed Global 4+2 plan, overseas sales targets, profitability improvement for Qiyuan/Deepal/Avatar, ADAS deployment, and robotics investment plans, and weighs them against short-term earnings visibility.

Asset mapping & comparison

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

• Chongqing Changan Automobile - A (000625.SZ)

  subject_company

  Strengths

  Strong ties with Huawei on autonomous-driving and connectivity solutions; own-brand Qiyuan and Deepal are expected to improve; 2026 sales and export targets are relatively ambitious.

  Weaknesses

  FY2025 profit missed expectations; own-brand losses still weigh; expense ratio rose; JV margins compressed.

  Comparison

  JPMorgan prefers pure-EV or NEV names such as BYD, NIO, XPeng, Leapmotor, and Geely that are more technologically differentiated and can unlock operating leverage faster.

  Risks

  Actual sales or pricing of key models may be better or worse than expected; dividend payout may rise or fall unexpectedly; Avatar break-even remains uncertain.

• Chongqing Changan Automobile - B (200625.SZ)

  related_share_class

  Strengths

  Shares the same fundamentals as Changan Auto and strategic highlights such as cooperation with Huawei.

  Weaknesses

  B-share market liquidity is lower, and the valuation multiple is below that of A-shares.

  Comparison

  The B-share target price uses a 6x 2026E P/E, below the A-share 19x 2026E P/E, reflecting liquidity and historical discounts.

  Risks

  Liquidity, intensified competition, sales and pricing volatility, and changes in dividend policy.

• BYD, NIO, XPeng, Leapmotor, Geely

  preferred_peers

  Strengths

  The report believes these names are more attractive in terms of technological differentiation or operating leverage release.

  Weaknesses

  The report does not discuss their individual weaknesses in detail in this piece.

  Comparison

  Compared with Changan Auto, JPMorgan prefers these pure-EV or NEV-related names.

  Risks

  Competition in the NEV industry, pricing pressure, and demand volatility.

Key data

• FY25 revenueRMB164bn, +3% YoYRevenue growth was mainly supported by about 9% growth in sales volume, but the competitive pricing environment remained in place.
• FY25 gross marginabout 16%Up from about 15% in FY24, showing some resilience at the product level.
• FY25 opex ratioabout 13%Higher than FY24's 12%, mainly driven by increased R&D and marketing spending.
• FY25 net profitdown about 44% YoY, with net margin of about 2.5%About 25% below Bloomberg consensus and about 8% below JPMe.
• 2026 wholesale volume target3.3 million units, about +13% YoYManagement reiterated this target on the earnings call.
• 2026 overseas volume targetover 750k unitsThe globalization plan includes local production in Thailand and Brazil, as well as a dealer network of more than 1,000 outlets.
• Qiyuan 2026 expected profitabout RMB1.1bnFY25 losses were about RMB1.3-1.4bn, with improvement supported by the ramp-up of new models such as Q07.
• Deepal profitabilityexpected to break evenFY25 losses were about RMB700-800mn.
• Robotics investmentRMB5-6bn over three yearsThe in-vehicle components robot is planned to debut in 2Q26, and the humanoid robot prototype is planned for 4Q26.
• A-share target priceRmb9.50Previous target was Rmb11.00; the target price horizon is extended to Dec-26.
• B-share target priceHK$3.50Previous target was HK$4.00; based on 6x 2026E P/E.

Impact & implications

The investment implication is that Changan Auto has long-term optionality in Huawei cooperation, smart driving, globalization, and robotics, but near-term share price catalysts remain limited by the visibility of earnings recovery. The target prices are below the current A-share and B-share prices, reflecting the report's cautious view on 2026 competition pressure, brand investment, and the quality of profit recovery.

Risks

• Actual sales or pricing of key models may be better or worse than expected.
• The dividend payout ratio may rise or fall unexpectedly.
• The pace of Avatar loss narrowing and the timing of break-even remain unclear.
• The Chinese auto market is highly competitive and growth is slowing.
• R&D, marketing, and robotics-related investment may continue to weigh on profits.
• Margins at the Changan-Ford and Changan-Mazda joint ventures may continue to compress.

What to watch

• Progress toward the 2026 wholesale sales target of 3.3 million units.
• Achievement of the target of more than 750,000 overseas sales and progress in local production in Thailand and Brazil.
• Whether Qiyuan can deliver about RMB1.1bn of profit in 2026.
• Whether Deepal can improve from FY25 losses of RMB700-800mn to break-even.
• The speed of Avatar loss narrowing and the commercialization effect of the cooperation with Huawei.
• End-to-end autonomous driving deployment in 2Q26, regulatory approval for L3 models in 4Q26, and progress in L4 testing.
• The 2Q26 debut of the in-vehicle components robot and the 4Q26 launch of the humanoid robot prototype.