Key Takeaways
Citigroup trimmed its price target for Leapmotor (09863.HK) to HKD 98, causing shares to fall nearly 11 percent despite the bank forecasting a second-quarter breakeven for the automaker.
The report noted that first-quarter profitability met expectations but gross margin fell short, primarily due to a higher proportion of lower-priced models and the initial dilutive impact of CBU exports.
Citi cut its target from HKD 100 but maintained a Buy rating on the stock. The bank projects Leapmotor’s gross margin will rebound to between 12 and 13 percent in the second quarter on expected deliveries of 245,000 vehicles, a stronger product mix including the high-margin D19 model, and cost-saving synergies.
The negative stock reaction highlights investor concern over current margins, though Citi's forecast for a Q2 breakeven presents a clear performance catalyst. To reach that goal, the bank projects research and development expenses of RMB 1.5 billion, selling expenses of RMB 1.2 billion, and administrative expenses of RMB 0.5 billion for the quarter.
The sharp sell-off puts the stock under significant pressure, testing investor confidence against analyst optimism. All eyes are now on the second-quarter results to validate Citi's breakeven forecast and justify the "Buy" thesis.
This article is for informational purposes only and does not constitute investment advice.
