Guangzhou Automobile Group (GAG) announced that its controlling shareholder, Guangzhou Automobile Industry Group Co. (GAIGC), plans to use propriety funds to purchase GAG’s A-shares from now through to end-2018. GAIGC made the decision based on its views about GAG’s current market performance and growth outlook.
Planned purchase is up to Rmb300mn; purchase price is not fixed.
Compared to investors, GAG’s controlling shareholders and management – along with related Guangzhou SOEs – are more confident in GAG’s medium and long term development.
Strong growth momentum, undemanding valuation and confidence of controlling shareholder.
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Valuation and recommendation
We maintain our BUY ratings on GAG-A/-H and reiterate our target prices of Rmb28.90/HK$25.50 (implying 15x/12x 2018e P/E).
Implementation of the share purchase plan misses expectations; automobile demand plunges.