Citi has opened coverage on Chery with a Buy rating and a target price of HK$36, the broker said in its initial report. The valuation underpinning the target is set at 9 times the estimated 2026 price-to-earnings ratio and 7.6 times the estimated 2027 price-to-earnings ratio.
Founded in 1997, Chery is identified as China’s third-largest automaker based on its fiscal 2025 volumes of 2.7 million units. The company leads Chinese manufacturers in exports, shipping 1.3 million units last fiscal year, a factor Citi cites as central to its positive outlook.
Citi forecasts a 16% compound annual growth rate in net profit for the period from 2026 through 2028. The bank also points to Chery’s stronger return on invested capital and higher asset turns when compared with selected industrial peers, specifically BYD, Geely, and Great Wall Motor.
In the broker’s view, the wider auto sector reached a historical cyclical low in July. Citi further suggested that Chery may still be undervalued in part because it has only been trading since September 2025, giving the stock a relatively short public track record.
On market concentration, Citi notes that China’s passenger vehicle export market share concentration ratio reached 95% in Western Europe during the first five months of 2026. That figure is materially higher than the roughly 60% concentration ratio observed in China’s domestic market in the same period.
Chery plans to establish 830,000 units of overseas production capacity in fiscal 2026, a step the bank regards as enabling the company to capture share from Japanese and Korean brands in international markets. Citi additionally highlights Chery’s shareholder returns profile, with an estimated dividend yield of 4.1% for 2026 and a strong rate of free cash flow conversion.
Summary
Citi’s initiation of coverage on Chery assigns a Buy rating with a HK$36 target that reflects mid-2020s earnings multiples. The bank’s case rests on export strength, planned overseas capacity, superior capital efficiency versus peers, a healthy dividend yield estimate, and an above-average free cash flow conversion rate.
Key points
- Valuation: Target price of HK$36 equates to 9x 2026 estimated P/E and 7.6x 2027 estimated P/E.
- Export leadership and capacity build: Chery exported 1.3 million units and plans 830,000 units of overseas capacity in fiscal 2026.
- Profitability and returns: Forecasted 16% net profit CAGR for 2026-2028, with higher ROIC and asset turns versus BYD, Geely, and Great Wall Motor.
Risks and uncertainties
- Short trading history - Chery has been publicly traded only since September 2025, which Citi says may contribute to continued valuation discount.
- Sector cyclicality - Citi observed the auto sector hit a cyclical bottom in July, signalling that cyclical forces remain relevant to near-term performance.
- Export concentration - High passenger vehicle export concentration in Western Europe (95% in the first five months of 2026) could concentrate demand risk in specific markets.