Goldman Sachs: ZHONGSHENG HLDG faces weak demand and gross margin challenges, significantly lowering the target price to 11 yuan

Zhongsheng (00881.HK) opened nearly 1.5% lower this morning, hitting a low of HKD 10.46 during the day, a drop of nearly 10%. It closed at HKD 10.49, down 9.7%, making it the blue-chip stock with the largest decline. Goldman Sachs released a report announcing the cessation of coverage on Zhongsheng Group (0881.HK), stating that the company faces declining demand for ICE (internal combustion engine vehicles) and intensified competition in the new energy vehicle sector, which puts pressure on gross margins. The firm ended coverage with a "Neutral" rating, valuing the company at a price-to-earnings ratio of 6.5 times, with a final target price of HKD 11 (previously HKD 21).

Zhongsheng Group is the largest listed automotive dealer in China, primarily representing brands such as Mercedes-Benz, Lexus, and Toyota. Due to declining revenue and ongoing competitive pressure leading to a decrease in gross margins, the firm has lowered its earnings forecasts for Zhongsheng for 2025 and 2026 by 41% to 43%