Yutong Bus amid China-EU trade friction: The logic of global expansion remains unchanged, but the cloud of tariffs lowers short-term expectations (Morgan Stanley)
Morgan Stanley updated its risk-reward research on Yutong Bus (600066) and lowered its revenue, gross profit margin and net profit forecasts for 2027 and 2028 due to the potential impact of the EU IAA under China-EU trade frictions.
Morgan Stanley updated its risk-reward research on Yutong Bus (600066) and lowered its revenue, gross profit margin and net profit forecasts for 2027 and 2028 due to the potential impact of the EU IAA under China-EU trade frictions. However, the report believes that the company has the strength to cope with industry headwinds, and the logic of global expansion and stable dividends still holds. The market may have killed the bus export sector due to trade friction, but Morgan Stanley believes that this is more of a short-term emotional impact. Yutong's global competitiveness has not been weakened, but it may show stronger resilience in the face of headwinds due to its industry leading position. One sentence conclusion: EU tariffs are the "Sword of Damocles" hanging over Yutong Bus, but the company's global competitiveness cannot be shaken overnight. The stock price adjustment has instead provided a better margin of safety for long-term value investors. Positive/negative: It is clearly negative for Yutong Bus (600066) in the short term, but it may provide long-term layout opportunities. It is even more negative for other Chinese bus companies that rely heavily on the EU market. The market has reacted to the risk of tariffs, but may have underestimated its growth potential in non-EU markets and domestic stability. Catalysts: 1) The final ruling and timetable of the EU IAA investigation; 2) Yutong’s order growth data in non-EU markets such as Latin America and Southeast Asia; 3) Domestic new energy bus policies boosting sales.