Citi Initiates Chery Coverage With 'Buy' Rating on Export Strength

Citi has initiated coverage on Chinese automaker Chery (HKEX:CHERY) with a 'Buy' rating and a price target of HK$36, citing the company's dominant export business and an opportunity for investors.

Key Drivers for 'Buy' Rating

Analysts at the investment bank set the price target based on a valuation of 9 times the company's estimated 2026 price-to-earnings (P/E) ratio. The firm highlighted Chery's status as China's leading auto exporter, with 1.3 million units shipped overseas in fiscal year 2025.

Citi forecasts a 16% net profit compound annual growth rate (CAGR) for Chery from 2026 to 2028. The bank also noted that Chery is well-positioned to capture market share from established Japanese and Korean brands in overseas markets, supported by plans to establish 830,000 units of overseas production capacity in fiscal year 2026.

Valuation and Financials

According to the research note, Chery may be undervalued due to its short trading history since its public listing in September 2025. The bank's analysis indicates that Chery demonstrates superior financial metrics, including a higher return on invested capital (ROIC) and asset turns compared to industry peers such as BYD, Geely, and Great Wall Motor.

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For investors focused on returns, Chery offers an estimated 4.1% dividend yield for 2026 and maintains a strong free cash flow conversion rate, according to Citi's analysis.

Market Context

Chery, founded in 1997, is China's third-largest automaker, producing 2.7 million vehicles in fiscal year 2025. Citi's initiation comes as the firm believes the broader auto sector reached a cyclical bottom in July.

The competitive landscape for Chinese automakers in Europe is highly concentrated. The note pointed out that the market share concentration ratio for China's passenger vehicle exports to Western Europe reached 95% in the first five months of 2026, significantly higher than the domestic concentration ratio of approximately 60%.