Stock Analysis & Valuation Chongqing Changan Automobile Company Limited (200625.SZ)

• Previous Close: $4.04
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	25.41	529
Intrinsic value (DCF)	5.40	34
Graham-Dodd Method	6.05	50
Graham Formula	10.03	148

Strategic Investment Analysis

Company Overview

Chongqing Changan Automobile Company Limited stands as one of China's oldest and most established automotive manufacturers, tracing its origins back to 1862. Headquartered in Chongqing, this state-owned enterprise has evolved into a comprehensive automotive group manufacturing and selling a diverse portfolio of vehicles including passenger cars, sedans, MPVs, SUVs, and a growing range of electric vehicles (EVs). The company operates through multiple well-known brands such as Changan, Changan SHENLAN, Oshan, Kaicene, Avatr, and Changan UNI, while also maintaining significant joint ventures with global players like Ford and Mazda under the Changan Ford and Changan Mazda banners. Beyond manufacturing, Changan Auto has strategically expanded into high-growth service sectors including mobility solutions, car services, battery swapping infrastructure, and auto finance, creating a more resilient and diversified business model. As a key player in the world's largest automotive market, the company is aggressively pivoting towards new energy vehicles (NEVs) to capitalize on China's green transportation policies and shifting consumer preferences. This strategic focus on electrification and intelligent connected vehicles positions Changan Automobile at the forefront of China's automotive transformation.

Investment Summary

Chongqing Changan Automobile presents a compelling investment case with notable strengths and risks. The company demonstrates solid financial health with HKD 64.2 billion in cash against minimal debt of HKD 1.3 billion, providing significant financial flexibility. With a market capitalization of HKD 137 billion and revenue of HKD 159.7 billion, Changan operates at scale in the world's largest auto market. The company generated HKD 7.3 billion in net income with diluted EPS of HKD 0.74 and pays an attractive dividend of HKD 0.38 per share. However, investors should note the high beta of 1.37, indicating above-average volatility relative to the market. The capital expenditure of HKD -4.9 billion reflects substantial ongoing investments, particularly in EV and smart vehicle technologies, which may pressure short-term profitability but are essential for long-term competitiveness in China's rapidly electrifying auto sector. The company's joint venture structure provides diversification but also exposes it to the challenges facing its foreign partners in the competitive Chinese market.

Competitive Analysis

Chongqing Changan Automobile occupies a unique competitive position within China's automotive landscape, balancing traditional manufacturing strengths with an aggressive push into electrification. The company's competitive advantage stems from several key factors: its long-established manufacturing expertise, extensive distribution network across China, and strategic joint ventures with Ford and Mazda that provide technological transfer and brand diversification. Changan's multi-brand strategy allows it to target different market segments effectively, from premium offerings through the Avatr brand (developed with CATL and Huawei) to more affordable models under the main Changan brand. The company's significant investment in NEVs, particularly through the Deepal (SHENLAN) brand, positions it to capitalize on government incentives and growing consumer demand for electric vehicles. However, Changan faces intense competition from both domestic champions and new EV entrants. Unlike some competitors that have focused exclusively on EVs, Changan maintains a balanced portfolio between traditional internal combustion engine vehicles and NEVs, providing revenue stability during the transition period but potentially slowing its EV market share growth. The company's state-owned enterprise status provides certain advantages in terms of government relations and access to resources but may also impose constraints on operational agility compared to more nimble private competitors. Changan's expansion into auto finance and mobility services creates additional revenue streams and enhances customer loyalty, though these segments face their own competitive pressures. The company's relatively strong balance sheet with minimal debt provides a competitive edge in funding the capital-intensive transition to electric and autonomous vehicles.

Major Competitors

• BYD Company Limited (1211.HK): BYD is China's dominant EV manufacturer with vertical integration from batteries to complete vehicles, giving it significant cost advantages. The company's early focus on electrification has made it the market leader in NEVs, outperforming traditional automakers in the transition. BYD's strength in battery technology (through its FinDreams battery division) and economies of scale pose a substantial challenge to Changan's EV ambitions. However, BYD primarily competes in the mass market segment, while Changan's multi-brand approach allows it to target premium segments through brands like Avatr.
• SAIC Motor Corporation Limited (600104.SS): SAIC Motor is China's largest automobile manufacturer with strong joint ventures with Volkswagen and General Motors. Similar to Changan, SAIC benefits from JV partnerships while developing its own brands like MG and Roewe. SAIC has been aggressive in EV development through its IM Motors and Rising Auto brands. The company's larger scale and broader international presence through MG give it advantages, but Changan's focus on specific segments and potentially more agile structure could provide competitive differentiation in targeted markets.
• Guangzhou Automobile Group Co., Ltd. (2238.HK): GAC Group operates similarly to Changan with successful joint ventures (particularly with Toyota and Honda) while developing its own Trumpchi brand. GAC has been innovative in EV technology through its Aion subsidiary, which has gained significant market share. The company's strength in hybrid technology through its Toyota partnership complements its EV efforts. GAC and Changan compete directly in the mid-market segment and face similar challenges in balancing JV revenues with independent brand development.
• NIO Inc. (9866.HK): NIO represents the new generation of Chinese EV makers focused exclusively on premium electric vehicles. The company's strength lies in its innovative battery swapping technology, premium brand positioning, and strong customer community. While NIO operates in a different price segment than most of Changan's offerings, it competes directly with Changan's premium Avatr brand. NIO's pure-EV focus gives it technological edge but also makes it more vulnerable to market fluctuations compared to Changan's diversified portfolio.
• Li Auto Inc. (2015.HK): Li Auto has successfully targeted the family SUV segment with extended-range electric vehicles (EREVs), addressing range anxiety concerns that affect pure EVs. The company's focused product strategy and efficient operations have yielded strong profitability. Li Auto competes directly with Changan's SUV offerings and represents the successful startup model that traditional automakers like Changan must counter. However, Changan's broader product range and manufacturing experience provide advantages in scaling across multiple segments.
• Xpeng Inc. (9898.HK): Xpeng emphasizes advanced driver-assistance systems and smart technology as key differentiators in the EV market. The company's strength in software and autonomous driving technology positions it as a technology leader. Xpeng competes with Changan in the tech-focused EV segment and particularly challenges Changan's efforts to develop intelligent connected vehicles. However, Xpeng's narrower focus and smaller scale compared to Changan's diversified operations present both advantages in agility and disadvantages in resource allocation.