Uncertainty Persists Despite Strong BMW JV Performance; Brilliance Shares Remain Suspended

After shares being suspended from trading for more than a year, Brilliance China Automotive announced preliminary 2020 annual results and 2021 interim results. We maintain our fair value estimate at HKD 9.90 while raising our 2021-22 net profit forecasts by 2% and 4%, respectively. Despite the solid BMW joint venture performance as reflected in the results, our biggest concern remains Brilliance’s corporate governance issues. The independent auditor did not express an opinion on the company’s 2020 financial results and as to whether the consolidated financial statements have been properly prepared in compliance with the disclosure requirements. This indicates uncertainties persist as issues relating to unauthorized guarantees and unauthorized pledged bank deposits are still under investigation. Even if trading resumes, we think investors are likely to continue staying on the sidelines until there is more clarity on the outlook.