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Capital Calls Great Wall Motor risks hitting speed limit

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People wearing face masks check out the third-generation Haval H6 SUV by GWM (Great Wall Motors) at the Beijing International Automotive Exhibition, or Auto China show, following the coronavirus disease (COVID-19) outbreak, in Beijing, China September 27, 2020. REUTERS/Tingshu Wang

HONG KONG, March 31 (Reuters Breakingviews) - Concise insights on global finance in the Covid-19 era.

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GREAT STALL. Chinese carmaker Great Wall Motor (601633.SS) may be driving too fast. On Tuesday, the $36 billion company reported net profit grew by a fifth last year. After rallying more than 400% over 12 months, shares are trading at a zippy 29 times forward earnings, per Refinitiv. That puts it motoring ahead of giants like Toyota Motor (7203.T) and Daimler (DAIGn.DE), as well as compatriots including Geely Automobile (0175.HK) and Dongfeng Motor (0489.HK), which trade on multiples closer to half that figure.

The group is dabbling in electric cars, hydrogen read more and chips, all catnip to investors. But it is still early days for Great Wall’s technology. Sales of new-energy vehicles aren’t much better than those of other legacy automakers, and initiatives like investing in semiconductors are barely underway. Meanwhile, a closer inspection of the recent results reveals that the bottom line was flattered by one-off gains, without which growth would have been stagnant.

There is cause for optimism: Sales are on the up and new models might boost margins. But the stock could soon hit the speed limit. (by Katrina Hamlin)

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Edited by Antony Currie and Sharon Lam

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