Chery Auto IPO Valuation Analysis

Chery Auto [Bullish]

• Our base case valuation of Chery Auto is target price of HKD 40.6 which is 32% higher than the high end of the IPO price range.

• Our base case valuation is based on EV/EBITDA of 5.9x our estimated EBITDA of 37.1 billion RMB in 2026. Our target multiple is 30% premium to the comps' average multiple.

• We have chosen to use a premium valuation multiple mainly due to Chery Auto's higher ROE, sales growth, and net margins vs the comps.