Maintain BUY. Great Wall's 2Q26 results were in line with its profit alert, with ASP beating our forecast on a record export mix. We see an earnings inflection in 2H26E, driven by the expected receipt of RMB3-4bn in Russian recyclingfee reimbursement by Dec 2026, new model ramp-ups (such as the H10), and stabilizing selling expenses following the completion of its direct-sales network expansion. Exports—now accounting for more than half of total sales volume with structurally higher margins—underpin earnings quality, while the Guiyuan platform should revive domestic sales, in our view.

2Q26 core profit in line, revenue beat. Great Wall's 2Q26 net profit of RMB1,519mn (-67% YoY, +61% QoQ) fell within its profit-alert range of RMB1.4-1.7bn. The YoY decline was mainly due to the delayed recognition of about RMB2.0bn of recycling-fee reimbursement in Russia (vs. RMB2.3bn recognized in 2Q25); excluding this drag and adverse forex, core net profit was largely flat YoY. Revenue rose 9% YoY to RMB57.0bn, 4% above our forecast, driven by a record quarterly ASP of RMB181,000 (+8% YoY). GPM remained resilient at 18.3% (vs 18.8% in 2Q25).

Prioritizing profit over volume. We cut our FY26E sales volume forecast by 30,000 units to 1.35mn units (0.7mn units for exports and 0.65mn units for domestic market), as it appears to us that Great Wall continues to prioritize profitability over volume. This implies 2H26 sales volume of about 0.77mn units, up 31% HoH and 2% YoY. Factoring in a higher export contribution offset by year-end bonus accruals, we expect 2H26 GPM to narrow 0.5ppts HoH to 17.9%. We conservatively assume RMB3.0bn of recycling-fee reimbursement to be received in 2H26. Accordingly, we trim our FY26E net profit by 1.3% to RMB9.2bn. For FY27E, we lower sales volume forecast from 1.6mn to 1.53mn units but expect rising exports and the Guiyuan platform to support margins, bringing our FY27E net profit forecast to RMB10.9bn (-7.5%).

Valuation/Key risks. We maintain BUY and cut our H-share target price from HK$19.00 to HK$14.00, now based on 10x FY27E P/E (prior 12x), to reflect compressed sector-wide valuation multiples. Our A-share target price is adjusted to RMB25.00, based on the current A/H premium of about 110%. Key risks to our rating and target price include lower sales volume and margins than we expect, as well as a further sector de-rating.