Lantu Motors' first day of listing drops sharply; how to "survive in the gaps" amid existing stock competition?

When investing in stocks, rely on Golden Kylin Analysts’ reports—authoritative, professional, timely, comprehensive—to help you uncover potential thematic opportunities!

On March 19, 2026, Dongfeng Motor Corporation’s high-end new energy vehicle brand, Lantu Auto, officially listed on the Main Board of the Hong Kong Stock Exchange through an introduction, earning the title of “China’s First High-End State-Owned New Energy Vehicle Stock.”

However, this capital debut, which Dongfeng Group had high hopes for, ended in a disastrous “black opening.”

Lantu Auto’s first-day opening price was HKD 7.5 per share, but after opening, the stock price continued to decline, reaching a low of HKD 6.25 during trading. By the close, the stock was at HKD 6.51, a 13.2% drop for the day, with a total market capitalization of only HKD 23.957 billion.

Contrasting sharply with the sharp drop in stock price is Dongfeng Group’s grand narrative of “mother retreating, child advancing” in capital operations. Just one trading day before Lantu’s listing, Dongfeng Group officially completed its 20-year listing journey in Hong Kong and delisted through privatization.

According to Dongfeng Group’s plan, the core purpose of this “cage transformation” is to escape the low valuation dilemma faced by traditional fuel vehicle companies in the Hong Kong market, to push Lantu, a key asset in new energy, onto the capital market, and to obtain higher valuation and stronger financing liquidity.

But the market’s performance on the first day of listing starkly revealed a huge gap between expectations and reality, turning this carefully planned capital maneuver into a disappointment from the outset.

01

Dongfeng’s Privatization Gamble

Looking back to 2005, Dongfeng Group’s listing on the Hong Kong Stock Exchange set a record as the largest IPO in the global automotive industry that year, marking a milestone in the capitalization of China’s automotive industry.

However, twenty years later, this veteran automaker has fallen into a dual crisis of low valuation and liquidity in the Hong Kong stock market.

Before the privatization suspension, Dongfeng Group’s price-to-book ratio had been below 0.5 for a long time, even dropping below 0.1 at its lowest, losing its ability to refinance through equity. The company openly stated in its announcement: “It has basically lost the financing function of the H-share listing platform.”

The valuation dilemma is essentially a pessimistic market pricing of traditional fuel vehicle companies’ transformation prospects.

Dongfeng’s difficulties are not just about “low valuation.” Behind this are complex issues such as the collapse of traditional joint venture models, high costs of自主转型, the failure of capital market logic, and internal governance challenges.

Previously, Dongfeng’s performance heavily depended on fuel vehicle sales from joint ventures like Dongfeng Nissan and Dongfeng Honda. As the penetration of new energy vehicles rapidly increased, sales of joint venture brands continued to decline.

In 2025, Dongfeng Honda’s sales fell by 23.92% year-on-year, Dongfeng Nissan by 4.94%, and Dongfeng Shenlong by 24.61%, directly leading to the group’s losses.

Hong Kong investors have lost interest in traditional comprehensive automakers like Dongfeng, which mainly rely on fuel and joint venture businesses.

Under such fundamentals, even if Lantu, as the core of the new energy transformation, achieves breakthroughs in sales and profitability, it cannot be reflected in the overall valuation, instead being dragged down by the sluggishness of traditional businesses.

Splitting Lantu for listing essentially involves separating a high-quality asset that has been “dragged down” from the parent company to seek an independent valuation and financing potential.

In Dongfeng’s narrative, this operation is “retreat to advance.” To support this capital maneuver, underwriters and brokerages have also set very high valuation expectations.

CICC, the sole sponsor, in a January 2026 research report, indicated that Lantu, as a “high-end new energy profit target of central state-owned enterprises,” should be valued based on the sales-to-market ratio of Ideal Auto, with an estimated valuation of about HKD 714 billion for 2025 revenue of HKD 34.86 billion, roughly HKD 19.45 per share. Meanwhile, CITIC CLSA’s target price was even higher at HKD 22.

02

The Embarrassment of a 21x P/E Ratio

However, developments often go against expectations. The core reason for the sharp decline in stock price on the first day is the market’s lack of recognition of Lantu’s current valuation.

By the close of trading, Lantu’s trailing twelve months (TTM) P/E ratio was 21.27x, nearly equal to BYD’s HK stock P/E of 22.19x.

But whether in terms of performance scale, growth certainty, or industry chain competitiveness, Lantu and BYD are vastly different.

Financial data shows that Lantu achieved a surface-level breakthrough in 2025. Full-year revenue reached HKD 34.865 billion, up 65.4% year-on-year; net profit was HKD 1.017 billion, marking its first annual profit, with gross margin increasing from 14.2% in 2023 to 20.9%.

However, analyzing the profit structure reveals significant weaknesses.

According to the prospectus, government-related subsidies accounted for as much as HKD 1.08 billion in 2025, exceeding the company’s net profit attributable to shareholders for that year.

This means that after excluding non-recurring gains and losses like government subsidies, Lantu’s core business is still in a loss state, with uncertain sustainability of profits.

Sales volume is another core weakness affecting valuation.

In 2025, Lantu’s total sales volume was 150,200 units, an 87% increase year-on-year, but still far behind leading new energy vehicle companies.

Moreover, the 150,200 units fell short of Lantu’s target by 50,000 units, only achieving 75% of its goal.

Compared to other automakers, BYD sold over 4.6 million vehicles in 2025, Leap Motor nearly 600,000, Xiaomi Auto and Li Auto each over 400,000, and Changan’s Deep Blue reached 330,000.

In the increasingly competitive new energy industry, a sales volume of 150,000 units annually just reaches the industry’s “life-and-death line” of 100,000 units, without enough scale effects. Its supply chain bargaining power and R&D cost absorption are still far behind top-tier companies.

Looking at industry valuation levels, Lantu’s pricing lacks support.

Currently, BYD’s HK stock P/E is around 22x, supported by over 4.6 million annual sales, full industry chain vertical integration, cost advantages in batteries and energy storage, and an expected 25%-30% growth rate.

Similarly, Leap Motor, which also achieved its first full-year profit in 2025 with HKD 538 million net profit and 600,000 units sold, has a P/E of only 14.3x, far below Lantu’s 21x.

03

Liquidity Trap Under the Double-Edged Sword

Lantu’s choice of the introduction listing model is also a key reason for the significant stock price volatility on the first day and poses hidden risks for subsequent capital operations.

Unlike a traditional IPO that issues new shares to raise funds, the introduction listing’s core feature is “listing without issuing new shares or raising funds,” simply listing existing shares held by current shareholders on the exchange. No new investors are introduced, and there is no price discovery process for new share issuance.

This method allows for quick listing and the creation of an independent capital platform, facilitating future refinancing—main reasons Dongfeng chose this approach.

But the downside is that, without the institutional pricing and anchor investors typical of IPOs, the stock price is entirely determined by market trading, and existing shareholders’ shares can be freely sold once listed, risking sharp declines from concentrated selling.

The 11.09% turnover rate on the first day essentially reflects the original shareholders’ quick exit after distributing Lantu shares.

A more severe challenge is liquidity differentiation, a problem Dongfeng Group previously struggled with—once liquidity dries up, it can lead to increased volatility and even render the core financing purpose of listing ineffective.

Meanwhile, Dongfeng’s privatization has also cost over HKD 14.6 billion in cash consideration.

This high-stakes gamble aimed to boost Lantu’s valuation post-listing, using the revaluation of state assets to cover privatization costs. But the first-day market cap of around HKD 24 billion was nearly half of the institutional expectation of HKD 43 billion, risking the failure of Dongfeng’s goal to preserve and increase the value of state assets at a higher valuation.

04

The Long and Difficult Road of Industry Stock Competition

At the same time, the cautious attitude of the capital market is a rational judgment of Lantu’s future prospects.

By 2026, China’s new energy vehicle industry has shifted from a phase of explosive growth to a stock competition stage. CAAM predicts that in 2026, domestic NEV sales will reach about 19 million units, a 15.2% increase, with growth slowing significantly compared to previous years. Industry competition is shifting from “price wars” to “life-and-death battles.”

The trend of market concentration among leading companies continues, with the industry CR3 reaching 50%, and CR10 expected to rise to 90%. Top companies hold over 80% of the market share.

Brands with annual sales below 200,000 units face multiple difficulties—weak bargaining power in supply chains, high channel costs, insufficient R&D investment—and will gradually be phased out.

In segmented markets, Lantu’s focus on the 200,000-400,000 yuan mid-to-high-end NEV segment has become one of the most fiercely competitive “red oceans.”

Lantu’s brand recognition and product differentiation are weak, lacking full industry chain cost advantages, autonomous intelligent features, and strong brand premium. It can only rely on terminal discounts to boost sales, further squeezing already fragile profit margins.

Global expansion is viewed as a key growth driver. Lantu has entered over 40 countries and regions, but actual overseas sales are minimal and have yet to achieve scale.

Meanwhile, leading companies like BYD, Geely, and SAIC have already established production capacity and distribution channels abroad, gaining first-mover advantages.

Furthermore, with the parent company’s declining support, whether Lantu can sustain autonomous growth remains a big question mark.

Of course, for Lantu, listing in Hong Kong is just the beginning, not the end.

Whether it can realize the group’s strategic goal of “retreat to advance” depends on whether Lantu can develop competitive products, achieve sustained profitability in core operations, and build its own core barriers.

But given the current start, everything remains “difficult.”