BERLIN (Reuters) - Porsche AG's shares fell 7% on Friday, the biggest drop among European firms and its worst day since listing on the stock market, after the carmaker warned that the cost of new models and battery-related expenses would dent its 2025 profits.

Porsche shocked investors with a statement late on Thursday that it expected a profit margin of just 10-12% this year, below analysts' expectations of 14.8% and well under the mid-term target of 17-19%.

The company will take an 800-million-euro ($832 million) hit to profits to launch new combustion engine and plug-in hybrid models, it said, the latest carmaker to pivot back towards combustion engine vehicles amid low demand for EVs in Europe and intense competition in China from local rivals.

"We see this as P911's last shot to prove they can turn around this business before losing more trust of long-term shareholders," Deutsche Bank analysts said in a note.

Porsche, which at its stock market debut in 2022 was valued higher than its parent company Volkswagen AG, has fallen from grace since then, struggling to get EV sales off the ground and suffering from weak demand in China, its top market.

Shares slumped 27% in 2024 and its market capitalisation has halved from its May 2023 peak of just under 110 billion euros.

'MAJOR CONCERN'

The margin forecast was a "major concern" for the carmaker, said Bernstein Research analyst Stephen Reitman, adding that "febrile" investors would expect further explanation from management ahead of full-year results on March 12.

The company said last week it was in talks to end the contracts of its chief financial officer and sales chief early, after both came under heavy criticism for the company's poor performance and weak share price.

While 75% of the carmaker's share capital is owned by Volkswagen AG, just over 12.5% is held by Porsche SE, an investment firm controlled by the Piech and Porsche families and which is also the top shareholder of Volkswagen.

Porsche SE said on Thursday it expects impairments on its stake in Porsche AG nearly double the size of its December forecast, reaching 2.5 billion euros to 3.5 billion euros.

The holding firm also said it expects writedowns related to Volkswagen, which is undergoing major cost cuts, towards the upper limit of its forecast range of 7 billion to 20 billion euros.

($1 = 0.9619 euros)