Incident: The company released its report for the third quarter of 2021. The company achieved revenue of 37.212 billion yuan during the reporting period, -11.71% year on year; it achieved net profit of 120 million yuan to the mother, -85.19% year on year. The main reason for the decline in revenue and profit was that the automobile industry was impacted by a shortage of chips in Q3, and sales declined due to tight supply of new vehicles. We believe that the shortage of automotive chips reached an inflection point at the end of September, and the entire industry has strong flexibility to increase inventory. As a leading dealer in the automotive industry, Q4 and Q1 next year are expected to see strong performance improvements.
Automobile sales declined, OEMs rebates declined, and Q3 gross margins were under pressure in the short term. The company's Q3 gross margin reached 8.45%, down 0.03 percentage points from the previous year. The reason for the decline in gross margin is, on the one hand, the decline in automobile sales due to a shortage of chips; on the other hand, the company's inventory level as a dealer is low, and OEMs' rebates have declined. Sales expenses ratio is 3.41%, +0.58 percentage points year on year; management expenses rate is 1.83%, +0.38 percentage points year on year; financial expenses ratio is 1.89%, +0.10 percentage points year on year.
Actively promote the field of sales and services of new energy sources. In the first half of 2021, the company made active efforts in the field of sales and service of new energy vehicles. The company has signed strategic cooperation agreements with ARCFOX Extreme Fox and Polestar brands. In addition, the company is actively exploring the new energy afterservice market. The company established “State Grid Guanghui” in a joint venture with China Power Grid at the end of 2019. Its main business is the construction and operation of new energy charging stations and related new energy services. After nearly two years of exploration, the company has continuously improved its business chain.
Sales rebates for new energy vehicles are generally higher than fuel vehicles. Seen from a rebate perspective, they are more profitable, which is expected to further increase the company's gross profit margin.
The used car market has fully recovered, and the company is ready to go. On the one hand, the company is vigorously boosting the used car exchange business, and on the other hand, it has upgraded the original used car trading service centers in various regions based on the national used car professional platform company it has set up. Driven by policy dividends, the national used car market maintained a rapid growth trend in 2021. The company gradually adjusted its business model in the context of tax reform, and the used car business was poised to develop.
Profit forecasts and ratings: Due to the chip shortage and the impact of car companies' sharp rebates on dealers, the company's net profit for Q3 was 120 million yuan lower than expected, so the profit forecast was lowered. The company's net profit for 2021-2023 is estimated to be $2.145 billion, $3.157 billion, and $3.495 billion respectively.
The company's net profit EPS was 0.26 yuan, 0.39 yuan, and 0.43 yuan respectively, and the price-earnings ratio was 9.76 times, 6.63 times, and 5.99 times, respectively, maintaining the “buy” rating.
Risk warning: automobile demand falls short of expectations, and the company's new business development falls short of expectations