Net profit increased by 90.2% over the same period last year
Beijing Automobile (BAIC) released its financial results for 2021 on March 24: revenue fell 0.6 per cent year-on-year to 175.9 billion yuan, while net profit rose 90.2 per cent year-on-year to 3.9 billion yuan. The net profit is lower than Huatai's forecast of 4 billion yuan. We believe that the decline in revenue is mainly due to the global shortage of chips, while the increase in net profit is due to increased government subsidies and exchange gains. We estimate that the company's 2022 / 2023 / 2024 EPS will be RMB 0.52 / 0.59 / 0.68. We arrive at the target price of HK $4.06 based on the 2022 forecast PE of 6.5x. In view of the uncertainty of the sales recovery of BAIC and Beijing Mercedes-Benz brands, our target multiple is 8.1 times lower than the average PE of comparable companies' consensus Wind expectations in 2022. Maintain "buy".
Weak sales performance in 2021
BAIC's sales fell 13 per cent year-on-year to 1.031 million vehicles, according to the announcement. In terms of brands, BAIC's own brand sales fell 36 per cent to 72000 vehicles, Beijing Mercedes-Benz brand sales fell 8 per cent to 561000 vehicles and Beijing Hyundai brand sales fell 19.1 per cent to 361000 vehicles. We believe that the weak sales are mainly due to the global chip shortage and increased competition in the domestic market.
Gross profit margin fell in 2021
According to the announcement, BAIC's overall gross profit margin was 21.4%, down 2.4 percentage points from 2020. The gross profit margin of BAIC's own brand and Beijing Mercedes-Benz brand was-56.8% and 25.2% respectively, down 6.4pm 1.9 percentage points respectively. BAIC sales and distribution expense rate is 5.9% (2020: 6.4%), management expense rate is 3.3% (2020: 4.5%). The company's net profit margin in 2021 was 2.2%, up 1.1 percentage points from a year earlier. We believe that the increase in net profit is mainly due to increased government subsidies and higher exchange gains. The company's gross profit margin fell in 2021, which we attribute to lower sales and higher raw material costs.
Maintain a "buy" rating
In view of the weak operating performance in 2021, we lowered our 2022 Universe revenue forecast by 80.4 per cent to RMB 202 billion / 226 billion in 2023, and lowered our net profit forecast by 41.0 per cent to RMB 4.1 billion / 4.7 billion. We expect the net profit to reach 5.4 billion yuan in 2024. Based on the 6.5x 2022 forecast PE (previous value: 8x 2021 forecast PE), we arrive at the target price of HK $4.06( previous value:
HK $4.80). In view of the uncertainty about the sales recovery of BAIC and Beijing Mercedes-Benz brands, our target multiple is lower than the average PE average of comparable Wind consensus expectations in 2022 (previous value:
9.1 times 2021 PE).
Risk tips: 1) sales are lower than we expected; and 2) gross profit margin is lower than we expected.
