The 2022 results are in line with our expectations

The company announced 2022 results: 2022 revenue of 38.3 billion yuan, -61% year on year; net profit of 400 million yuan, -91% year on year, minus non-net profit of -1.7 billion yuan, -148% year on year. 4Q22 The company's revenue was 7.9 billion yuan, -22% year on year, +4% month on month; Guimu's net profit was 1 billion yuan, +207% year on year, which was positive. The company's performance is in line with our expectations.

Development trends

The downturn in the industry and the impact of the epidemic on performance are expected to benefit from industry recovery and share growth in the future. According to the China Automobile Association, sales of heavy trucks/medium trucks/light trucks in 2022 were 67/10/162 million units, or -52%/-44%/-24% over the same period last year. The decline in the company's 2022 performance was mainly due to low industry demand and the impact of the epidemic. Combined with non-recurring profit and loss of 2.1 billion yuan (mainly due to the company's government land collection and storage and government subsidies), the company's deduction of non-net profit was negative. The company sold 140,000 heavy trucks in mid-2022, and the share of Beidou Data Caliber terminals in the domestic market was 25.7%. We expect sales of heavy trucks/light trucks to reach 85/1.9 million units in 23, +26%/+17% year on year. We believe the company is expected to achieve further share growth by continuously improving product competitiveness and service quality. In the future, as the industry recovers and the company's share increases, performance is expected to improve.

Profitability is under pressure, and is expected to improve as scale effects increase and high-end products improve. In 2022, the company's gross profit margin was 8%, year-on-year - -2ppt, net interest rate was 1%, year-on-year - 3ppt. 4Q22 gross profit margin is 12%, year-on-year -7ppt, month-on-month +8ppt, net profit margin is 13%, year-on-year +10ppt, +24ppt month-on-month. The decline in the company's profitability is mainly due to: 1) insufficient capacity utilization due to falling sales; 2) focusing on independent innovation and high R&D expenditure rate. In 2022, the company's R&D expenditure rate was 7.6%, compared to +4.2ppt. We believe that with the recovery in the company's sales and the release of the high-end product J7 in the future, profitability is expected to improve.

Boosting overseas markets, new energy and intelligent connectivity continue to break through. The company exported 28,000 vehicles in 2022, +98% year on year. By the end of 2022, the company had developed nearly 70 new energy products around the three technology routes of pure electricity/power exchange, hybrid power, and fuel cells, and ordered more than 500 hydrogen fuel cell vehicles.

The company sold 2,723 new energy units in 2022, +22% year on year. In the field of intelligent connectivity, the company pioneered a driverless forward-looking vehicle and a dual-system intelligent cockpit. We believe that with its excellent R&D capabilities, the company is expected to accelerate the deployment of new energy and intelligent connectivity, forming a new impetus for growth in performance.

Profit forecasting and valuation

Considering that it will take some time for the industry to recover and the company's upgrading process, the 2023/2024 profit forecast was lowered by 32%/12% to $2,23/40.3 billion. The current stock price corresponds to a price-earnings ratio of 17.1 times/9.4 times in 23/24. Considering that the company's leading position in the industry is stable, maintaining an industry rating that outperforms the industry rating and target price of 10 yuan, corresponding to 20.9x/11.5x 2023/2024e P/E, there is room for an upward trend of 22.2% from the current stock price.

risks

Demand for real estate and infrastructure fell short of expectations, economic recovery fell short of expectations, and promotion of new energy technology fell short of expectations.