Incident Overview
The company released its 2022 annual report and the first quarter report of 2023: revenue for the full year of 2022 was 744.06 billion yuan, -4.6% year on year, net profit of 16.12 billion yuan to the mother, -34.3% year on year, after deducting 8.99 billion yuan from non-Gummo, minus 8.99 billion yuan from the previous year, -51.6% year on year. Of these, 22Q4 revenue was 216.65 billion yuan, -4.6% year on year, +2.5% month on month, net profit of the mother was 3.47 billion yuan, -17.1% year on year, -39.6% month on month, net profit of the non-return mother was -1.65 billion yuan, -395.7% year on year, -136.4% month on month. 23Q1 revenue was 145.92 billion yuan, -20.0% year on year, -32.6% month on month, net profit of 2.78 billion yuan, -49.5% year on year, -19.8% month on month, net profit of non-return mother of 2.16 billion yuan, -56.3% year on year, +231.1% month on month.
Analytical judgment:
22Q4 & 23Q1: Profit declined year over year under pressure from demand for joint ventures
Revenue side: The company's total revenue for 22Q4 was 216.65 billion yuan, -4.6% year on year and +2.5% month on month. Total revenue for 23Q1 was 145.92 billion yuan, -20.0% year on year and -32.6% month on month. Mainly due to the decline in the company's sales volume: 22Q4/23Q1, the company's wholesale sales volume was 1,532/ 891 million units, respectively -16.9%/-27.0% year-on-year. Independent performance was relatively good, and joint venture sales were under pressure: 22Q4/23Q1 SAIC Volkswagen sold 35.9/226,000 units respectively, -8.4%/-31.7% year-on-year; 22Q4/23Q1 SAIC-GM sold 31.6/186,000 units respectively, respectively -26.4%/-32.3% year-on-year. We judge that it is mainly due to the expiration of the fuel purchase tax halving policy at the end of 2022. Joint venture fuel demand is clearly under pressure, and demand is expected to be boosted in 2023 under the electrification transition.
Profit side: The company's 22Q4 net profit/net profit after deducting non-return to the mother was 34.7/-1.65 billion yuan respectively, -17.1%/-395.7% year-on-year respectively. In 23Q1, the company's net profit attributable to the mother/net profit after deducting non-attributable net profit was 2,78/2.16 billion yuan respectively, -49.5%/-56.3% year-on-year respectively. 22Q4/23Q1 The company's gross margin was 9.5%/9.8%, respectively, and +4.4pct/+0.5pct respectively over the previous year. The pressure on performance was mainly due to the decline in investment income in the joint venture sector:
The joint venture investment income of 22Q4/23Q1 companies was 330/2.27 billion yuan respectively, -29.1%/-49.1% year-on-year respectively. We expect that short-term joint venture profits will still face some pressure, and successful electrification transformation is expected to accelerate profit release.
Expense side: The company's 22Q4 sales/management/finance/R&D expenses ratio was 4.4%/4.6%/-0.3%/2.5%, respectively, and +3.5pct/+0.9pct/-0.4pct/-0.4pct/-0.6pct respectively over the previous year. The 23Q1 sales/management/finance/R&D expenses ratio was 4.0%/3.8%/0.2%/2.6%, respectively, and +0.4pct/+0.2pct/+0.2pct/+0.5pct respectively over the previous year. We judge that the cost rate of the company has increased to a certain extent due to the impact of the accelerated launch of new products and the reduction in scale. It is expected that the cost rate will decline marginally after the month-on-month improvement in sales volume.
High-end acceleration of Zhiji+Feifan New Energy
The Zhiji LS7 made a stunning debut, leading the way in high-end upgrading. The Zhiji LS7 was released in February, with a guide price of 3098-459,800 yuan. It combines performance and luxury experience: it can accelerate 100 kilometers in 4.5 seconds, and the car is linked to electric slides, zero-gravity floating seats, etc., to effectively improve cockpit comfort and space utilization. As of March, the cumulative number of LS7 orders exceeded 15,000. We judge that the sales trend will remain good and continue to contribute to the company's growth.
Feifan F7 orders were impressive, and Wuling Bingo Space's performance was superior. Skyfan F7 was launched in late March and is equipped with an all-sensory interlocking Bach cockpit to promote the brand's high-end upgrade. Cash orders exceeded 12,000 in the first month of its debut, which is expected to further boost overall demand. Wuling Bingo went on sale on March 29. The guide price was 598-88,800 yuan, and the wheelbase of the vehicle reached 2,560 mm. Compared with the prices of competitors in the same class, it has a comparative advantage and plenty of space inside the car, which is expected to drive up the company's production and sales.
New energy continues to be popular overseas, and the acceleration of new energy is imminent
Exports are growing rapidly, and the European market is leading the way. In 2022, the company exported a total of 1,017,000 vehicles, +45.9% over the same period last year. Growth continued in 2023. The company's overseas sales reached 97,000 units in March, +92.1% year on year and +15.5% month on month, maintaining a good trend. In the European market, the independent brand MG has doubled its monthly sales volume over the same period last year, ranking at the top of the new car sales list in European countries such as the United Kingdom and France, and has accelerated its entry into Australia, Mexico and other places. We expect the company's new energy to have a clear advantage in terms of product strength compared to mainstream European competitors, and overseas sales are expected to rise steadily.
New energy sources are rising month-on-month, and a rapid recovery is expected. The company sold 65,000 new energy vehicles in March, -12.4% year on year and +46.2% month on month. As industry demand picked up, the new energy overdraft effect weakened. Looking ahead, the company's new cars will be launched rapidly. Driven by continued product strength, we judge that the month-on-month recovery is expected from April onwards.
Investment advice
The company's underlying technology is solid, platforming capabilities are excellent, and independent growth is becoming more and more clear. With the gradual improvement of chip supply, the company is expected to usher in a new growth cycle of own+joint venture two-wheel drive, and the return of the leading passenger car king. Considering increased competition in the industry, the company's profit forecast was adjusted to adjust the revenue forecast for 2023-2024 from 9050/1,097 billion yuan to 853/8387 billion yuan, and the net profit attributable to the mother in 2023-2024 was adjusted from 231/29.8 billion yuan to 163/176 billion yuan. Corresponding EPS was adjusted from $1.98/2.55 to $1040/1.50, adding to the 2025 profit forecast. Expected revenue, net profit, and EPS were 853.3 billion yuan/19.0 billion yuan/1.63 billion yuan/1.63 billion yuan respectively. Corresponding to the closing price of 14.12 yuan/share on April 28, 2023, PE was 10/9/9 times, respectively, maintaining the “buy” rating.
Risk warning
The impact of the lack of chips continues; downside risks in the car market; downside risks for joint venture brands; implementation of new electric smart models falls short of expectations; overseas expansion falls short of expectations.