Investment highlights: The company released its 2022 annual report and the first quarter report of 2023, achieving revenue of 744.0.6 billion yuan in 2022, -4.6% year on year, net profit of 16.12 billion yuan, -34.3% year on year; of which 22Q4's single-quarter revenue was 216.65 billion yuan, -4.6% year on year, and Guimo's net profit was 3.47 billion yuan, -17.1% year on year; 23Q1's quarterly revenue was 145.92 billion yuan, -20.0% year on year, and Guimo's net profit was 2.78 billion yuan, -49.5% year on year. The 22Q4 and 23Q1 results fell slightly short of our expectations.
Sales declined slightly in '22, and 23Q1 sales fell short of expectations, mainly under pressure from joint ventures. On the one hand, they were influenced by the industry, and on the other hand, joint ventures took the initiative to remove inventory and optimize the inventory structure. The Group sold 5.303 million units in '22, a slight decrease of 2.9% from '21; of these, 22Q4 sold 1,532 million units, -16.9%/-0.2% year-on-month respectively. The month-on-month growth rate was the same as that of the industry, and the year-on-year growth rate was lower than that of the industry. Sales volume in 23Q1 was 8910,000 vehicles, -27.0%/-41.9% year-on-month respectively. The growth rate was lower than that of the industry, mainly under pressure from joint ventures. On the one hand, it was dragged down by coin holding and wait-and-see sentiment caused by the rush at the end of '22 and the price war after the Spring Festival. On the other hand, it was mainly due to SAIC Volkswagen, SAIC GM, and SAIC Wuling taking the initiative to reduce production batches, remove inventory, and optimize the inventory structure.
On the profit side, the decline in profit in '22 was mainly calculated by a decline in investment income and significant asset impairment. 23Q1 was also a decline in investment income under pressure from joint ventures. ① The company achieved net profit of 16.12 billion yuan to the mother in '22, compared to -34.3% year on year, of which investment income was 147.0 billion yuan, compared to -45.9% in '21. The main reason is that investment income in the vehicle sector dropped significantly. In addition, the company has set aside 3.54 billion yuan in asset impairment preparations. The main items are accounts receivable, inventory, and long-term assets. ② Net profit of 23Q1 was 2.78 billion yuan, or -49.5% year on year. Also under pressure from joint ventures, investment income in the vehicle sector declined, bringing single-quarter investment income to -47.6% year-on-year to 3.05 billion yuan. ③ On the cost side, the sales/management/R&D expense ratio in '22 was 9.9%, an increase of 0.5pct over '21; the 23Q1 sales/management/R&D expenses ratio was 4.0%/3.8%/2.6% respectively. The Group is currently increasing its efforts to reduce costs and increase efficiency, and it is expected that cost control will improve.
Joint ventures are under pressure. In the short term, there will still be pressure on the Group's sales volume, but overseas and new energy sales will be the highlight. Under pressure from the joint venture, we expect the Group to sell 5.15 million vehicles in '23. The company targets sales of 1.5 million new energy vehicles and 1.2 million overseas sales in 23 years. We expect that it will probably be completed, and overseas targets may even exceed expectations. In addition, the Group raised its new energy sales target for 2025 and made every effort to accelerate the transition to new energy. The target is to sell 3.5 million new energy vehicles in 25 years (previously 2.7 million units), with a compound annual growth rate of over 50%; overseas sales target in 2025 is 1.5 million units.
Looking ahead to 2023, the company will enter a new smart electric product cycle, while focusing on product focus and increasing cost reduction and efficiency.
① Independent brands: New energy products such as the next-generation hybrid platform eRX5, Roewe EP39, MG MULAN, Bingo, and Clear Sky will continue to bring in new volume and drive overseas sales. The Feifan F7 and Zhiji LS7 have already been launched, and the two brands also have various new product plans. Shangtong Wuling has a rich electric vehicle matrix, moving from A00 to A0 and A class, and introducing cost-effective hybrid models. At the same time, SAIC Passenger Vehicle will focus on product focus in '23, gather marketing resources, and develop the advantages of seven major technology bases. ② Joint venture brand: Accelerating the transformation of electrification. Driven by the ID series, SAIC Volkswagen aims to double its new energy sales in '23. SAIC-GM will launch 3 new Ultron electric vehicles within the year. At the same time, the joint venture brand focused on optimizing the product structure and increasing the proportion of high-margin mid-range and high-end model sales, while the Volkswagen brand also focused on reducing costs in '23.
Profit forecasts were lowered and holdings growth ratings were maintained. Independent brands, new energy vehicles, and overseas operations of the “troika” jointly helped the Group complete the transformation of old and new tracks. Considering the intensification of industry competition, the 23-24 revenue forecast was lowered to 7519.7906 billion yuan (8736/932.7 billion yuan before the adjustment), the profit forecast was lowered to 143/17.8 billion yuan (209/244 billion yuan before the adjustment), the additional 25-year revenue/profit forecast was 8052/21.3 billion yuan, corresponding to the 11/9/8 times PE in 23-25. Considering that the company is actively carrying out new energy transformation, overseas sales growth is highly certain and the advantage is obvious, and the company's valuation center has remained at 10.5x in the past 3 years The range corresponds to a 15% increase in PE in 2024, maintaining the increase in holdings rating.
Core risks: demand recovery falls short of expectations, automobile price war intensifies, joint venture profits fall short of expectations.