Incidents:

SAIC Motor released its report for 2022 and the first quarter of 2023: in 2022, the company achieved revenue of 744.063 billion yuan, a decrease of 4.59% over the previous year; net profit attributable to shareholders of listed companies was 16.118 billion yuan, a decrease of 34.30% over the previous year; net profit attributable to shareholders of the parent company after deduction was 8.992 billion yuan, a decrease of 51.59% over the previous year.

In Q1 2023, the company achieved revenue of 145.916 billion yuan, -20.03%/-32.65% year-on-year; net profit attributable to shareholders of listed companies of 2,783 billion yuan, -49.55%/-19.77% over the same period; net profit attributable to shareholders of the parent company after deduction was 2,163 million yuan, -56.32% /month over month.

Key points of investment:

The joint venture business was under pressure, and the company's brand structure was actively transformed. In the joint venture sector, SAIC-VW sold 1.32 million vehicles a year, up 6.3% year on year; SAIC-GM sold 1.17 million vehicles per year, down 12.1% year on year. It plans to launch new energy products, Buick brand E5/E4 and Cadillac Ultium 2 to improve the product structure, and its sales are expected to improve. The company's sales structure is actively changing, with independent brands accounting for 60% of global sales.

Renewable energy and overseas sales have both increased, achieving annual sales of “double million”. In 2022, with the simultaneous development of the domestic NEV market, the company achieved sales of 1,073 million new energy vehicles, an increase of 46.5% over the previous year. At the same time, the company's overseas business continued to gain strength, achieving two 100,000 regional markets in Europe and America, with overseas sales reaching 1,017,000 vehicles, an increase of 45.9% over the previous year. Among them, MG brand performance was impressive. Overseas annual sales exceeded 500,000 units for the first time, product competitiveness continued to improve, overseas systems continued to improve, and it has initially built an overseas automobile industry chain integrating R&D, manufacturing, marketing, finance, logistics, parts, used cars, etc., and is expected to continue to grow in the future.

Smart electric drives the high-end of independent brands, and the Zhiji/Feifan product lineage has gradually been improved.

In 2022, independent brands of high-end smart electric cars, Zhiji L7 and Feifan R7, were delivered one after another; in Q1 2023, the two brands continued to improve their product layout, launching the Zhi Ji LS7, which was positioned as a medium to large SUV model, and the Skyfan F7, a medium and large sedan, respectively. Among them, the Zhiji LS7 restructured the vehicle's interior vision and space, provided differentiated product features from competitors, and had strong product competitiveness. In April, 1,930 vehicles were sold. The target sales volume for the Zhiji+Feifan brands is 100,000 units in 2023.

Profit forecasting and investment rating companies' independent brands have developed well, actively deployed high-end smart electric models, and maintained high growth in overseas sales. Based on the consideration that the company is currently in a transition period, joint venture brand sales are under pressure, so we adjusted the company's profit forecast. It is estimated that the company will achieve main business revenue of 7546, 7710, 801.8 billion yuan in 2023-2025, with a year-on-year growth rate of 1%, 2%, 4%; the net profit returned to the mother was 143, 16, 183 billion yuan, a year-on-year growth rate of -11%, 12%, 14%; corresponding EPS was 1.22, 1.37, 1.57 yuan; PE was 11.3, 10.1, 8.8 times. It is optimistic about the transformation and development of the company as a leader in the domestic industry and maintains the “growth” rating.

Risks suggest that the overall recovery of the automotive industry fell short of expectations; joint venture brand sales fell short of expectations; Zhiji/Skyfan brand sales fell short of expectations; the growth of the company's overseas business fell short of expectations; and risks brought about by increased market competition.