Recently, the company released its 2023 semi-annual performance forecast: it is expected to achieve net profit of 380 million yuan to 420 million yuan, an increase of 123.33% to 146.84% over the previous year; net profit after deducting non-return mother net profit of 131 to 171 million yuan, an increase of 222.95% to 260.60% over the previous year.

[Comment]

Domestic recovery compounded by high exports, and the increase in the volume and efficiency of truck products led to a high increase in the company's net profit. According to the forecast, the company's 23H1 net profit increased dramatically, mainly due to the recovery in domestic commercial vehicle demand and the maintenance of a high boom in overseas markets. The company's strengths and weaknesses, sales volume of medium and heavy truck and light truck segments blossomed across the board, and the competitive advantage of its product strength continued to be verified.

Terminal share remains leading, and medium and heavy truck leaders are expected to continue to benefit from the industry reversal. In June 2023, China's commercial vehicle industry achieved sales volume of 355,000 units, +26.3% year-on/month-on-month; cumulative sales volume in January-June was 1.971 million units, +15.8% year-on-year. Benefiting from the industry's recovery and leading brand advantages, the company's sales volume increased year-on-year. From January to June 2023, the company sold a cumulative total of 112,300 units/18,400 units/888 units of medium and heavy trucks, respectively, +31.75%/+22.90%/+1266.15%. Among them, the cumulative terminal share of medium and heavy trucks reached 25.8%, maintaining the industry lead. As the industry's recovery logic continues to be verified in the future, the company's performance potential is expected to be further unleashed.

Regularly add new energy to help the company grow in the long term. The company's fixed increase plan recently announced that it plans to issue no more than 695,599,849 shares (inclusive) to no more than 35 specific investors (inclusive), raising a total capital of no more than 3.713 billion yuan (inclusive) for new energy intelligent connectivity and vehicle R&D capacity enhancement projects, vehicle production line upgrade construction projects, powertrain production line upgrade construction projects, and supplementary liquidity. Of these, 846 million yuan will be used for new energy intelligent connectivity and comprehensive vehicle R&D capacity enhancement projects. Since the launch of the “15333” new energy strategy, the company has developed a comprehensive layout in terms of R&D, production capacity, ecology and exclusive new energy services. In 2022, the company achieved sales volume of 2,723 units of new energy products, +22.22% over the same period last year. This fund-raising project accurately grasps the “new four modernizations” of the industry and is expected to increase the company's R&D capabilities in the field of new energy intelligent connectivity and support the company's long-term growth.

[Investment advice]

In the short term, demand for commercial vehicles recovered after the epidemic improved. The company and dealers are jointly exploring the terminal market, and are expected to achieve a rapid performance catch up in 2023. In the medium to long term, the company has an active layout in new energy, intelligence, and exports, and is optimistic about the company's future transformation. We maintain our projected revenue for 2023-2025 at $457.15, 620.64, and $79.231 billion, respectively, with net profit of $6.03, 8.62, and $1,326 billion respectively, corresponding EPS of $0.13, 0.19, and $0.28, respectively, and PE of 71, 50, and 32 times, maintaining the “increase in holdings” rating.

[Risk Reminder]

Economic recovery fell short of expectations

Demand growth in the commercial vehicle industry fell short of expectations

The progress of the air suspension business fell short of expectations