1H23's performance met our expectations
The company announced 1H23 results: revenue of 15.429 billion yuan, +8.48%; net profit of 729 million yuan, +61.23%; 2Q23 revenue of 7.903 billion yuan, +13.06%, month-on-month, +5.02%; net profit of 547 million yuan, +111.55%, and +199.12%. It met our expectations.
Development trends
Sales volume in the commercial vehicle business is under pressure, and the boom in demand for SUVs is driving revenue growth. 1H23 achieved vehicle sales of 146,350 units, +7.64% year-on-year. Among them, 33,346 light buses/trucks/31,790 vehicles/27,415 vehicles, compared to -2.64%/-14.07%/-23.48%; and 53,799 SUVs, passenger cars, +86.25%. The year-on-year decline in commercial vehicles is mainly due to a slight decrease in market share this year, based on last year's high sales volume base. Jiangling Ford Technology's domestic and international sales volume reached 50,758 vehicles +79% year-on-year. The main factors were: 1) Ford Lingrui led the effort, with sales volume +135% year-on-year; 2) Ford's new Tureo sales volume +31% year-on-year. We believe that with the restoration of the company's commercial vehicle sector and the continued release of strong demand for new energy passenger vehicles, the number of orders is expected to increase steadily and revenue will be strongly boosted.
Profitability grew steadily, and government subsidies increased in the first half of the year. 1H23 gross margin was 14.73%, year on year +1.43 ppt,2q23 gross margin was 16.02%, year on year +1.88 ppt, and +2.64 ppt month on month. Steady, moderate and positive profitability is mainly due to: 1) the reduction in raw material costs and prices; 2) the expansion of the passenger car business to improve the company's revenue structure. The company's expenses are well controlled. The total sales, management, and financial expenses rate for 2Q23 was -0.39ppt to 7.56% year-on-year. 1H23 Government grants increased to 359 million yuan, +37.4% year-on-year. 1H23 achieved operating cash flow of 1.66 billion yuan, a year-on-year positive change. Looking ahead, we believe that the company's profit margin is expected to benefit from a fall in the cost side and an optimization of the product structure, and further increase in profit elasticity.
The agreement was signed to deepen export business cooperation with Ford and accelerate the development and launch of new energy. The company attaches importance to overseas business development and signed a cooperation framework agreement with Ford in May to expand export sales. In terms of product portfolio, the new Kaiyun+ light truck was released in February, the new pickup truck brand Jiangling Boulevard was released in March, and the 23 Jiangling Ford Lingrui models released in August have upgraded some of the features and configurations of some models. At the same time, entry-level models have been added, and the product matrix continues to improve. In terms of new energy, brand establishment and promotion have been accelerated. The new brand Jiangling LeXing was officially launched in June, and a new pure electric platform light truck, the Jiangling E Rudder, was launched at the same time. We continue to be optimistic about the company's deepening international layout and the volume of new energy orders, bringing more performance resilience and growth certainty.
Profit forecasting and valuation
Considering that the increase in the company's passenger car sales has had a certain scale effect and that profitability has been restored, we raised our 2023 net profit by 15.7% to 1,052 million yuan, keeping our profit forecast unchanged for 2024. The current price of A shares corresponds to the price-earnings ratio of 13.4/12.4 times 2023/2024. We maintain our outperforming industry rating. Considering the accelerating global layout of the company, we raised the target price of A-shares by 22.5% to 19.6 yuan, corresponding to the price-earnings ratio of 16.0 times/14.8 times in 2023/2024, which is 19.7% upward from the current stock price.
risks
Fluctuations in raw materials exceeded expectations, vehicle sales fell short of expectations, and overseas business expansion fell short of expectations.