Events: The company released its three-quarter report for 2023. 23Q1-3 achieved operating income of 23.508 billion yuan, up 6.7% year on year; net profit of 1,009 billion yuan, up 40.75% year on year; net profit after deduction of 657 million yuan, up 1048.11% year on year; gross profit margin 15.37%, up 7.1 pcts year on year; 23Q3 achieved operating income of 8.078 billion yuan, up 3.46% year on year; net profit of 280 million yuan, up 5.76% year on year.

Comment: The company's passenger car export business is growing rapidly, and the commercial vehicle business is picking up. In terms of sales volume, the company achieved total vehicle sales of 221,096 units from 23Q1-3, an increase of 6.46% over last year. Among them, sales of passenger car SUVs were 80,333 units, up 49.33% year on year. The main reason was the rapid growth of the SUV export business; the sales of 55,094 light passenger vehicles, an increase of 1.61% over the previous year, and the market share declined slightly, mainly due to the slow replacement of the company's light passenger products; the sales volume of pickups and light passenger vehicles was 39,530 and 46,139 units, down 19.52% and 8.7%, respectively. The main reason for this was the slow replacement of pickup truck products and the short time for new energy light trucks. Looking ahead to Q4, the company's passenger car SUVs are expected to continue to have a high number of exports, and the commercial vehicle sector is expected to pick up as new models are replaced. In terms of profit, 23Q1-3 gross margin increased 1.02pct to 15.37% year on year; 23Q3 gross margin increased 0.32pct to 16.58% year on year. The main reason for the increase in profitability was: 1) Ford Lingrui's export business was strong. The company's 23Q1-3 achieved SUV exports of 50,980 units, and the increase in vehicle sales led to an increase in gross margin. 2) The cost of raw materials has declined. Net interest rate of 48.77% in Q3 fell by 48.77% month-on-month, mainly due to fluctuations in minority shareholders' equity. We believe that with the steady rise in the company's export business and the launch of Ford's high-end pickups and SUVs, the company's profitability is expected to further improve.

Deepen export cooperation with Ford and transform domestic products. The company signed a cooperation framework agreement with Ford in May, which will further expand export sales. The company expects the annual export volume to reach more than 100,000 vehicles.

In the domestic market, the Ford Ranger pickup, and the hardcore off-road vehicle Bronco will be officially launched by the end of the year and the first half of next year. The new Ford product line is expected to bring new performance growth points to the company.

The commercial vehicle business is picking up, and new energy products have been launched one after another. On October 15, the company launched the new Ford Transit T8 series products, which include hundreds of models such as passenger versions, logistics versions, and pure electric versions. Pickup, the company successively launched the Road Explorer, Light Chaser, and Almighty series this year, and launched the new Yuhu 7 series pickup truck in September. On the light truck side, the company launched the Jiangling Lexing new energy brand in June of this year, and its new pure electric platform, the Jiangling Lexing E-Luda light truck, was officially launched.

With the replacement of the company's commercial vehicle products and the launch of new energy products, commercial vehicle sales are expected to pick up.

Investment suggestion: The company is expected to achieve net profit of 12.4/11.76/1,375 billion yuan from 2023-2025, corresponding to PE 11.4/12.0/10.3 times. First coverage, giving a “buy” rating.

Risk warning: sales volume falls short of expectations, industry competition intensifies, raw material prices fluctuate