Core views

2023Q1-Q3 achieved operating income of 23.508 billion yuan, an increase of 6.70% over the previous year, net profit of 1,009 billion yuan, an increase of 40.75% over the previous year, and net profit of 658 million yuan after deducting non-return to mother, changed from negative to positive. 2023Q3 achieved operating income, net profit and net profit of $80.79, 2.80, and 240 million yuan, up 3.46%, 5.76%, and 513.45% year-on-year respectively, up 2.22%, -48.07%, and -41.27% over the previous year. In 2023, the company's vehicle sales volume gradually improved, while promoting cost reduction and efficiency, further improving the cost side.

It is estimated that the company's net profit from 2023-2024 will be 1.35 billion yuan, corresponding to the current stock price PE of 11X and 9X.

occurrences

The company disclosed the results report for the third quarter of 2023. 2023Q1-Q3 achieved operating income of 23.508 billion yuan, an increase of 6.70% over the previous year, net profit of 1,009 billion yuan, an increase of 40.75% over the previous year, and net profit of 658 million yuan after deducting non-return net profit of 658 million yuan, which changed from negative to positive. Among them, 2023Q3 achieved operating income of 8.079 billion yuan in a single quarter, an increase of 3.46% over the previous year, net profit of 280 million yuan, an increase of 5.76% over the previous year, and net profit after deducting non-return mother of 240 million yuan, an increase of 513.45% over the previous year.

Brief review

Q3 Vehicle sales increased, and revenue increased slightly month-on-month. In the single quarter of 2023Q3, the company achieved revenue, net profit and net profit of $80.79, 2.80, and 240 million yuan respectively, up 3.46%, 5.76%, and 513.45% year-on-year respectively, up 2.22%, -48.07%, and -41.27% from the previous quarter. The company's Q3 revenue increased month-on-month, due to the increase in the company's vehicle sales in the third quarter of 2023. Vehicle sales in 23Q3 reached 74,800 units, up 4.23% year on year and 0.34% month on month. Among them, light buses, light trucks, pickups, and SUVs sold 2.17, 1.43, 1.21, and 26,500 units, respectively, up 8.89%, 5.95%, -8.82%, and 6.52% from the previous year. The sales volume of 2023Q1-3 vehicles reached 221,000 units, up 6.46% year on year. Among them, light buses, light trucks, pickups, and SUVs sold 5.50, 4.61, 3.95, and 803,000 units, respectively, up 1.61%, -8.07%, -19.52%, and 49.33% from the previous year. The recovery in vehicle sales has benefited from: (1) macroeconomic improvements; (2) the company's bus share in the ambulance market and motorhome market has further increased; and (3) high-quality, cost-effective products continue to gain strength. Optimistic about economic stabilization to boost demand, the company's vehicle sales are gradually improving.

Benefiting from lower raw material prices, Q3 gross margin was +0.52 pct month-on-month. In 2023Q1-Q3, the company's gross profit margin and net profit margin were 15.37% and 2.86% respectively, with a year-on-year ratio of +7.11 and -7.22 pct, respectively. The gross profit margin, net profit margin, and period expense ratio of the 2023Q3 company were 16.58%, 2.79%, and 11.71% respectively, with a year-on-year ratio of +0.32, -0.50, and -0.68pct, respectively, and +0.52, -0.89, and -0.50 pct, respectively. Among them, the Q3 sales/management/R&D/finance expense ratios were 4.49%, 2.67%, 4.99%, and -0.73%, respectively, +0.48, -0.31, +0.29, -0.30pct, and +0.04, -1.01, +0.03, and -0.16 pct over the previous year. R&D expenses are mainly used for the development of pure electric and hybrid passenger vehicles and replacement projects for light buses, light trucks, and pickups.

SUVs are entering overseas markets smoothly, and light trucks are expected to benefit from economic recovery. (1) Light truck sector: After the implementation of the blue light truck policy, the light truck market officially ushered in a major policy year. The company's light truck product replacement project continues to advance. Traditional cars have already been put into production in 2022, and the pure electric platform will be launched this year, which is expected to continue to benefit from the increase in market share brought about by the strong light truck cycle. (2) Light passenger sector: The purchase tax exemption policy for new energy vehicles has been officially extended until the end of 2023, and the company's independent brand replacement products have been launched in 2022. It is optimistic that sales volume brought about by the company's new energy light passenger benefit policy dividends will continue to rise. (3) Pickup truck sector: Jiangling Pickup launched a new product “Jiangling Avenue”, and the Jiangling Ford Ranger will also be unveiled at the Guangzhou Auto Show. The company's pickups will replace and put all pickup trucks into production from 2023-2025, further improve the pickup truck layout, and accelerate the expansion of the pickup truck sector. (4) SUV sector: Domestic market companies have completed the construction of 183 Ford experience stores, successfully expanded channels, and developed hybrid and BEV projects for passenger cars, which will be put into production in 2024-2025. At the same time, it used Ford channels to enter overseas markets, with remarkable results. In 2023, the Q1-Q3 SUV segment completed sales volume of 80,300 units, an increase of 49.33% over the previous year. (5) Cost side: The company continues to promote cost reduction and efficiency, lean management, and build an efficient and agile organization to lay a solid foundation for the company's overall strategic development.

Investment advice

2023Q3 achieved net profit of 280 million yuan, an increase of 5.76% over the previous year; net profit after deduction of net profit of 240 million yuan, an increase of 513.45% over the previous year.

In 2023, the company's vehicle profit continued to recover. While vehicle sales continued to increase, it continued to promote cost reduction and efficiency, further improving the cost side. It is estimated that the company's net profit from 2023-2024 will be 1.35 billion yuan, corresponding to the current stock price PE of 11X and 9X.

Risk analysis

1. The prosperity of the industry fell short of expectations. Stimulated by steady growth policies such as automobile purchase tax cuts in the second half of 2022, the industry is booming. Under expectations of a decline in policy support in 2023, future industry conditions may fluctuate.

2. The competitive landscape of the industry has deteriorated. Domestic competitors are speeding up product launch. As supply factors such as technological progress and new production capacity change, industry competition may intensify in the future, and the company's market share and profitability may fluctuate.

3. The company's channels and mass production progress of new projects fell short of expectations. The company's channel construction and dealer optimization progress may fall short of expectations. The pace of car companies' development of new model projects may fluctuate, or affect the pace of subsequent new car launches and mass production delivery.