[Matters]

On November 28, FAW Jiefang signed a hydrogen energy strategic cooperation framework agreement with Faurecia Hydrogen Energy and France's Air Liquide Group. The three parties reached consensus on hydrogen technology research and development and the layout of the hydrogen energy industry chain. In the future, the three parties will rely on the technological and resource advantages of all parties to accelerate the application of hydrogen energy in the field of transportation and jointly contribute to global green travel and sustainable development.

On November 8, at the China International Commercial Vehicle Exhibition, FAW Jiaxin showcased a hydrogen fuel-fueled forward-looking vehicle called the “Xing Yi”. By reducing the vehicle weight by more than 1000 kg, the vehicle's wind resistance by 40%, and the vehicle's energy consumption by 5%, the hydrogen consumption per 100 kilometers is less than 7 kg, thus supporting long-term driving of more than 1,200 km.

[Comment]

Actively implement the new energy strategy and cooperate with the three parties to accelerate the application of liquid hydrogen. Since the release of the “15333” new energy strategy in September 2021, the company's vision is to provide customers with “China's first, world-class” new energy intelligent transportation solutions, and has implemented the three technical routes of pure electric, hybrid, and fuel cells. Among them, hydrogen energy, as a clean energy source, has broad application prospects in the field of heavy trucks. Liquid hydrogen is also an important solution to improve the hydrogen loading capacity of heavy trucks, increase vehicle range, and reduce vehicle life cycle usage costs. Through cooperation with Faurecia Hydrogen Energy and France-Liquid-Air, the company is expected to further accelerate the promotion and application of liquid hydrogen in China while enhancing product competitiveness.

Joining hands with Huawei to empower digital transformation is expected to create a new leading edge. In October 2023, the company and Huawei signed a memorandum of understanding on comprehensive and deepening cooperation. The two sides will jointly build a major model for the commercial vehicle industry. While empowering the liberalization of internal applications, they will also gradually export intelligent solutions and carry out in-depth cooperation in areas such as intelligent driving. The company and Huawei have maintained close cooperation in the fields of public cloud, integrated communications, and IPD transformation since 2015; in May 2019, the two sides formally established a strategic partnership; in 2021, the two sides reached a comprehensive and deepening strategic cooperation, expanding the areas of cooperation to fields such as digital cloud platforms, AI platforms, intelligent manufacturing, industrial Internet, talent training, and structured organization construction. With the support of this cooperation, the company is expected to build a new leading edge in the digital field of the commercial vehicle industry.

A fixed increase enhances core competitiveness and helps the company grow in the long term. In October 2023, the company's fixed growth plan passed the review by the Shenzhen Stock Exchange. Through the construction of fixed increase projects, the company can enhance its R&D capabilities in the field of new energy intelligent connectivity and enhance the company's core competitiveness under the “new four modernizations” of the industry, which is expected to support the company's long-term growth.

[Investment advice]

In the short term, demand for commercial vehicles has recovered, and the company and dealers are jointly developing the terminal market, and it is expected that the company will rapidly catch up in performance in 2023; in the medium to long term, the company is actively deploying new energy, intelligence, and exports, and is optimistic about the company's future transformation. Considering the good recovery of the heavy truck industry this year and the company's market share gradually increasing, we have raised the company's profit forecast. The company's 2023-2025 revenue is estimated to be 544.07, 666.74 and 862.16 (previously 457.15, 620.64 and 792.31) billion yuan, respectively, and net profit of 6.38, 11.21, and 17.49 (previously 6.03, 8.60 and 13.24) yuan, corresponding to EPS of 0.14, 0.24, and 0.38 (previously 0.13, 0.19 and 0.29) yuan, PE was 76, 43, and 28 times, respectively, maintaining the “overweight” rating.

[Risk Reminder]

Economic recovery fell short of expectations

Demand growth in the commercial vehicle industry fell short of expectations

Vehicle exports fell short of expectations