Overseas profits are expected to improve profits in the autonomous sector, investment returns will stabilize, and the company's current valuation level is low

Overseas profits are expected to improve profits in the independent sector, and with stable investment returns, we expect the company's net profit to be 148.5/168.5/19.43 billion yuan respectively in 23-25, corresponding PE is 11/9/8X, respectively, and the current PB is only 0.54X, which is a low valuation level. Considering the segmented valuation, the “investment income” portion representing the joint venture profit and the “net profit from investment income” portion representing independent profit were assessed at 24-year 9X and 20X PE respectively, corresponding to the target price of 17.32 yuan; considering the overall valuation, GAC, Changan, and Great Wall were selected as comparable companies, considering the company's joint venture pressure, giving the company a 15% valuation discount compared to the industry. The target price for 24 years was 12.24 times, corresponding to the target price of 17.66 yuan. The target price of 17.66 yuan was selected for the two methods to maintain the “purchase” rating.

SAIC Motor Group's sales have been under pressure in recent years, but autonomy, new energy, and overseas are the three new driving forces, SAIC Motor Group's vehicle sales fell 8.0% year on year from January to November 23, putting pressure on overall sales; in the first three quarters of '23, the company achieved operating revenue of 523.34 billion yuan, down 0.8% year on year, and realized net profit of 11.41 billion yuan, down 9.8% year on year. In terms of autonomy, SAIC Autonomy (including Feifan and Zhiji)'s share of the Group's vehicle sales increased year by year, and the share of sales increased to 20.7% from January to November 2023. In terms of overseas travel, SAIC Motor exported 969,000 vehicles from January to November 2023, an increase of 23.7% over the previous year.

In terms of new energy, the Zhiji brand has already introduced a “hot model” model, the LS6, and a total of 8,151 units were delivered in November 2023; SAIC Motor's main joint venture brands SAIC Volkswagen and SAIC-GM are also speeding up the transition to new energy sources.

Going overseas: Overseas sales have been number one for many years, with a good overseas sales base. As of 2022, the Group's vehicle exports remained number one in the country for 7 consecutive years. The products have entered more than 90 countries and regions around the world, and formed 2 “100,000 vehicle classes” in Europe and America, and 4 “50,000 vehicle classes” in Australia, New Zealand, the Middle East, ASEAN, and South Asia. In the first half of 2023, SAIC Motor Group officially announced its plans to invest in the construction of a NEV factory in Europe. Building a factory in Europe can avoid geographical risks, reduce tariffs and logistics costs, and enhance the competitiveness of vehicle prices. SAIC Motor's successful overseas business expansion is expected to continue to help improve the profits of the entire autonomous sector.

Joint venture: Increasing investment in smart electric power and trying to catch up with the mainstream level in the country has been impacted by autonomy and new forces, and SAIC Volkswagen and SAIC-GM's sales have been under pressure in recent years. From January to November '23, SAIC Volkswagen sold 1.04 million units, -3.6% year on year; SAIC-GM sold 707,000 units, -14.6% year over year. While stabilizing fuel truck sales, the active transition to electrification may become the key to joint venture brand competition. From January to November '23, SAIC Volkswagen's share of NEV sales was 10.2%, up 4.1 pct from the same period in '22. ID.3 sales grew rapidly due to cost performance advantages; in the same period, SAIC-GM's NEV sales accounted for 9.1%, up 4.9 pct from the same period in 2022. SAIC-GM-Wuling's cumulative passenger car sales volume from January to November 23 was 629,000 units, -16.8% year over year. Mainly during the product restructuring period, it expanded from A00 cars to A0 and A class cars, while bicycle profits are expected to continue to rise.

Risk warning: Consumer demand falls short of expectations, overseas trips fall short of expectations, and the company's intelligent progress falls short of expectations.