Key points of investment
Key points of the announcement: Foton Motor announced its 2023 performance forecast. It is expected to achieve net profit of 901 million yuan for the full year of 2023, +1297% year over year; net profit after deducting non-return to mother is 220 million yuan, +171% year over year.
2023Q4's net profit equivalent to mother was 121 million yuan, +169%/-34% year-on-month. Net profit after deduction was -232 million yuan. The year-on-year loss narrowed by 69 million yuan, and the year-on-year loss increased by 273 million yuan. The 23Q4 performance was largely in line with our expectations.
Looking at the heavy truck industry, 23Q4 achieved production volume of 22.0/204,000 units, +71.9%/+37.3% year-on-year, and the industry maintained a high year-on-year growth trend and remained basically flat month-on-month; Foton 2023Q4 achieved overall wholesale sales of 180,990 vehicles, +81.0%/+23.8%, respectively. Strong sales growth brought about a significant scale effect, with losses narrowing compared with the same period last year. Foton's Q4 medium and heavy truck sales reached 26,255 units, +38.2%/-2.4%, accounting for 14.85% compared to the same period, respectively; Q4 light trucks achieved sales volume of 139,720 units, +101.5%/+32.6% year over month, respectively, accounting for 77.20% of sales, and +7.9/+5.1 pct, respectively. The month-on-month increase in net loss after deduction in Q4 was mainly due to the accelerated transformation of new energy sources. High investment in early R&D dragged down profits. At the same time, the share of high-profit heavy truck sales declined month-on-month, leading to a slight decline in overall profitability.
Looking forward to the future: The commercial vehicle industry is recovering, Foton Light Truck has built high barriers with a comprehensive layout of “product+technology+marketing”. Heavy duty trucks/buses/engines/gearboxes are flourishing, and performance is expected to continue to improve.
In the short to medium term, from 2024 to 2025, the company will actively promote AMT transmissions to cover all commercial vehicles, continuously improve product competitiveness; accelerate the layout of commercial vehicle export business, and vigorously develop high-priced and high-profit products such as Mercedes-Benz heavy trucks in the domestic market to optimize the profit structure. In the long run, the intelligent transformation of new electric vehicles enhances domestic competitiveness, and accelerates the development and expansion of influence in overseas markets. The company promotes digital transformation, deepens the construction of a value creation system, continuously promotes cost reduction and efficiency throughout the value chain, continuously optimizes its business structure, and is expected to continue to improve profitability.
Profit forecast and investment rating: Considering the pressure on the company's overseas business, we lowered Foton Motor's profit forecast for 2023-2025. The net profit forecast to mother was lowered from 9.82/17.20/2,766 billion yuan to 9.10/13.38/1,089 billion yuan. The corresponding EPS was 0.11/0.17/0.14 yuan, respectively, corresponding to PE valuation 27/18/23 times. Maintain Foton Motor's “buy” rating.
Risk warning: the recovery of the commercial vehicle industry falls short of expectations; raw material prices fluctuate greatly; competition intensifies.