2023 forecast net profit to mother increased 115-122% year over year
The company issued a performance forecast: net profit of 23.98-2,478 billion yuan in 2023, up 115-122%, corresponding to the core 2,438 billion yuan/increase of 118.5%; deducted non-net profit of 1,533-1,613 billion yuan in 2023, with a year-on-year increase of 67-76%, corresponding to 1,573 billion yuan/71.5% increase.
We estimate that the net profit center for 4Q23 was 161 million yuan, a year-on-year decrease of 65%/58%; 4Q23 deducted the non-net profit center of 169 million yuan, a decrease of 34%/54% year-on-year. 4Q23 profit was slightly lower than our expectations and was mainly affected by one-time fees.
Key points of interest
In 4Q23, the company's profit declined month-on-month during the off-season for heavy trucks in China and the US, which was in line with our expectations after reverting to the impact of one-time expenses. Referring to data from China Automobile Association and MarkLines, 4Q23 domestic/US heavy truck sales were 204/620,000 units, +37.3%/-17.7% YoY, and -6.3%/-7.1% month-on-month; in 2023, domestic/US market sales reached 911,000/264,000 units, +35.6%/+3.9% YoY. We expect the company's 4Q23 profit to decline month-on-month due to the low season in the industry, but there were many one-time expenses at the end of the year, which fell short of our expectations, including: 1) the company implemented the Starlink Plan to carry out domestic organizational development adjustments and optimization, which generated large one-time expenses and consulting expenses; 2) asset clean-up and impairment accrual of subsidiaries; 3) year-end assessment bonus accrual.
The business in North America and Europe is steady, domestic business reforms are gradually being implemented, emerging markets continue to grow rapidly; commercialization of the new energy business is accelerating. Looking at 4Q23 business by region: 1) The supply chain shortage in the North American semi-trailer market has been alleviated, supply and demand for semitrailers have returned to normal, and the unit price and profit contribution of the North American business have returned to normal levels; 2) demand in the Chinese market is gradually recovering, and the domestic semi-trailer and special vehicle business has improved; 3) the European business is developing steadily; 4) the emerging market business continues to grow rapidly. Looking ahead to 2024, we expect the company's overseas business in Europe and the US to grow steadily, and the domestic business is expected to benefit from market share, sales and profit contributions after the implementation of the reform; the company will continue to increase research and development of innovative new energy head-mounted trains, and EVRT new energy concrete mixer products are expected to enter the domestic trial operation stage. Furthermore, we believe that the company is a highly elastic target of the North American economy. If the US economy recovers beyond expectations in 2024, we suggest the possibility that the company's 2024 performance may exceed expectations.
Profit forecasting and valuation
Considering that the profitability of the North American business has returned from an excess level to a normal level and domestic business reforms are continuing, we lowered our 2023/2024 profit forecast by 5.4%/11.4% to 24.7/1.80 billion yuan, and introduced the 2025 profit forecast of 2.15 billion yuan for the first time. Maintaining an outperforming industry rating, we lowered our target price for A-shares by 11.6% to $12.02, corresponding to 13.5 times 2024 P/E, with 29.8% upside compared to the current one (corresponding 10.4 times 2024 P/E); due to the company's high historical dividend ratio of Hong Kong stocks and attracting steady investors, we maintained a target price of HK$8.04, corresponding 7.9 times the 2024 P/E, with 16.2% upward space compared to the present (corresponding 6.8 times 2024 P/E).
risks
Domestic reforms fell short of expectations, North American business declined, and domestic and foreign semi-trailer industry production and sales fell short of expectations.