2023 results are in line with our expectations
The company announced results: 2023 revenue +44% YoY to 85.5 billion yuan, net profit to mother 196% YoY to 5.32 billion yuan; of these, 2H23 revenue +46%/+7% YoY to 44.1 billion yuan, and net profit to mother +473%/+24% YoY to 2.95 billion yuan. It met our expectations.
Development trends
The heavy truck sector contributed most of the revenue and profit, while the engine and financial sector increased profits. By business in 2023:1) Heavy truck sales volume +44% year over year to 227,000 units, market share +2.1pct to 25.7% year over year, continuing the number one position in the industry. Heavy truck business revenue was +50% year-on-year to 75.3 billion yuan, and operating profit margin was +0.6pct to 5.8% year-on-year. 2) Light truck sales volume +21% YoY to 97,000 units, revenue +21% YoY to 10.3 billion yuan, and operating profit margin -1.9pct YoY to -6.0%. 3) Engine sales volume was -3.5% to 128,000 units, and the operating profit margin was +13.7pct to 14.2% year over year, mainly due to increased sales of major assemblies and components of other heavy trucks such as transmissions and various castings and forgings to drive profit improvement. 4) External revenue from the financial business was -4.8% to 1.2 billion yuan, and the operating profit margin was +15.7pct to 55.6% year over year, mainly due to lower interest rates on domestic financial loans and reduced interest expenses driving up profits.
Heavy truck and bicycle revenue reached a record high in 2023, and bicycle profits reached an all-time high level. In 2023, the company's domestic sales/export heavy truck sales reached 97/ 130,000 units respectively, and domestic/export heavy truck revenue was 337/41.1 billion yuan respectively. We estimate that the company's bicycle revenue from domestic sales and exports of heavy trucks in 2023 was 348/316,000 yuan. The average bicycle revenue was +14,000 yuan to 330,000 yuan, a record high. We believe it mainly benefited from the increase in the number of high-value models such as diesel national six cars and gas cars, as well as the increase in the share of high-end brands such as Shantou Deka in export models. We estimate that the net profit of the company's heavy trucks and bicycles in 2023 was +12,000 yuan to 23,400 yuan year-on-year, reaching a historically high level in the past. We believe it was mainly due to scale effects diluting fixed costs, export release profit flexibility, and product structure upgrades.
The upward cycle of the industry is compounded by its own equity incentives, which are optimistic about the steady growth of the company's performance, and high dividends have defensive properties. We judge that the sales volume of the heavy truck industry is expected to increase by 20% to 1.1 million units in 2024 due to factors such as renewal and replacement, stable exports, and heavy natural gas truck volume. The industry continues its upward cycle. The company has a strong export lead, gradually increasing its gas vehicle market share, and is expected to maintain its leading position. At the same time, considering the equity incentive plan issued by the company in January, the revenue and profit target guidance is positive, and we are optimistic about the steady growth of the company's performance. In addition, the company proposes to distribute cash dividends of RMB 9.65 per 10 shares in 2023, totaling RMB 2,664 billion, with a cash dividend ratio of 50%. We believe that the company has the ability to pay high dividends and the will to pay back to shareholders, and has defensive properties.
Profit forecasting and valuation
The profit forecast for 2024/2025 remains unchanged. Maintain outperforming industry ratings. The current stock price corresponds to 7.9 times the 2024 P/E, and we keep our target price unchanged, corresponding to 9.1 times the 2024 P/E, with 13.9% upside compared to the current one.
risks
Production and sales in the industry fell short of expectations, heavy truck exports fluctuated, heavy natural gas truck sales fell short of expectations, and competition worsened.