Revenue increased 1.1% year-on-year to $74.3 billion in '23
The company released its annual report for the year 23, and achieved operating income of 72,595 billion yuan, up 0.8% year on year; net profit to mother was 573 million yuan, down 59.4% year on year, mainly due to the decline in bicycle profits due to price cuts in new car sales. Considering the relatively low profit margin on sales of new energy vehicles, we expect the company's 24-26 net profit to be 7.8/9.5/1.26 billion yuan (previous net profit of 24-25 years), which is comparable to the company's average 24E PE 9.4x, giving the company 24E 9.4x PE, corresponding to a target target of HK$3.97 (previous value of HK$4.16) to maintain “purchase”.
The new energy business maintains its growth momentum and actively lays out leading brands
The overall sales volume of the company's new car sales remained stable in '23, with a total sales of 194,000 vehicles, +1.5% year over year; after-sales business revenue increased 4.4% year on year to 10.54 billion yuan, of which maintenance revenue was 9.05 billion yuan, up 11.5% year on year. The company's new energy business maintained a strong momentum. The sales volume of independent new energy brands increased +92% year-on-year to 18,400 units, and single-store sales increased from 16 units at the beginning of the year to 50+ units at the end of the year. The corresponding after-sales business also increased year-on-year, with maintenance revenue for independent new energy brands reaching 160 million yuan, +255% over the same period last year. In the future, the company will focus on developing brands related to Hongmeng Zhixing, Xiaopeng, Smart, and Zhiji, and has obtained the first batch of sales and service center outlets authorized by Xiaomi Motors.
Optimizing the store structure+promoting cost control and fee reduction. Facing the pressure on profit, the company's profitability was under pressure in '23. The gross margin for the whole year was 6.88%, down 1.99 pcts from the previous year. Among them, the gross margin of the new car sales business fell 2.16 pct to 2.47% year on year, or the company continued to expand and reduce bicycle profits; the gross margin of used car sales fell 2.21 pct to 8.72% year on year; the gross margin of the after-sales service business fell 3.28 pct to 41.53% year on year; and the gross margin of automobile operation and leasing services fell 4.63 pct to 22.8% year on year. Facing the challenge of declining profits, the company, on the one hand, actively adjusted the structure of new car outlets, reduced the number of high-end brand outlets, closed 5 stores with poor profitability, and at the same time focused on promoting cost reduction and fee control, optimizing the mechanism linked to performance, and strictly implementing cost control.
The scale of used car sales is growing rapidly, and efforts are being made to shape new growth points
The company's used car business is becoming an important driving engine for the growth of its main auto service business. As the world's leading dealer group for Porsche and BMW brands, the company is expected to continue to take advantage of its rich brand-certified used car resources to improve sales scale and retail quality. In '23, the company's used car business transaction volume was +15% to 93,000 units, of which the sales scale was +167% to 44,600 units, and revenue was +57% to 5.28 billion yuan. It is expected to continue the growth trend in the future.
Risk warning: Demand for passenger cars falls short of expectations; profit improvement falls short of expectations.