Incidents:

On March 29, 2024, Jiangling Motors released its 2023 annual report: in 2023, the company achieved revenue of 33.167 billion yuan, +10.2%; net profit to mother of 1,476 million yuan, +61.3% year on year; net profit after deducting non-return to mother of 995 million yuan, +533.3% year on year, of which 2023Q4 achieved revenue of 9.659 billion yuan, +19.7% year on year; net profit to mother 466 million yuan, +135.6% year on year.

Investment highlights:

In 2023, the company's revenue was +10% year-on-year, and the SUV sales performance was impressive. In 2023, the company achieved revenue of 33.167 billion yuan, +10.2% year over year, mainly due to the main increase in vehicle business contribution (vehicle business revenue of 34 billion yuan in 2023, +12.3% year over year). Sales volume by model: light passenger sales volume: 80,000 units, 3.9% YoY; light truck sales volume: 63,000 units, -3% YoY; Pickup sales volume: 60,000 units, -5% YoY; SUV sales volume: 107,000 units, +39.1% YoY (the rapid increase in SUV sales is mainly due to rising overseas demand).

Both gross margin and net margin strengthened, and net profit to mother increased dramatically. The company's net profit in 2023 was 1,476 billion yuan, +61.3% year-on-year, mainly due to high revenue growth combined with a sharp rise in profit levels. In 2023, the company's gross profit margin was 15.38%, YoY +1.14pct, net profit margin 3.21%, +0.34pct YoY. The company's expenses rate for the period of 2023 was 10.65%, -1.74pct year on year. Specifically, the company's sales/management (excluding R&D) /financial/R&D expenses were 4.42%/2.97%/-0.62%/3.88%, respectively, -0.38pct/-0.24pct/-0.07pct/-1.05pct, respectively. Thanks to the company's continuous promotion of cost reduction and efficiency, lean management, all expense rates were effectively controlled.

Light commercial vehicle leader, “export+new” two-wheel drive. 1) Exit. Benefiting from the boom in domestic automobile exports in 2023, the company exported 96,000 vehicles, a significant increase of 52% over the previous year. Furthermore, the company has signed a vehicle export cooperation framework agreement with Ford. In the future, the company is expected to rely on Ford's mature global business layout and network to continue to maintain rapid export sales growth and build an export product engineering and manufacturing center that supports Ford's global market sales network.

2) Brand new. In June 2023, the new Jiangling Pickup brand “Avenue” was launched. It is positioned as a “full-scene expert for Chinese pickups”, covering high-end commercial and passenger off-road pickups worth more than 100,000 yuan, establishing a strategy where three series of products coexist, and completing the product matrix layout with full price range in the pickup truck market. In December 2023, Jiangling Pickup introduced the Ford Ranger for the first time, positioning it as a high-end passenger pickup truck, and the next city for high-end pickup trucks.

Profit forecasting and investment rating The company's SUV export performance is impressive. Combined with the volume of new high-end pickup products such as the Road and Ranger, it is expected that the company will achieve a sharp rise in volume profit in the future. Therefore, we expect the company to achieve total operating income of 432, 521, and 61.5 billion yuan in 2024-2026, with a year-on-year growth rate of 30%, 21%, and 18%; achieving net profit of 18.4, 23.4, and 2.85 billion yuan, with year-on-year growth rates of 25%, 27%, 22%; EPS is 2.13, 2.71, and 3.3 yuan, corresponding to the PE valuation of the current stock price It was 14, 11, and 9 times, respectively, and the first coverage gave it an “gain” rating.

Risks suggest that raw material prices continue to rise; sales fall short of expectations; sales of new models fall short of expectations; production capacity at new plants falls short of expectations; overseas market expansion falls short of expectations; and new product development progress falls short of expectations.