Core views

In 2023, the company's revenue, net profit attributable to mother, and net profit after deduction were 33.167 billion yuan, 1,476 billion yuan, and 995 million yuan respectively; year-on-year increases of 10.19%, 61.26%, and 533.34%, respectively. The company's annual operating performance was high, mainly benefiting from sales recovery compounded by changes in minority shareholders' profit and loss; cost reduction and efficiency continued to be realized, and gross margin returned to more than 15%; the cost control situation was good, and the net interest rate hit a new high since 2017. Looking ahead, the company's recovery in vehicle sales is compounded by cost reduction and efficiency, which is conducive to increasing its own profits; at the same time, it ushered in a new Ford product cycle, and overseas exports continued to expand, driving the company's performance to be further released.

occurrences

On March 29, 2024, the company released its 2023 annual report. It achieved operating income, net profit to mother, and net profit after deduction of 33.167 billion yuan, 1,476 billion yuan, and 995 million yuan respectively, with year-on-year increases of 10.19%, 61.26% and 533.34% respectively. At the same time, the company announced the 2023 profit distribution plan and plans to distribute cash dividends of 0.684 yuan/share to all shareholders, totaling 590 million yuan, accounting for about 40% of net profit attributable to mother for the year.

Brief review

Sales recovery combined with changes in minority shareholders' profit and loss contributed to a high increase in performance, and the dividend payment rate continued to maintain 40%. In 2023, the company's revenue, net profit attributable to mother, and net profit after deducting non-net profit were 33.167 billion yuan, 1,476 million yuan, and 995 million yuan respectively; +10.19%, +61.26%, and +533.34% year-on-year respectively. On the revenue side, revenue grew steadily throughout the year, directly benefiting from the recovery of the industry and a significant recovery in the company's sales volume. According to China Automobile Association data, China's automobile production and sales in 2023 were 30.1.61 million units and 30.94 million units, respectively, +11.62% and +12.02% year-on-year respectively.

Among them, annual sales of light buses and light trucks are 399,900 units and 1.894,500 units, respectively. +25.13% and +17.08%, respectively. The SUV achieved retail sales of 10.389,000 units, +10.37% year-on-year (passenger union caliber). The company sold 310,000 complete vehicles throughout the year, +9.93% year-on-year, mainly benefiting from the continued high increase in SUV export sales. On the one hand, the company ushered in a new Ford product cycle, and the launch of Ford's legendary Ranger pickup truck at the end of the year boosted pickup truck sales volume; on the other hand, the company's SUV segment sold 107,300 units, +39.05% over the same period last year. Mainly due to increased cooperation between Jiangling and Ford, overseas sales continued to increase. On the profit side, in addition to factors boosting sales, the company has implemented cost reduction and efficiency measures such as design optimization and process improvements since 2019 to promote steady profit restoration, and will continue to be realized in 2023. In addition, changes in profit and loss of minority shareholders of the holding subsidiary Jiangling Ford Automotive Technology (Shanghai) (-411 million yuan, -52 million yuan in 2022) increased net profit attributable to mother. The increase in profit was partially offset by asset impairment provisions (approximately $244 million) calculated from long-term asset inactivity due to the termination of the restructuring transaction of the wholly-owned subsidiary Jiangling Heavy Duty Truck Co., Ltd. Q4 revenue for a single quarter, net profit attributable to mother, and net profit after deducting non-net profit were 9.659 million yuan, 466 million yuan, and 338 million yuan, respectively, +19.71%, +135.59%, and +310.66% year-on-year, respectively, +19.56%, +66.44%, and +40.86%, respectively. The year-on-year profit surged or the base was low due to the 2022/Q4 pandemic; the improvement in month-on-month performance mainly benefited from the 2023Q4 company's sales volume +19.0% month-on-month (the growth rate hit a new high since 2021/Q4) and good cost control. In terms of dividends, the company plans to distribute cash dividends of 0.684 yuan/share to all shareholders, totaling 590 million yuan, accounting for about 40% of net profit returned to mother for the year. The dividend payment rate has stabilized at around 40% for three consecutive years, which is expected to enhance shareholders' confidence.

The results of cost reduction and efficiency were shown, and the net interest rate hit a new high since 2017. The company's gross profit margin and net profit margin in 2023 were 15.38% and 3.21% respectively, +1.14pct and +0.34pct year-on-year, respectively. Among them, gross margin returned to more than 15% after 2020. On the one hand, it benefited from the company's strong production and sales and diluted costs, and on the other hand, the company showed results in reducing costs and increasing efficiency. Net interest rate hit a new high since 2017. Apart from the increase in gross profit and the impact of minority shareholders' profit and loss, the main reason was good cost control.

The company period/sales/management/R&D/finance expenses rates for 2023 were 10.65%, 4.42%, 2.97%, 3.88%, and -0.62%, respectively, -1.74pct, -0.38pct, -0.24pct, -1.05pct, and -0.07pct, year-on-year. Q4 single quarter gross profit margin and net margin were 15.42% and 4.06%, respectively, +1.45pct, +1.78pct, month-on-month, -1.17pct and +1.27pct, respectively; Q4 period/sales/management/R&D/finance expense ratios were 8.05%, 4.64%, 2.56%, 1.40%, and -0.55%, respectively, -4.82pct, +0.18pct, -0.90pct, -4.17pct, +0.08pct, month-on-month 0.15pct, -0.11pct, -3.59pct, +0.18pct

The company expects to sell 360,000 vehicles in 2024, and the Bronco market is expected to drive SUV sales. In 2024, the company plans to sell 360,000 vehicles, with revenue of about 37.8 billion yuan, +16% and +14% year-on-year respectively, demonstrating the company's operating confidence. (1) Light truck sector: The company sold 62,800 light trucks in 2023, -2.95% year-on-year, mainly due to a decline in demand in the high-end market where Jiangling's light truck products are positioned. In June, the “Jiangling Lexing” new energy brand's first pure electric platform, the light truck Lexing E-Luder, was launched. It can cover a variety of usage scenarios, meet diverse and personalized logistics needs, and lay the foundation for subsequent sales growth and transformation into new energy sources. (2) Light passenger segment: In 2023, the company sold 80,200 light passenger vehicles, +3.87% year-on-year. With the introduction of the Ford V363 platform in the Jiangling light passenger segment and the launch of the Quanshun T8, the company's product matrix was further improved, and its competitiveness in the high-end light passenger market was strengthened. (3) Pickup truck section:

In 2023, the company sold 59,700 pickups, -5.11% year-on-year. The Jiangling pickup product matrix continues to improve. In March 2023, the new brand “Jiangling Avenue” was launched, including the Almighty, Light Chaser, and Off-Road Edition (Daredevil, Fighter), covering the high-end pickup market of 100,000 yuan or more. In December, the JMC Ford Ranger was officially launched, using Ford's technology and brand power to drive the company's pickup truck sales volume over 10,000 in a single month. Currently, the company's pickup truck products are gradually being transformed from tool pickups and commercial dual-use pickups to off-road leisure pickups, and it continues to expand overseas exports to accelerate the expansion of the pickup truck sector. (4) SUV segment: In 2023, the company sold 107,300 SUVs, an increase of 39.05% over the previous year. With Ford's entry into overseas markets, SUVs continue to be popular in many parts of the world, driving a high increase in overall sales. In March 2024, the company introduced a new popular Ford model, the Bronco Liema, and officially launched. All models will be launched at the end of April, which is expected to further boost SUV sales. At the same time, the passenger car hybrid and BEV projects developed by the company will also be put into operation one after another from 2024-2025.

Investment advice

The company's vehicle business sales recovery compounded cost reduction and steady progress in efficiency, which is conducive to the continued growth of its own profits. At the same time, it ushered in a new Ford product cycle, and overseas exports continued to expand, driving the company's performance to be further released. The company's net profit for 2024-2025 is estimated to be 1.80 billion yuan and 2.27 billion yuan, corresponding to current stock prices of 14X and 11X.

Risk analysis

1. The industry boom falls short of expectations. Domestic economic recovery rebounded steadily in 2024, but the exact pace remains to be seen. Demand in the automotive industry may fluctuate accordingly; it will still take time to fully implement the trade-in policy for consumer goods such as automobiles, which will affect the recovery process of industry demand.

2. Export sales fell short of expectations. Exports are affected by various factors such as the international situation, national policies, and exchange rates, and there is a risk of fluctuations in overseas sales growth.

3. The competitive pattern of the industry has deteriorated. Domestic competitors are speeding up product launch. With changes in supply factors such as technological progress and new production capacity investment, future industry competition may intensify, and the company's market share and profitability may fluctuate.

4. The company's channels and sales volume of new models fell short of expectations. The company's channel construction and dealer optimization progress may fall short of expectations. There is a risk that sales volume of new models will fall short of expectations due to market demand.