Matters:
The company released its 2023 annual report:
1) Revenue: 602.3 billion yuan/+42%, Q4 single quarter 180 billion yuan/year over year, +11% month on month; 2) gross profit margin: 20.2% /+3.2PP, Q4 single quarter 21.2% /year over year +2.2PP, month-on-month -0.9PP; 3) Net profit to mother: 30 billion yuan/year over year +81%; Q4 single quarter 8.7 billion yuan/year on year +19%; 4) deducted from mother: 28.5 billion yuan/year over year +82%, Q4 single quarter +91% +25% YoY, -6% Month-on-Month.
Commentary:
The annual results were in line with expectations, with Q4 bicycle net profit of 0.85 million yuan/-0.3 million yuan YoY. The company achieved net profit of 30 billion yuan/year on year +81% year on year in 2023, 8.7 billion yuan/year on year +19% in Q4, and -17% month on month, which is in the middle of the forecast and in line with expectations. Simply excluding BYD's electronic financial statements, the company's Q4 sales volume was 945,000 vehicles (announced value)/+53% YoY, +15% month-on-month, to 8 billion yuan/YoY +16%, and -15% month-on-month.
Equivalent to Q4, the net profit of bicycles was 0.85 million yuan/year over year -0.27 million yuan, and -0.29 million yuan month-on-month. In order to sprint to the annual sales target of 3 million vehicles, Q4 model discounts and channel rebates were given more.
The peak of high-intensity capital expenditure may pass, and the declining share of fixed costs will help increase profit elasticity. In 2021-2023, the company's capital expenditure increased rapidly along with sales growth. The new fixed asset investment was 97/462/60.5 billion yuan, the final value of projects under construction was 142/373/34 billion yuan, and the depreciation of fixed assets reached 109/146/37.7 billion yuan. The balance of the company's 2H23 fixed asset purchases and projects under construction declined month-on-month compared to the first half of the year.
Regardless of weight, the budget completion rate for each industrial park at the end of '23 was about 73%. The peak period of addition of fixed assets may have been reached. In the future, it is expected that we will see the peak inflection point of fixed asset depreciation arrive, improving profit flexibility.
The Honor Edition's popularity increased capacity utilization, and the Q1 performance is expected to reach 4.5 billion yuan/year over year +10%. After the Spring Festival, the company continued to launch the Honor Edition in Dynasty and Ocean Network, and the popularity of terminals picked up, driving up production capacity utilization.
Q1 sales volume is expected to reach 620,000 units/year over year and -34% month-on-month. Depreciation and amortization and model price reductions are adversely affected, but battery and supply chain cost reductions are also being hedged. In the end, we estimate that Q1 bike's profit is expected to reach 70,000 yuan, and the overall Q1 performance is expected to reach 4.5 billion yuan/year on year +10%.
Investment advice: Product innovation begins a new cycle in 2024, and the company is expected to gain market share at an accelerated pace. Consider the company's layout in terms of price, technology, and intelligence, adjust the 24-25 forecast, and introduce a new 26-year forecast:
1) Sales volume: 376/451/5.07 million units, +24%/+20%/+12%; 2) Revenue: 7,324/8,989/10,404 billion yuan, +22%/+23%/+16%; 3) Return to mother: 337/434/50.2 billion yuan, +12%/+29%/+16%, with an original value of 381/60.5 billion yuan in 24-25 years.
4) EPS: 11.57/14.89/17.25 yuan.
The company currently has a strong desire to compete, and is expected to blossom more in domestic market share, overseas sales, and high-end technology. We gave the 2024 target PE 20 times and PS 1.0 times, an average target market value of 703.2 billion yuan, and adjusted the corresponding target price to 241.5 yuan. Taking into account the exchange rate and A/H premium, adjust the target price of Hong Kong stocks to HK$238.0, corresponding to 1.1 times the A/H premium. Maintain a “strong” rating.
Risk warning: Price competition intensifies, high-end products fall short of expectations, export sales fall short of expectations, etc.