Key points of investment
The best model for going overseas, how can domestic leaders go global? Looking back at 2023, Yutong achieved resonance growth in the three dimensions of export sales/performance/market value, and the market experienced a new round of revaluation of Yutong. Yutong has provided us with the best template for overseas enterprises, that is, to achieve high growth through high export profitability based on domestic recovery expectations, and have both dividend attributes through high dividends. At a time when Yutong's market capitalization is at a record high, we think it is more appropriate to discuss Yutong's investment value on a long-term basis. Starting from exploring the roots of the growth of leading companies, this report focuses on analyzing two questions: how can Yutong establish a leading position in the domestic market? Looking ahead to this big cycle, how can Yutong become the world leader?
Last round of major cycle: In 2012-2016, Yutong used domestic NEV dividends to stabilize its leading position in the country. On a strategic level, the company's management seizes the dividends of the school bus/new energy bus industry through MBO holding companies, and “lay out early and follow the trend”. The share of large and medium passengers increased from 28% in 2012 to 33% in 2016. On a financial level, in the last cycle, Yutong achieved a sharp rise in quantitative profit under the pressure of balance sheet expansion/high investment in R&D. In 2012-2016, the compound revenue growth rate reached 16%, and the compound profit growth rate reached 27%. In summary, Tianhe comes first (school bus/new energy bus cycle), followed by geographical advantage (Yutong has the most “volume” of all bus companies), people-oriented (management that actively seeks change), and Tianshijiren has a stable leading position in the industry.
This big cycle: 2020-2027E, Yutong will take advantage of overseas new energy promotion dividends to achieve a leading position in the world. From the perspective of export sales, Yutong's current cycle began in 2020, but domestic performance was pressured by the epidemic, so a stable domestic base is a prerequisite for studying export logic. From a performance perspective, the current cycle dividend was reflected in 2023. Revenue for the full year of 2023 was +24% year over year, and net profit to mother was +139% year over year, mainly dependent on export sales volume +79% year over year for large and medium customers, and +86% year over year in overseas revenue. Looking ahead to this round of bus export cycle, the industry has recovered significantly. In 2023, large and medium passenger exports are +47% year-on-year. We expect exports to maintain a growth rate of more than 30% in 2024/2025, and the overseas penetration rate of new energy buses is less than 20%, and the overseas penetration rate of new energy buses is still on the path of rapid improvement. In this cycle, the rest is king. A stable pattern is the first element in the establishment of the top-down logic of this cycle. Yutong/Jinlong has maintained a total market share of more than 50% since 2010, and the export market share is close to 60%. Based on the weak position of overseas car companies, there is plenty of room to increase the global market share of Chinese buses. High growth is the core reason for Yutong's upward valuation in this round. According to our estimates, China's overseas bus market share is expected to increase from 22% to 44% in 2023-2027, and the penetration rate of new energy overseas is expected to increase from 14% to 31%. High export profitability is the root cause of high growth. Yutong's gross export margin in 2023 was 32%, significantly higher than the domestic gross margin of 23%. High dividends are a strong support for stock prices. In this cycle, Yutong does not have the need to start new production capacity. Cash flow is significantly better than profit, and we expect high dividends to be sustainable.
Profit prediction and investment rating: Yutong is one of the few companies with strong export attributes and high growth/dividend characteristics. We maintained the company's operating revenue of 347/414/49.9 billion yuan from 2024 to 2026, +28%/+20% year over year, net profit to mother of 29.7/39.8/4.95 billion yuan, +63%/+34%/+24%, corresponding EPS of 1.3/1.8/2.2 yuan, corresponding PE 18/13/11 times, maintaining a “buy” rating.
Risk warning: The global economic recovery fell short of expectations, and demand for domestic and foreign buses fell short of expectations.