Matters:
The company released its 2023 annual report, with annual revenue of 744.7 billion yuan, +0.1% year over year; net profit to mother of 141 billion yuan, -12% year on year; joint venture investment income of 10.7 billion yuan, -1.1% year on year.
Commentary:
4Q23 The company's sales volume improved month-on-month, and the scale effect boosted performance:
1) Sales volume: 4Q23 SAIC Motor's total sales volume was 1.64 million units, +7.2% YoY, +26% month-on-month; of these, SAIC Motor's 360,000 passenger cars (including Zhiji Motors), +47% YoY and +40% month-on-month.
2) Revenue and gross profit were improved by production and sales growth: 4Q23 revenue of 218.2 billion yuan, +3.5% YoY, +14% month-on-month; gross sales margin of 10.7%, YoY +1.2PP, and month-on-month +0.3PP.
3) Net profit: Net profit for 4Q23 was 2.7 billion yuan, -22% year-on-year, and -38% month-on-month; of these, the joint venture sector contributed to an improvement in net profit, with joint venture investment income of 3.4 billion yuan, +50 billion yuan year-on-year, and +540 million yuan month-on-month.
4) Impairment preparations had a significant impact on net profit: In 4Q23, impairment preparations totaled 6 billion yuan. The main reasons: 1) financial services increased provision rates to accrue credit impairment; 2) industry price wars increased depreciation on inventory; 3) depreciation was applied to long-term assets such as machinery, equipment, and molds for slow-selling models.
The 2H23 joint venture sector improved significantly from month to month:
1) SAIC Volkswagen: sales volume of 710,000 units, -4.6% YoY, +41% month-on-month; ASP 122,000 yuan, YoY -14,000 yuan, +15,000 month-on-month; bicycle profit 0.37,000 yuan, YoY -0.43 million yuan, +0.26 million yuan month-on-month; net profit of 2.6 billion yuan, -56% YoY, +387% month-on-month.
2) SAIC-GM: sales volume of 550,000 vehicles, -17% YoY, +22% month-on-month; ASP 1,55,000 yuan, YoY +14,000 yuan; bicycle profit 0.37,000 yuan, YoY -0.13,000 yuan, month-on-month +0.25,000 yuan; net profit of 2 billion yuan, -39% YoY, +281% month-on-month.
3) Shangtong Wuling: sales volume of 880,000 vehicles, -10% YoY, +70% month-on-month; ASP 560,000 yuan, YoY +0.40,000 yuan; bicycle profit 0.10,000 yuan, YoY +0.09,000 yuan; net profit of 890 million yuan, -20% YoY, +2116% month-on-month.
4) SAIC passenger cars: sales volume of 580,000 units (including Zhiji Auto), +21% month-on-month; ASP 98,000 yuan, year-on-year -40,000 yuan, month-on-month -20,000 yuan; bicycle profit -0.4 million yuan, year-on-year +0.01 million yuan, month-on-month +0.08,000 yuan; net profit (excluding investment income) -2.3 billion yuan, year-on-year +20 million yuan, month-on-month.
Optimistic about the company's overseas business, with a target sales volume of 1.35 million vehicles by 2024. The company has a mature overseas layout. SAIC Motor sold 1.21 million vehicles overseas in 2023, +19% over the same period last year. We forecast that in 2024, China will export 5.11 million passenger cars, +26% over the same period last year. The company's overseas business can be expected to grow, with an overseas sales target of 1.35 million vehicles in 2024, +12% over the same period last year. Overseas sales prices for the same model are relatively higher, and overseas business may contribute to better net profit performance for the company.
The company accelerates the transformation of new energy sources, focusing on the new smart car L6. The company actively transformed in accordance with the “Three-Year Action Plan for New Energy Vehicle Development”. In 2023, the company sold 1.12 million new energy vehicles, accounting for 22%. The Zhiji brand is a new driver for SAIC Motor's autonomous new energy transformation. The highest monthly sales of the new Zhiji LS6 in 2023 were close to 10,000, opening up a certain volume for the brand. The new Zhiji L6 will be launched in 2024, equipped with a smart digital chassis and a quasi-900V ultra-fast charging solid-state battery. The pre-sale price range is 230,000 to 330,000 yuan. It is expected to be officially launched in May. Zhiji L6 is highly popular, and its launch may further enhance the brand's sales and popularity, and promote the company's new energy transformation.
Investment proposal: SAIC Motor's total sales volume is expected to be 4.85 million, 4.76 million, 4.64 million vehicles in 2024-2026, with total operating revenue of 768.9 billion yuan, 804 billion yuan, and 839 billion yuan. Considering the performance of the joint venture, we gave the company a net profit forecast of 15 billion yuan, 15.5 billion yuan, and 16.6 billion yuan for 2024-2026 (previous values of 16 billion and 15.6 billion yuan), corresponding to PE 12, 11, and 10 times PE. Based on the company's historical valuation level and future prospects for new energy and overseas development, we gave the company 13 times PE in 2024, corresponding to a target price of 16.83 yuan/share, a target space of 13%, and maintain a “recommended” rating.
Risk warning: New product sales fall short of expectations, declining industry sales, increased market competition, etc.