Incident: Great Wall Motor released its 2024 quarterly report, achieving revenue of 42.86 billion yuan, +47.6% year on year, net profit of 3.23 billion yuan, +1752.6% year on year, after deducting non-net profit of 2.02 billion yuan (same period last year - 220 million yuan).

The company's performance reached a record high in the first quarter, and the sharp rise in volume and price drove revenue growth.

1) Volume increase: The company's total automobile sales volume in 24Q1 was 275,000 units, +25.1% year on year, including 59,000 new energy vehicles, +112.4% year on year;

2) Price increase: 24Q1 ASP reached 156,000 yuan, a year-on-year increase of 24,000 yuan, a month-on-month increase of 90,000 yuan, a record high. The main reason was the optimization of the business structure: ① Tank: Q1 sold 49,000 units, +103.2% year over year, accounting for 6.9pct to 17.9%. Tank 300, 400, and 500 sales performance was steady. New products such as tanks 700/300Hi4-T and tank 330 were launched during the reporting period; ② Exports: Q1 sales volume of 93,000 units, +79% year-on-year ratio Increased 10.1pct to 33.7%.

The optimization of the management structure drives profit growth, and continues to increase research and development.

1) Operating structure optimization drives gross margin growth: 24Q1 gross profit margin 20.0%, year-on-year +4.0pct, month-on-month +1.6pct;

2) Revenue growth and diluted expenses: 24Q1 sales expense ratio 4.0%, -1.0pct year on year; management expense ratio 2.3%, year-on-year -1.3pct; continued increase in R&D investment, R&D expenses of 1.96 billion yuan, up 27.7% year on year; R&D expenses rate 4.6%, year-on-year -0.7 pct;

3) Bicycle profit: 24Q1 bicycle net profit of 12,000 yuan, a year-on-year increase of 11,000 yuan, and a month-on-month increase of 60,000 yuan.

4) Non-recurring profit and loss of 1.2 billion yuan: We expect that about 600 million yuan will mainly come from value-added tax deductions for advanced manufacturing enterprises, and about 600 million yuan from deferred revenue amortization, tax rebates after overseas localized production and sales, etc. Currently, the value-added tax credit policy will continue until the end of 2027, so we believe that non-recurring profit and loss are highly sustainable.

In the short term, export+new energy off-road will bring highly elastic growth; in the medium term, the company will break through the mainstream market under comprehensive transformation.

1) Accelerated overseas layout: Export sales exceeded 300,000 units in 2023. Currently, the company's key models are distributed in Europe, the Middle East, Australia, New Zealand, ASEAN and other regions. After the Brazilian vehicle factory is put into operation, the first batch of Weipai Alpine MPVs were delivered in Dubai, and the Eula Lightning Cat officially landed in Malaysia.

2) New energy off-road is expected to bring about highly elastic growth: the new energy off-road industry has large space, tank series sales performance is impressive, and subsequent product matrix improvements are expected to further contribute to increased performance.

3) Breakthrough in the mainstream market under comprehensive transformation: ① Product refinement, close to user needs: since this year, second-generation Big Dog Hi4 and Raptor 2024 have been launched, and subsequent Xiaolong Max facelift and Blue Mountain facelift are expected to achieve better performance; ② Changing marketing ideas: restructuring the organization and building a marketing platform to achieve efficient use of marketing resources; Recruiting talents from various new media to form a professional marketing team and launch accurately and scientifically on platforms such as Douyin, Station B, and Weibo recently; Mr. Wei has recently entered Weibo and Douyin, Weibo, etc., frequent interaction with Xiaomi is a powerful force in Great Wall's marketing transformation Confirmation; ③ Direct channel construction: According to the company's official account, a dual sales model with equal emphasis on direct management+distribution will be launched. Starting May 1, 33 “Great Wall Smart Choice” direct sales stores will be opened in 17 urban core business districts across the country, while also recruiting and training a professional team of more than 600 people.

Investment advice: Maintain a “buy-A” rating. The company's net profit for 2023-2025 is estimated to be 134.8, 19.75, and 23.59 billion yuan, respectively, corresponding to the current market capitalization PE of 15.7, 10.7, and 9.0 times, respectively.

Considering that the company's sales structure was clearly optimized under the growth of the new energy off-road and export business in 2024, and profits are expected to rise significantly, we gave the company a price-earnings ratio of 25 times in 2024, corresponding to a target price of 39.4 yuan/share for 6 months.

Risk warning: New product developments fall short of expectations, sales of new models fall short of expectations; industry price wars continue to intensify, etc.