1Q24 results are in line with our expectations
The company's 1Q24 revenue was 37.02 billion yuan, +0.6% yoy, -21.3%; net profit to mother was 1.26 billion yuan, -11.9% yoy, -49.0% month-on-month; net profit without return to mother was 1.09 billion yuan, -7.9% yoy, -54.0% month-on-month; the decline in gross margin was under pressure, and overall performance was in line with expectations.
Development trends
Overall revenue performance was steady, with industry customers declining year over year, and customers from outside the industry and new products helped stabilize revenue. In 1Q24, SAIC Motor Group sold 834,000 units, -6.4% over the same period. Overall sales volume outperformed the industry and was under pressure. Among them, SAIC-GM and SAIC passenger car inventory and wholesale sales declined significantly, and SAIC Volkswagen and Shangtong Wuling maintained positive growth; on this basis, the company's revenue was stable year on year. We believe it mainly benefited from volume hedging from customers outside the industry, overseas markets, and some new businesses. By business, 1Q24 achieved revenue of 281.1/21.0/62.4/13.5/140 million yuan in the interior and exterior parts/functional assembly/metal forming and molding/electrical components/heat processing category, YoY +3.7%/-17.4%/+3.8%/-23.8%/+3.7%.
The core business of interior and exterior parts has maintained steady and positive growth, reflecting global competitiveness. In addition, the company's non-operating income was 405.46 million yuan, +77% year-on-year, mainly due to subsidiary companies completing compensation payments.
Gross margin is already expected to be under pressure in the market. Cost reduction and fee control continue to advance, and investment returns are steady. The company's gross margin for 1Q24 was 12.2%, -1.3/-2.0ppt compared to the same period. It was mainly due to the combined effects of customer price reduction pressure, rising production capacity for new overseas projects, high pressure on new business development costs, increased overseas labor costs, and exchange rate fluctuations. In order to cope with this pressure, the company continued to step up efforts to reduce costs and fees. The results were gradually reflected. The sales, management and R&D rates were 0.7%/4.8%/4.4% respectively. The sales expenses rate was stable year-on-year, and the management expenses rate and R&D expenses rate decreased by 0.3 ppt/0.5ppt respectively. The main joint ventures of 1Q24 operated steadily, with investment income of 520 million yuan, the same as the previous year, and recorded investment income of 150 million yuan/310 million yuan for interior/functional parts. Profits for functional parts were strong. We expect this to be mainly driven by the volume of new energy businesses such as Bosch Huayu.
Cash flow performance is steady, and we expect an increase in gross margin due to improvements in product and customer structure. As of 1Q24, the company's cash and equivalent balance reached 41.19 billion yuan. At the same time, accounts receivable, accounts payable, and fixed asset balances all declined month-on-month. The company managed cash expenses more carefully. We believe that the company has a healthy cash flow to cope with current external competitive pressure. Looking ahead, the company's expansion in overseas markets, customers outside the industry and new energy sources continues to be realized, hoping to help revenue return to steady growth; on the profit side, in addition to releasing scale effects, the company actively promoted fee reduction plans, continued to maintain the intensity of fee reduction on the basis that 4Q23 had already shown results, and hedged the current cost reduction pressure on the industrial chain to a certain extent.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 7.1x/6.5x 24E/25EP/E. Maintain the outperforming industry rating and target price of 22.5 yuan unchanged, corresponding to 9.0x/8.3x 24/25EP/E, with 27% upside compared to the current stock price.
risks
Downstream customers are under pressure to cut costs, and price competition is intensifying.