1Q24 results are in line with our expectations
SAIC Motor Group announced 1Q24 results: total revenue of 143.07 billion yuan, -1.9% YoY, -35.4%; net profit to mother of 27.1 billion yuan, -2.5% YoY, +0.6% month-on-month; net profit after deducting non-return to mother was 2.12 billion yuan, -1.9% YoY, +270% month-on-month.
Development trends
The performance of independent joint venture brands is divided, and new energy sources are still gaining strength. The total sales volume of the 1Q24 company reached 834,000 units, -6.4% year-on-year, of which sales of new energy vehicles were 210,000 units, +47.9% year-on-year, maintaining a rapid increase; overseas sales volume was 227,000 units, -11.8% YoY, and the MG brand sold more than 20,000 units in Europe in a single month. By brand, sales of the independent brands Shangtong Wuling and Zhiji increased, while SAIC passenger car sales declined, with sales volume of 16.3/22.4/10,000 units respectively, -17.3%/+16.4%/+165.6% year-on-year. The new Zhiji L6 model was launched at the Beijing Auto Show, further enriching the product matrix. The sales performance of joint venture brands was divided. SAIC Volkswagen and SAIC-GM sold 248/112,000 units, +9.6%/-40.0% year-on-year. SAIC Volkswagen's overall sales were stable, and ID.3 sales were resilient enough, driving SAIC Volkswagen ID family sales to exceed 10,000 in a single month.
Gross profit margins are under slight pressure, and cost reduction and fee control continue to advance, with a view to improving operating efficiency. The gross margin of the 1Q24 company was 11.4%, -1.6pp/ -0.5ppt compared to the same period last month. It was mainly a promotional price reduction to cope with fierce price competition. In order to cope with this pressure, the company continued to promote cost reduction and fee control. The results were gradually reflected. The company's sales, management, and R&D expenses were 3.7%/3.4%/2.8%, respectively, -0.2/-0.4/+0.1ppt. Furthermore, the month-on-month increase in financial expenses reached 960 million yuan, mainly due to an increase in interest expenses and a decrease in interest income. The profit level of joint venture brands is relatively stable, and profit performance is superior to sales performance. 1Q24 investment income was 2.75 billion yuan, -9.7% year over year, of which joint venture revenue was 2.2 billion yuan, a slight decrease of 3% year on year.
The company's operating cash flow improved. The net operating cash flow outflow in 1Q24 was 4.55 billion yuan, which was narrower than the same period last year, mainly driven by finance companies' optimization of deposit structures.
The implementation of subsidies supports the new vehicle cycle, and the transformation of sea space and new energy can be seen in the long run. In the short term, the trade-in subsidy rules have been implemented, and the company's main brand core products fall within the preferred scope of end-of-life car purchases. We believe that the company is expected to benefit from policy impetus. The implementation of the policy is compounded by the launch of the auto show and the start of a new car cycle. We are optimistic about the company's sales performance in May-June. The company plans to achieve a sales target of 5.45 million units in 2024, of which 1.35 million units will be sold overseas, and plans to further expand the regional market. We believe that localization will help the company seek an upward breakthrough in the overseas sales ceiling. At the same time, we look forward to the release of new models of Shangtong Wuling, SAIC passenger cars and the Zhiji brand one after another to accelerate the company's new energy transformation and solidify the foundation for sales growth.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 11x/10x 24E/25EP/E. Maintain the outperforming industry rating and target price of 17.5 yuan unchanged, corresponding to 12x/12x 24/25EP/E, with 15% upside compared to the current stock price.
risks
Price competition has surpassed expectations, and overseas sales growth has fallen short of expectations.