Key points of investment

Performance summary: The company released its 2024 quarterly report. Q1 achieved revenue of 18.98 billion yuan, +35.2%/+20.3%, net profit to mother of 170 million yuan, +174.0%/-51.7% month-on-month, net profit of 104 million yuan after deducting net profit from the same period. The 24Q1 performance was in line with our expectations, and the company's performance increased significantly year-on-year.

Heavy truck sales performed better than the industry, and heavy natural gas truck sales increased rapidly. The total sales volume of 24Q1 was 78,500 units, +34.2/ +42.4%, respectively, of which the company sold 59,000 heavy trucks, +33.3/ +43.8%, respectively, and performed better than the overall heavy truck industry; under the China Automobile Association's caliber, 24Q1's heavy truck market share was 21.7%, +3.3/+1.6 pct, respectively; high product reliability & perfect natural gas heavy truck product matrix led to a steady upward increase in market share. Under the terms of Jiaotong Insurance, 24Q1 sold 15,500 heavy natural gas trucks, a sharp increase of 127.7% over the previous year. Its market share in the heavy natural gas truck market was 34.2%, and its share remained high and stable. The share of exports declined or led to a month-on-month decline in the average price of products. 24Q1's overall average bicycle price was 241,900 yuan, +0.7%-15.5%, 24Q1 exported 13,000 vehicles, +64.0%/-24.8%, with exports accounting for 21.4% of the company's sales volume and +4.0/ -19.5pct, respectively. Exports declined month-on-month or led to a month-on-month decline in the average price of products.

The gross margin increased slightly year-on-year, and the expense ratio improved markedly during the period. The 24Q1 company's overall gross profit margin was 6.3%, +0.2/-4.4 pct, respectively. The year-on-year increase was mainly due to increased capacity utilization and increased scale effects. The month-on-month decline in the company's sales volume in 24Q1 was mainly due to increased competition in the industry and a slight increase in terminal discounts; at the same time, the company's export sales volume declined month-on-month, and the product sales structure changed. Q1 Sales/management/R&D/finance expense rates were 2.3%/2.0%/2.9%/-1.1%, respectively, -0.2/-0.8/-0.7/+0.3pct year-on-year, and -0.6/-2.0/ -3.9/+0.5pct, respectively; the total cost rate for the period was 6.1%, -1.5/-6.0 pct compared to the same period, increasing the scale effect and better amortizing expenses. Q1 Net interest rate to mother was 0.9%, +0.5/-1.3pct, year-on-month, respectively.

Continue to promote the growth of domestic heavy truck sales, and accelerate technological progress through globalization+electrification and intelligence. The company continues to promote the growth of domestic heavy truck sales to ensure the strategic goal of being the number one terminal in the medium and heavy truck industry. The company is focusing on building export channels for heavy trucks, and the global strategic layout is more clear; in addition, the company continues to transform its electric intelligence, accelerate technological breakthroughs, and enrich its product matrix.

Profit forecast and investment rating: Considering that the high boom in heavy natural gas trucks supports the increase in the total volume of the industry, we maintained the company's profit forecast for 2024-2025. Net profit to mother was 10.28/1,724 billion yuan, and the profit forecast for 2026 was raised from 1,738 billion yuan to 2,451 billion yuan, corresponding to EPS of 2024-2026, 0.22/0.37/0.53 yuan, respectively, and the corresponding PE was 41.07/24.51/17.23 times, respectively, maintaining the “buy” rating.

Risk warning: The recovery of the heavy truck industry fell short of expectations; fluctuations in overseas exports exceeded expectations; prices of raw materials fluctuated sharply.