Net profit for the first quarter of 2024 turned a loss into a profit. In 2023, Cyrus achieved revenue of 35.84 billion yuan, +5.1% year over year, net profit to mother of 2.45 billion yuan (3.83 billion yuan in 2022), deducted non-net profit of 4.82 billion yuan (-430 billion yuan in 2022). The pressure on 23-year results was mainly due to high R&D investment in M9, M7, etc. At the same time, the company increased investment in sales channel construction and marketing, and sales pressure suppressed the release of scale effects; 24Q1 achieved revenue of 26.56 billion yuan, +421.8% year-on-year, and +38.6% month-on-month Net profit for parent reached 220 million yuan (-630 million yuan for 23Q1 and -160 million yuan for 23Q4), after deducting non-net profit of 110 million yuan (-920 million yuan for 23Q1 and -1.80 billion yuan for 23Q4). The company has continued to invest in R&D and focus on building products in recent years. After nearly four years of loss pressure, the 24Q1 results turned net profit into profit.
Gross margin increased month-on-month, and the cost control effect was obvious. The gross margin of the 23Q4 company was 13.5%, -1.0pct year on year and +6.0pct month-on-month. The year-on-year decline was mainly due to the price reduction of the new M7 compared to the old model. The month-on-month increase was mainly due to the release of the scale effect brought about by the increase in delivery volume. Operating activities generated a net cash flow of 6.398 billion yuan in 2023 (-1,169 billion yuan in '22), with excellent cash flow performance; 24Q1 Cyrus's gross margin was 21.5%, +12.6pct year over year, +8.0 pct month-on-month, mainly due to 1) increased sales volume acceleration cost amortization, driving the release of scale effects (24Q1 sales volume of 830,000 units, 23Q4 sales volume was 64,000 units; 23 was 104,000 units for the whole year); 2) Increased share of high-priced M9 models (M9 models sold 24Q1) amount 11,000 vehicles), improving overall ASP. On the cost side, 24Q1 Celis' sales/management/R&D cost rates were 12.8%/1.7%/3.6%, respectively, -2.3/-5.8/-3.2pct year-on-year, and -1.8/-1.5/+0.4pct month-on-month respectively. The company's cost control effect was obvious, driving profitability to increase year-on-month.
Product building capacity continues to improve, and it is expected that a new upward cycle will begin. As the company's first cooperative car company under the Huawei Smart Choice model, the two sides cooperate closely and mutually empower each other to focus on improving product competitiveness. The company adheres to software-defined automobiles, independently masters the core technologies of intelligence and electrification in the automotive industry, uses safety as the foundation, reinvents luxury with intelligence, explores the “new luxury” concept of “traditional luxury+technological luxury”, and promotes brand improvement with new quality productivity. In 2023, the AITO Challenge M5 smart driving version, the new M7 and M9 were launched one after another, and quickly occupied the market. With the gradual deepening of cooperation between the two parties, product definition and manufacturing capabilities continue to improve. At the same time, the channel side layout is becoming more and more perfect, and the company's sales volume is expected to continue to increase, starting a new upward cycle.
Risk warning: the risk of increased competition in the industry and the risk of fluctuating raw material prices.
Investment advice: raise profit forecasts and maintain the “gain” rating.
We are optimistic that the company's model volume will continue to improve profitability, and the profit forecast is raised. The net profit forecast is estimated to be 32.4/60.4/8.30 billion yuan in 2024-2026 (originally forecast 2.8/3.06 billion yuan in 24/25), and EPS is 2.14/4.00/5.50 yuan (original forecast was 0.19/2.04 yuan for 24/25). We are optimistic that the company's competitiveness will continue to improve under the in-depth cooperation of Huawei and maintain the “increase” rating.