Description of the event
Huayu Auto released its 2024 quarterly report: The company achieved operating income of 37.02 billion yuan, an increase of 0.6% over the previous year, and net profit to mother of 1.26 billion yuan, a year-on-year decrease of 11.9%.
Incident comments
The company's external customers accelerated development, and the company's main downstream customers achieved steady growth in the first quarter under pressure on production and sales. Domestic passenger car wholesale sales in the first quarter of 2024 were 5.885 million units, +10.6% year over month; production and sales of the company's major customers were under pressure, SAIC Motor sold 834,000 units, -6.4% year over month, and -49.2% month over month, of which SAIC Volkswagen, SAIC-GM, and SAIC passenger car sales were +9.6%, -40.0%, and -51.6%, respectively; Tesla's global sales volume was 433,000 units, -1.1.7%, month-on-month, -12.7%, -12.7% month-on-month Among them, the Chinese region Sales volume was 221,000 units, -3.7% YoY and -11.2% YoY. The company's continuous development of external customers led to steady revenue growth. Q1 achieved revenue of 37.02 billion yuan, +0.6% year over year and -21.3% month over month.
Market competition has intensified, and the company's profit level is under pressure. The company's gross profit margin for the first quarter of 2024 was 12.5%, -1.3 pct year-on-year, and -2.0pct month-on-month. The cost ratio for the Q1 period was 10.3%, -0.4 pct year over year, and +0.8 pct month-on-month. Among them, sales, management, R&D, and finance expenses were 0.7%, 4.8%, 4.4%, and 0.4%, respectively. Q1 Investment income in joint ventures and joint ventures was $510 million, +21.5% YoY and -35.9% YoY. Q1 achieved net profit of 1.26 billion yuan, -11.9% year-on-year and -49.0% month-on-month, corresponding to net profit margin of 3.4%, -0.5pct year-on-year, and -1.8pct month-on-month.
External customers continue to develop, overseas is expected to enter a profit period, the share of new energy sources is increasing, and new technology is progressing well. The company's external customers continued to develop, and the transformation of new energy sources accelerated. In 2023, the revenue of vehicle customers other than SAIC Motor Group, reached 53.82%, an increase of 4.25pct over the previous year. Among the new business life cycle orders obtained by the company in 2023, NEV-related models accounted for more than 65% of the supporting amount, and domestic independent brands accounted for more than 40% of the supporting amount. The company has closely followed the trend of smart electric technology and accelerated technological innovation and large-scale application of products in the core business. Good progress has been made in the fields of smart cockpit, intelligent lighting, intelligent driving assistance, electric drive systems, and thermal management. At the same time, the company continues to promote business restructuring, adhere to the “do something, do nothing” strategy, and take the opportunity to withdraw from non-core businesses. In 2023, the company completed the 45% share sale of Shanghai Aixia Machinery Co., Ltd., and withdrew from door hinges and other businesses to further optimize resource allocation and achieve load reduction and efficiency.
Investment advice: Continued promotion of new products and new customers to support the steady growth of the company's performance. Facing the explosion of downstream new energy vehicles and the high-end development of its own brands, the company is seizing the opportunity of industry transformation to increase the support ratio for external customers. New businesses are progressing steadily, and new growth points are being tapped. The company's revenue target for 2024 is 170.6 billion yuan. The year-on-year growth rate is expected to reach 1.2%, the planned gross margin is over 13.0%, and the overall growth continues to be steady. The company's dividend ratio in 2023 was 32.78%, corresponding to a dividend rate of 5.0% for the past 12 months. Net profit due to mother for 2024-2026 is estimated to be 76.1 billion yuan, 80.0 billion yuan, and 8.40 billion yuan, respectively, corresponding to valuations of 7.4X, 7.0X, and 6.7X, maintaining a “buy” rating.
Risk warning
1. The downstream sales volume of the industry falls short of expectations;
2. Profitability is under pressure due to rising raw materials.