Core views:

The company's net profit after deducting non-return to mother in '23/24Q1 was +247.1% (after retroactive adjustment)/+19.0%, respectively. The company released its 23rd annual report and its quarterly report for '24, achieving revenue of 56.10 billion yuan, +20.8% year on year; 24Q1 achieved revenue of 12.87 billion yuan, -14.1% year on year and -2.2% month on month. The company achieved net profit before and after deduction of 91/450 million yuan in 23 years, +1262.3%/+247.1% year-on-year after retroactive adjustment; 24Q1 achieved net profit of 26/210 million yuan before and after deduction, respectively, -14.0%/+19.0% year-on-year, and +112.1%/+17306.2% month-on-month.

The company's labor cost rate for 23 years. The cost rates for the period were -0.9 pct and -0.2 pct, respectively. The labor cost for 23 years was 3.89 billion yuan, +6.6% year on year; the labor cost rate was 6.9%, -0.9pct year on year.

The labor cost for 24Q1 was 830 million yuan, +7.7% year over month, and -45.9% month on month; the labor cost rate was 6.5%, +1.3 pct year over year, and -5.2 pct month on month. The cost rate for the 23-year period was 10.1%, -0.2pct year over year. The cost rate for the 24Q1 period was 10.6%, +1.1 pct year over year and -0.1 pct month over month.

The operating plan was exceeded in '23, the planned sales volume in '24 was +10.9% year-on-year, and revenue increased +24.8% year-on-year. According to the annual report, sales of 631,000 vehicles were actually completed in 2023, 114.7% of the operating plan was completed, and revenue was 109.1% of the completed business plan. The company formulated a business plan for 2024: ensure sales volume of 700,000 vehicles (including Foton Daimler), +10.9% year over year; operating revenue of 70 billion yuan, +24.8% year over year.

Profit forecast and investment advice: The long-term upward trend in the truck industry will not change. The country is recovering moderately this year, and long-term cumulative flexibility is expected to be greater. The company adheres to the strategy of “focusing on commercial vehicles” and “lean operation”, aligning the interests of management with small and medium shareholders through employee shareholding plans. It has been focusing on improving ROE over the past few years, and is clearly reflected in financial reports. There is also a clear revenue side alpha in the future, which is expected to become a leading company in the automobile industry in this round of state-owned enterprise reform. EPS is expected to be 0.17/0.25/0.37 yuan in 24-26. Considering historical valuations and comparable company valuations, the 24-year PE is 22 times, a reasonable value of 3.73 yuan/share, maintaining a “buy” rating.

Risk warning: Industry sentiment is declining; raw material prices are rising; industry competition is intensifying, etc.