Interpretation of the core competencies of automakers: acceleration of intelligence, strengthening of demand control, marginal reduction of electrification; rapid and continuous increase in share for 21 years after autonomous and joint ventures are fully incorporated. After the pattern changes, the “product cycle” will gradually fail. Among the six forces of the vehicle, demand control and intelligent capabilities are differentiated. In terms of intelligence, with the launch of affordable smart driving+the intensive launch of urban L3 models, the difference in consumer experience is increasing and accelerating.
Electrification review: Strong product rhythm & scale effects build competitive barriers; Tesla and BYD are key catalysts in the electrification market. The core of the two rounds of electrification is: ① The first year of electrification: the trend of high-end products, mainly benefiting from technology+scale cost reduction to give products strong comprehensive performance; ② inflection point year of electrification: the increase in affordable products, mainly benefiting from technology cost reduction and entering the main price band. Electrification leaders rely on technology+scale cost reduction to quickly expand the product lineage. After launch, they continued to consolidate their scale advantage, ushered in a rapid increase in volume+share+profit, and built cost barriers to form a moat.
Intelligent inflection point: Smart driving & affordable smart driving will actually increase share and differentiate more significantly; large model technology is mature and policies promote intelligent inflection points. Affordable smart driving will be the core of scale effect cost reduction & data iteration algorithms to differentiate, and the focus of the short to medium term market focus is on high-end city NOA. It is expected that in '24, smart driving & affordable smart driving will actually increase their share, and the resulting pattern differentiation will be even more significant.
Changan's intelligent strategy: Huawei supports smart driving and self-developed SDA-S; launched the Beidou Tianshu Plan in '18 to take the lead in intelligent layout: 1) Self-developed SDA-S architecture: Self-developed SDA-S architecture: Self-developed the first SDA-S architecture in China to achieve regional control+central computing, leading in capabilities. 2) Support from Huawei Smart Driving: Cooperate with Huawei to establish an intelligent joint venture, and the cooperation gradually progresses from Avita to Deep Blue and Qiyuan.
The company's smart driving competitiveness: resource inclination+range adaptation - product rhythm, smart driving alliance - scale effect; in the early days of the smart driving industry, car company competition will still revolve around product rhythm+scale effect: 1) Product rhythm: Smart driving is non-standard parts and large shares are expected to favor Huawei's R&D resources, high growth positioning and smart driving adaptability, and strong product rhythm advantage; 2) Scale effect: Smart driving competition is gradually factionalized. The scale effect of the Huawei faction reduces hardware costs and data iterative algorithms to reduce software costs even more significantly.
Investment rating: We expect the company's 24-26 revenue to be 2179/2770/299.2 billion yuan, a year-on-year growth rate of +44/+27/ +8%; net profit to mother will be 92/114/131 billion yuan, a year-on-year growth rate of -19/+24/ +15%, corresponding to PE16.1/13.0/11.3X, maintaining a “buy” rating.
Risk warning: Industry growth is slowing down due to the slowdown in the penetration rate of new energy sources, increased industry competition due to increased supply of new models, risk that market acceptance of new models will fall short of expectations, and public data used in research reports may be delayed or not updated in a timely manner.