Core views
In 2023, the company's revenue and net profit to mother were 56.097 billion yuan and 909 million yuan respectively, up 20.78% and 1262.27% year-on-year respectively. The company's annual performance increased, mainly benefiting from sales growth and structural optimization, and exports became the main source of profit. The company will strategically aim to maintain the first position in commercial vehicles, focus on the two core indicators of market share and profit margin, and the two strategic indicators of new energy and exports, enhance the dominant position in the commercial vehicle business, speed up the adjustment of its own business structure, and be optimistic about the increase in the company's market share and gradual improvement in profitability.
occurrences
The company released its 2023 annual report and 2024 quarterly report. For the full year of 2023, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 56.097 billion yuan, 909 million yuan, and 451 million yuan respectively, up 20.78%, 1262.27%, and 247.14% year-on-year respectively. In the first quarter of 2024, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 12.870 million yuan, 256 million yuan, and 207 million yuan respectively, up -14.05%, -13.96%, and 19.04% year-on-year respectively.
Brief review
Sales growth+structural optimization drove 23 years of high performance, and exports became the main source of profit.
In 2023, the company's revenue, net profit attributable to mother, and net profit after deducting non-net profit were 56.097 billion yuan, 909 million yuan, and 451 million yuan respectively, +20.78%, +1262.27%, and +247.14%, respectively.
On the revenue side, revenue grew steadily throughout '23, mainly driven by the two major businesses of vehicles and engines. The vehicle business directly benefited from the recovery of the commercial vehicle industry and the recovery of the company's sales. Among them, light passenger, light trucks (including microtrucks), and vehicle exports outperformed the industry. According to data from the China Automobile Association, in 2023, 4,030,900 commercial vehicles were sold nationwide, +22.13% year on year, and 769,700 units were exported, +32.24%; of these, light buses, light trucks (including microcards), medium trucks, and heavy trucks were 399,900, 38,200, 53,600, 2,521,000, 1071,000, and 911,000 vehicles, respectively, +25.13%, +3.79%, +4.03%, +18.64%, +11.96%, +, + 35.59%
The company sold 631,000 complete vehicles throughout the year, +37.14% year over year, and exported 137,700 vehicles, +49.10%; of these, the annual sales of light buses, medium trucks, and heavy trucks were 53,200, 0.15 million, 0.31 million, 452,900, 27,900, and 88,900 vehicles, respectively, +42.12%, +9.03%, -27.13%, +45.38%, -18.26%, and +31.49%, respectively. Sales of Fukang and Foton engines in the two major segments of the engine business have achieved steady growth. In 2023, the company sold a total of 287,600 engines, +29.79% over the same period; of these, Foton Cummins and Foton engines sold 197,400 units and 90,200 units respectively, +22.65% and +48.73% year-on-year respectively. On the profit side, the company's net profit to mother increased sharply year on year, mainly affected by the following positive factors: 1) High increase in vehicle sales combined with optimization of the sales structure led to a year-on-year increase in profit. In terms of sales volume, the company sold 631,000 vehicles a year in '23, +37.14% over the same period. The commercial vehicle market share increased by 1.7 pct to 15.6%, ranking first in the industry. In terms of structure, exports reached a record high and profits increased dramatically in '23, making it the main source of profit for the company's vehicle business; the annual sales volume of the Southern Market was +53.9% year-on-year, and the market share increased by 4.1 pct to 13.9%. 2) Profits of some joint ventures increased. Among them, Foton Cummins and ZF Foton contributed more (net profit in '23 was 722 million yuan and 558 million yuan respectively, +23.84% and +218.86% year-on-year respectively). 3) The company continued to promote cost reduction and efficiency. The cost rate for 23 years was 10.14%, -0.15 pct year on year. 4) The company insists on saturated investment in R&D. New products such as Auman Xinghui Edition, light truck facelift, Mars Pickup, Xiang Ling Q, and Tuano V are being launched centrally, and the digital transformation and marketing ecosystem evolves at an accelerated pace. 5) In 2023, the company successively transferred the equity proceeds of Zhiyue Engine and disposed of some machinery and equipment at the Miyun factory, increasing the total profit by about 244 million yuan.
The 24Q1 deduction was not +19.04% year-on-year, showing the results of cost reduction across the entire value chain. On a quarterly basis, 23Q4's revenue, net profit to mother, and net profit after deducting non-net profit were 13.155 billion yuan, 121 million yuan, and -01 billion yuan, respectively, +20.09%, +168.72%, and +99.60% year-on-year, respectively, -6.68%, -34.01%, and -102.94%, respectively.
24Q1 revenue, net profit attributable to mother, and net profit after deducting non-net profit were 12.870 million yuan, 256 million yuan, and 207 million yuan, respectively, -14.05%, -13.96%, and +19.04% year-on-year, respectively, -2.17%, +112.12%, and +17306.15%. On the revenue side, 23Q4 revenue grew steadily year on year, benefiting from the popularity of the company's light truck products during the quarter, driving vehicle sales to a record high during the same period; the slight month-on-month decline may be due to changes in the sales structure (increase in the share of light trucks) disrupted the vehicle business ASP. The year-on-month decline in 24Q1 revenue was mainly due to a decline in vehicle sales (-3.25% YoY, -14.34% YoY). Among them, the month-on-month decline was mainly due to the high sales base in 23Q4. On the profit side, 23Q4 profit increased year-on-year, directly benefiting from a large increase in sales volume and bicycle profit (+80.95% and +137.92% year-on-year respectively); the month-on-month decline in profit may also be affected by fluctuations in the sales structure in addition to revenue side factors (the gross margin of light trucks is lower than that of the company's other products, and its sales volume disrupts the overall gross margin). The reason for the year-on-year increase in 24Q1 deducted non-net profit and the month-on-month positive change was due to the company's cost reduction and efficiency results, and the gross profit margin and sales expense ratio continued to improve; the year-on-year decrease in Q1 net profit to mother was mainly due to a decrease in non-recurring profit and loss compared to 23Q1 (the total profit of the company's transfer of shares in Beijing Zhiyue Engine in March 2023 increased total profit by about 94 million yuan).
Profitability has been rising steadily, and cost control has remained steady. In 2023, the company's gross profit margin and net profit margin were 11.38% and 1.53% respectively, +0.002pct and +1.44pct, respectively. The slight increase in gross margin was mainly due to the increase in vehicle sales volume and optimization of the sales structure. On the one hand, the gross margin of the automobile-related business was +0.19pct year-on-year, and the gross margin of segmented products including medium and heavy trucks, stamping parts, and engines also increased (+7.56pct, +5.78pct, +2.88pct, respectively). On the other hand, the increase in revenue share disrupted the overall gross profit margin due to lower gross margins of the automobile industry business compared to other businesses of the company. The increase in net interest rates, as described above, mainly benefits from the positive effects of export-driven profit structure optimization, improved performance of some joint ventures, and results in cost reduction and efficiency. Expense control remained steady. The company period/sales/management/R&D/finance expense ratios were 10.14%/3.81%/2.74%/3.71%/-0.11% respectively in 2023, -0.15pct/-0.04pct/-0.46pct/+0.28pct/+0.07pct, respectively. On a quarterly basis, as short-term effects such as disruptions in the sales structure abated, 24Q1 gross profit margin and net margin rebounded smoothly from month to month. In addition, they also benefited from positive effects such as cost reduction and efficiency, and steady fee control. Specifically, the gross profit margin and net margin of the 23Q4 company were 9.31% and 0.79%, respectively, -1.36pct and +2.39pct year-on-year, respectively, and -3.33pct and -0.35pct, respectively. The 24Q1 company's gross profit margin and net profit margin were 11.62% and 1.86% respectively, +0.57pct and -0.13pct, respectively, and +2.31pct and +1.07pct month-on-month respectively.
The 23-year business plan has been exceeded, and the 700,000 sales target shows the company's confidence. In 2023, the company actually sold 631,000 vehicles, with revenue of 56.1 billion yuan, which is equivalent to 114.73% and 109.14% of the current year's business plan, respectively. In 2024, the company proposed an annual target of “ensuring sales volume of 700,000 vehicles and revenue of 70 billion yuan”, demonstrating its confidence in business. The company's strategic goal is to maintain the first position in commercial vehicles, focusing on the two core indicators of “market share” and “profit margin” and the two strategic indicators of “new energy” and “export”, and at the same time speeding up business restructuring, focusing on traditional advantageous markets such as light trucks, small trucks, and high-value-added businesses such as medium and heavy trucks, and guaranteeing a certain level of profit under the premise of leading scale. By business: (1) Heavy trucks:
In the future, the company will focus on stabilizing the tractor market base, expanding its leading edge in the high-end high-horsepower and AMT markets, and continuing to strengthen the NG market. (2) China Automobile: Subsequent companies will seize AMT and new energy market share based on the “Auman+Air Europe” dual brand advantage, restore the dominant cold chain market position, and focus on breaking through the green communication and express delivery markets. (3) Light trucks (including microtrucks): The company plans to gradually improve the construction of a new energy ecosystem, including planning to develop next-generation pure electric exclusive platform products for urban logistics vehicles, launch self-developed hybrid power, advance layout in hydrogen fuel and other technologies, and build star charging stations for Foton Motor. (4) Large and medium customers: The company will focus on the “domestic+overseas” and “vehicle+chassis” business strategies, promote modular platform integration, focus on value customers, focus on key regions, and follow up on comprehensive electrification policies. (5) Light passenger: The company will adhere to the “equal emphasis on oil and electricity” strategy, launch new Big V products based on scenario requirements in 24Q1, expand Genie 6 products, and expand the size of core regions such as the Pearl River Delta and Yangtze River Delta. (6) Exports: With the overall goal of “commercial vehicle export first”, the company will comprehensively promote the localization of manufacturing, the localization of talents, and the localization of operations; strive to break through high-end markets such as Europe, Japan, Australia and New Zealand, and build high-end commercial vehicle brands, etc.
Investment advice
The company's strategic goal is to maintain the first position in commercial vehicles. Focusing on the two core indicators of “market share” and “profit margin” and the two strategic indicators of “new energy” and “export,” the company is accelerating its own business restructuring while consolidating and enhancing its dominant position in the commercial vehicle business, and is optimistic about the increase in the company's market share and gradual improvement in profitability. We expect the company's net profit to be 1.34 billion yuan and 1.69 billion yuan respectively in 2024-2025, corresponding to current PE values of 16X and 12X, giving it a “buy” rating.
Risk analysis
1. The industry boom falls short of expectations. Domestic economic recovery rebounded steadily in 2024, but the exact pace remains to be seen. Demand in the automotive industry may fluctuate accordingly; it will still take time to fully implement the trade-in policy for consumer goods such as automobiles, which will affect the recovery process of industry demand.
2. Export sales fell short of expectations. Exports are affected by various factors such as the international situation, national policies, and exchange rates, and there is a risk of fluctuations in overseas sales growth.
3. The competitive pattern of the industry has deteriorated. Domestic competitors are speeding up product launch. With changes in supply factors such as technological progress and new production capacity investment, future industry competition may intensify, and the company's market share and profitability may fluctuate.
4. The company's channels and sales volume of new models fell short of expectations. The company's channel construction and dealer optimization progress may fall short of expectations. There is a risk that sales volume of new models will fall short of expectations due to market demand.