Investment advice
We are optimistic about the multi-dimensional empowerment of JAC under Huawei's smart selection model, as well as the subsequent progress of external cooperation between the company and Volkswagen Group, and the sustainability of overseas exports. Considering the relatively scarcity of high-quality supply in the luxury electric vehicle market and the successful experience of the Huawei Smart Choice series of models, we expect the company to become a high-end NEV manufacturer with the Smart Choice series of cooperative models with Huawei and achieve brand improvement.
rationales
“Business and Multiplication” builds the foundation of business and actively explores external cooperation. As an established automaker, JAC's products cover almost all commercial vehicle categories. In 2023, sales of all types of vehicles and chassis increased by 18.4% to 592,500 vehicles. In terms of commercial vehicles, the company maintained a steady market share, ranking fourth in the domestic market share for young trucks and the top ten for heavy trucks in the country; in terms of passenger cars, the company actively embraced electrification and sought external cooperation, joined hands with NIO Auto and Volkswagen Group to accumulate electrification and high-end production experience, and launched its own brand “Yttriwei” to strive for breakthroughs in the field of new energy passenger vehicles. Recently, the first model of Volkswagen Anhui, a joint venture owned by JAC, was unveiled at the Beijing Auto Show1.
Adhering to a diversified overseas layout, commercial export performance was outstanding. In terms of sales volume, the company's export sales volume was +48.0% to 170,000 units in 2023. The annual overseas sales volume accounted for 28.6% of the company's total sales volume, and the annual overseas main business revenue accounted for 62.7% of the company's total main business revenue; 1-4M24 export sales increased 30.4% to 76,000 vehicles year over year. In terms of orders, the company has had a lot of overseas orders since 2022. In the commercial vehicle and passenger vehicle sectors, it has received many overseas orders from the United Arab Emirates, Mexico, Saudi Arabia and other countries and delivered them one after another.
Huawei enabled the brand to improve, and the first model was positioned as a luxury pure electric high-end MPV. In March 2024, according to an announcement from the Anhui Provincial Department of Ecology and Environment, the company built an X6 luxury new energy pure electric platform, and the first cooperative model with Huawei is positioned as a luxury pure electric medium to large MPV2. We expect that Huawei will enable JAC to achieve electrification and high-end transformation in terms of technology, ecology, brand, channels, and management. We believe that, based on the past successful experience of the Huawei Smart Choice (Hongmeng Zhixing) Questionnaire series, the cooperation between the two sides is worth looking forward to.
Profit forecasting and valuation
Benefiting from the market's favorable response to Hongmeng Zhixing's high-end models and the company's steady upward trend in overseas sales, we raised the company's 2024/2025 revenue forecast by 3.8%/24.0% to 51.802 billion yuan/69.48 billion yuan, keeping the profit unchanged in 2024, and increasing net profit to mother by 8.2% to 715 million yuan in 2025. The current stock price corresponds to the 2024/2025 2.6/2.5 net market ratio. Considering the current intensification of market competition and a correction in the valuation center, we maintain our outperforming industry rating and target price of 22.50 yuan, which corresponds to a net market ratio of 3.6/3.4 times in 2024/2025, and has 38.2% room to rise compared to the current stock price.
risks
The progress of cooperation fell short of expectations, export sales fell short of expectations, and industry competition intensified.