Incident: Great Wall Motor released its May 2024 production and sales report, achieving sales volume of 910,000 units, -9.5% YoY, and -3.5% month-on-month; total sales volume for January-May 2024 was 462,000 units, +11.5% YoY.

Tank sales nearly doubled year-on-year, and pre-sale orders for the Great Wall artillery were impressive. Tank sales in May reached 20,000 units, a year-on-year increase of 94.9%, and a slight decrease of 0.7%; Haval brand sales volume was 47,000 units, -15.3% year-on-year, flat month-on-month. The new-generation Haval H6 upgraded the four dimensions of power, intelligence, design, and comfort, which is worth looking forward to; 15,000 pickup trucks sold, -18.8%, and -16.4% month-on-month. The decline was mainly due to the impact of the high base in 2023 and the product sales cycle. Pre-sale orders for the 2.4T Great Wall gun will provide a new sales contribution; the Euler brand sales volume of 6005 units, same Compared to -43.4%, the month-on-month recovery continued, with an increase of 28.1%; Weipai sold 2,862 vehicles, -50.4% year-on-year, and -35.8% month-on-month.

High-end and intelligent resonance may improve the company's product structure and profit level. (1) High-end:

From January to May 2024, the company sold 11,000 vehicles of 200,000 yuan or more, +108.7% compared with the same period last year. The high-end effect gradually became apparent. Meanwhile, the 700 Hi4-T tank is equipped with a self-developed 3.0T V6 engine+9HAT transmission, which is expected to lead the luxury off-road market. (2) Intelligence: The company accelerates intelligent transformation. The intelligent driving system EpilCoffeot Ultra achieves full-scene NOA without high-precision maps, and the Coffee OS 3 system uses AI+ models to take the lead in empowering Wei brand new energy vehicles. On the product side, all Wei brand coffee lines were upgraded OTA, the new Mocha Hi4 has comfortable positioning and smart travel, and the Blue Mountain Smart Driving Edition was unveiled at the Beijing Auto Show.

Actively explore overseas markets and actively seek changes in the organizational model. In May, the company's overseas sales volume reached 34,000 vehicles, +37.2% year over year, and -4.6% month on month. Overseas sales accounted for +12.8 pcts year on year to 37.7%, and the Russian market contributed mainly to the basic market. At the same time, Ola Good Cat went offline at its Rayong factory in Thailand, and the company achieved mass production of the first pure electric model overseas. The Great Wall Mountain Sea Pickup was successfully launched in Australia and pre-sold in Thailand.

Under the new situation of Chinese automobiles going overseas, the company has determined the “ONE GWM” brand strategy+high-quality overseas goal, and carried out overseas organizational changes to directly connect the business with the market and users, and create a flatter and faster organizational structure for decision-making. Furthermore, the company plans to sell 500,000 vehicles overseas in 2024 and break 1 million in 2030. Overseas markets will continue to contribute to new growth poles and deserve continued attention.

Profit forecast: The company is expected to achieve revenue of 2252.19, 2624.36, and 28.716 billion yuan in 2024-2026, and achieve net profit of 101.93, 127.70, and 14.958 billion yuan in 2024-2026. The corresponding PE is 21.35, 17.04, and 14.55 times, respectively, giving it a “recommended” rating.

Risk warning: NEV penetration rate growth falls short of expectations; sales of new models fall short of expectations; increased competition in the industry, etc.