Current overall perception: Being good at reflection and correction is the company's long-term high-quality gene. After 22 years of pressure, it transformed at the strategic, product, and channel levels, and gradually got out of trouble

In 2022, due to the impact of supply-side logistics and the epidemic in East China on the demand side, the annual monthly sales center was 89,000 vehicles (-17% year-on-year). At the end of the year, the company quickly corrected: strategic restructuring, WEY+ tanks and Eulla+ Sharon merged and returned to “ONE GWM”; the product level focused on niche segmentation and returned to major single products on the main channel (new energy SUVs); the channel level of energy became independent networks and built a distribution+direct management model. We believe that good reflection and correction are the company's long-term high-quality genes. As a result, the company's sales volume and profit have all reached an inflection point since 23Q2.

Current important marginal changes ①: Organizational structure 3.0 deepens changes, the central office places more emphasis on “globalization” + “internet thinking”, and the front desk emphasizes “user co-creation”

The company proposed a 3.0 organizational structure change in 2020, which is to form a “strong back office+large middle office+small front desk” system. Currently, the company continues to improve the 3.0 version organizational structure in line with business practices: “Globalization” and “Internet PR” platforms have been added at the central level, and “user co-creation” is emphasized at the front desk level, improving the ability to control market demand through various measures, and launching new products that meet consumer needs.

Current important marginal changes ②: Exports contribute to sales volume & profit elasticity. Russia is the focus, and local market space still has potential

The company's overseas sales revenue accounted for 30.7% in 2023, and the export business continued to contribute to the increase in sales volume and profit:

In terms of sales volume, as of May 2024, the company's overseas sales had exceeded 30,000 vehicles for 9 consecutive months; in terms of gross profit, the company's overseas gross profit accounted for 42.6% in 2023, and the overseas gross profit margin was 26.0% (domestic 15.5%) in the same year.

About 50% of the company's exported models are sold to Russia. Considering that the local market still has potential (from 940,000 repairs in 23 years to a reserve of about 1.5 million in the past year), the Russian business is expected to continue to bring sales volume and profit elasticity.

Profit forecast: 24-26 revenue was 1955.9/2395.3/3000.0 billion yuan, respectively; net profit to mother was 111.7/135.2/16.29 billion yuan, respectively; net profit to mother was 111.7/135.2/16.29 billion yuan, respectively, +59.1%/+21.0%/+20.5%; PE corresponding to the current market value is 18.9x/15.6x/12.9x, respectively, covered for the first time, giving a “buy” rating.

Risk warning: New car launch sales fall short of expectations, channel construction progress falls short of expectations, the risk of profits falling short of expectations due to the accelerated deterioration of the fuel vehicle pattern, the risk of historical rules failing, and the risk of untimely information updates.