Key points of investment:
Why should we revisit some lower-level thinking in the later stages of the development of an industry where the grand story has been discussed over and over again? What questions are rekindling our desire to research? What are some of the judgments we are blind people who are blind?
Looking back on the strategy reports of the past 3 years, as well as some recent roadshow experiences, we have compiled a review report in the form of questions and answers, which we hope will cause new discussions for everyone.
All questions and answers will begin with BYD to discuss his short-, medium- and long-term competitiveness/barriers, as well as potential risks. It then explores some of the underlying logic and rules of the automotive industry. At the same time, we are looking at overseas opportunities and risks in particular against the competition with Toyota.
Core ideas and topics:
Demand showed fragmentation and degradation in 2021, and increased competition was an inevitable result. The manufacturing industry's first-mover advantage in some fields must be respected, but at the same time, the variance is gradually being smoothed out.
Competition has brought the industry into a vicious cycle of burning money and grabbing shares. Only by breaking the circle can we break this death spiral. Following the strategy, it is impossible to discover the Blue Ocean under the Red Sea mentality.
The number of users a brand can carry declines simultaneously with the brand's differentiation, and the sales carrying capacity of a single brand is limited. The ability to operate multiple brands is one of the essential qualities for the “king of the next era” that we have mentioned many times (the other is' management 'mentioned below). Compared to Volkswagen in the past, the company has superior hardware conditions, but it still needs to settle down.
It's not easy to go out to sea. Toyota has gathered all the time, good people in the world, and right now it seems that people overseas are not happy. When it comes to going overseas, it is impossible to anticipate a growth path in a blink of an eye, nor will it be a linear growth that can be achieved overnight. The market, policy, and macro risks need to be objectively assessed.
Going back to the “theory of fatalism” again, it is definitely not determined by the model cycle; we should understand the causes of the “fatalism theory” from a higher level. Whether there is sufficient Oriental wisdom to deal with the deviation between business inertia and the market environment that may occur at any time is an important detail factor for us to observe the company's ability to cross the cycle in the future.
Investment analysis opinion: The competitive landscape is intensifying, and we are optimistic that companies that can continue to increase their market share under rapid changes will most likely reach the end of this major transformation. Taking into account the company's performance in overseas markets, the increase in the company's share of high-end products, and the slow release of domestic raw material costs, the company's 2024-26 revenue forecast was raised from 8105/9307/10506 billion yuan to 8292/9689/109.41 billion yuan; the net profit forecast was raised from 336/415/50.6 billion yuan to 360/443/513. The corresponding PE is 20/16/14 times. Considering the continuous increase in the company's share and surpassing the profit level of peers, the shareholding rating is maintained.
Core hypothetical risks: uncertainty about overseas policies, macroeconomic fluctuations, rising raw material prices, worsening competition