Most of Wuling Motor's customers plan to produce a large increase in production this year compared to last year. From this, it is estimated that their FY24E annual sales will record a considerable increase as a result. The acquisition of new customers and the increase in sales of new energy products will also boost its sales growth momentum.

The reduction in both NEV prices and down payment for car purchases will lower the vehicle purchase threshold, and related policies to encourage vehicle exchanges will boost NEV sales and directly drive NEV production, thereby increasing NEV parts orders. The sales growth prospects of Wuling Motor's NEV division will be very positive.

Wuling Motors has a high-quality new energy customer base, including NEV giants or emerging NEV companies such as BYD, Chery, Geely, Great Wall, Foton, and Nacha. Meanwhile, its main customer, SAIC-GM-Wuling, has more than 10 new energy models, targeting the sinking market.

Wuling Motor sells commercial and small special vehicles worldwide, and has implemented new energy and intelligence.

Wuling Motors set up an innovation center in Hong Kong and signed memorandums of understanding and cooperation with the Hong Kong Polytechnic University and the Chinese University of Hong Kong, respectively, to help it establish brand awareness in Hong Kong and Macau to promote its new energy commercial vehicle products and Wuling New Energy Vehicle products, obtain new technology patents and carry out the transformation and implementation of scientific research results.

Wuling New Energy, which holds about 20.0% of Wuling Automobile's shares, will not only be its platform for entering the NEV vehicle industry, but will also be an important customer.

As the second-largest shareholder of Wuling New Energy and the only shareholder with a listed platform, Wuling Auto has the conditions to become Wuling New Energy's fund-raising platform.

If Wuling New Energy is listed independently, its holdings in Wuling New Energy are expected to rise sharply, thereby boosting its own valuation.

It is predicted that during the FY23A-FY26F period, the 3-year compound growth rate of Wuling Motor's total revenue will reach 6.0%. Based on estimates that Wuling's operating profit margin will increase from 0.7% of FY23A to 2.3% of FY26F, it is estimated that Wuling Motor's profit before tax and profit attributable to shareholders will reach 54.3% and 83.9%, respectively.

Excluding the results of joint ventures, the profit attributable to Wuling Motor's FY23A core shareholders for the year was RMB 92.28 million, which is higher than the profit attributable to current shareholders of 293.1%. Profit attributable to core shareholders of Wuling FY24E, FY25F and FY26F is estimated to be RMB 112 million, RMB 126 million and RMB 162 million respectively, which is 119.5%, 45.4% and 11.2% higher than the profit attributable to FY24E, FY25F and FY26F shareholders, respectively

Wuling Motor's FY25F price/earnings ratio is only 0.16 times the projected 3-year compound profit growth rate. Based on the FY25F price-earnings ratio/profit growth ratio of 0.3 times as the valuation standard, we set a target price of 0.81 yuan for Wuling Motors. Since the target price is likely to increase by more than double the current price, we recommend buying Wuling Motors.

Wuling Auto's predicted FY23A-FY26F compound growth rate for rating-grade FY23A-FY26F is 83.9%. At HK$0.37 per share, its FY25F forecast price-earnings ratio is 13.1 times, and its FY25F price-earnings ratio/projected 3-year compound profit growth rate ratio (PEG) is only 0.16 times. The weighted average FY25F of major automobile and new energy vehicle manufacturers and parts manufacturers listed on the Hong Kong Stock Exchange predicted a price-earnings ratio of 12.8 times, but the weighted average price-earnings ratio/projected 3-year compound profit growth rate ratio was 0.65 times. Based on the FY25F price-earnings ratio/profit growth ratio of 0.3 times as the valuation benchmark, we set Wuling's target price at 0.81 yuan. Since the target price is likely to increase by more than 1 times the current price, we recommend buying Wuling Motors.