2Q24 results are in line with market expectations

The company announced 2024 interim results: 1H24 achieved revenue of 17.92 billion yuan, +16% year over year; net profit to mother was 0.895 billion yuan, +23% year over year; net profit after deducting non-return to mother was 0.811 billion yuan, +94% year over year.

Corresponding to 2Q24, revenue was 9.945 billion yuan, +26% year over month; net profit to mother was 0.413 billion yuan, -24% year over month, -14% month on month; net profit after deducting non-return to mother was 0.39 billion yuan, -4% year on year and -7% month on month. In line with market expectations.

Development trends

Pickup truck sales are growing rapidly, building a revenue growth engine. 1H24 achieved total vehicle sales of 159,677 vehicles, +9.1% year over year, with pickup truck sales +33.4% year over year to 36,579 units, ranking second in the industry in market share, contributing to the main sales increase. We believe that with the further release of sales of mid-range and high-end pickup trucks such as Jiangling Avenue and Ford Ranger, the company's sharp rise in volume and price is expected to be further realized. In terms of exports, the company's 1H24 export sales volume was 52,989 vehicles, an increase of 5.9% over the previous year. In May 2023, the company signed a vehicle export cooperation framework agreement with Ford. Looking ahead, we believe that the company can rely on Ford's mature global business layout and network advantages to expand the space for vehicles to go overseas.

Improved cost management has led to a steady increase in profits. On the profit side, the company 1H24 achieved net profit of 0.895 billion yuan, including asset disposal profit and loss of 0.011 billion yuan and asset impairment loss of 0.004 billion yuan. The company's 1H24 gross margin was -1.2ppt to 13.6% year over year, corresponding to 2Q24 gross margin -1.4ppt to 14.6% year over year. We believe that the short-term pressure on the company's profit was mainly due to the increase in raw material prices. On the cost side, the company's 2Q24 sales/management/ R&D/ finance expenses rates were 2.6%/2.5%/3%/-0.3%, respectively, -1.8pp/ -1.1pp/ -2pp/ +0.2ppt, year-on-year, and -1.9pp/ -0.1pp/ -1ppt/+0.4ppt, respectively. We believe that the company's lean management is continuously improved, and the improvement of cost management capabilities is expected to drive profit growth.

The transformation of electric intelligence is accelerating, and driverless freight vehicles are expected to create a new logistics ecosystem. In terms of new energy, the company insisted on full-scenario coverage, launched new energy products such as E-Luda, Dao EV, and E Quanshun, and launched the “Jiangling Lexing” new energy capacity brand to expand capacity and leasing business. In terms of autonomous driving, the company is targeting the freight sector in the same city. According to the company's announcement, in May 2024, JMC and Wenyuan's cooperation model Robovan were approved to carry out “pure unmanned tests” and “cargo tests” in Guangzhou, which is the first L4 class autonomous freight vehicle in an open road scenario in China. We believe that intelligently driving commercial vehicles will help create a new form of smart logistics, and the company is expected to gain a first-mover advantage with a forward-looking layout.

Profit forecasting and valuation

Keep the 2024/2025 earnings forecast unchanged. The current stock price corresponds to 2024/2025 8.9/7.6 times P/E. Maintaining an outperforming industry rating, but considering the downward trend in the sector's valuation center, we lowered our target price by 23.5% to 28.4 yuan, corresponding to 12.1/10.2 times P/E in 2024/2025, which has 34.9% upside compared to the current stock price.

risks

The new models fell short of expectations, and market competition intensified.