Matters:

The company released its 2024 interim results report. 1H24 achieved total operating income of 91.4 billion yuan (+31% YoY), realized net profit of 7.1 billion yuan, and net profit of 5.7 billion yuan after deducting non-attributable net profit of 5.7 billion yuan (YoY +654%).

Ping An's point of view:

Sales of tanks and overseas increased rapidly, and the share of sales of high-value-added models increased. According to the company's production and sales report and financial reports, 1H24 tanks and overseas sales were 0.116 million/0.202 million units respectively, up 98.9%/62.6% year on year respectively. Sales of models over 0.2 million yuan reached 0.141 million units in the first half of the year, up 64.3% year on year, and the company's share of high added value continued to rise. The average price of a 1H24 bike reached 0.165 million yuan, an increase of 0.03 million yuan over the previous year.

Tanks and pickups have high barriers and strong profitability. Tank is a local benchmark brand for off-road racing tracks. It has a complete product matrix. According to the company's disclosure, the tank brand's cumulative sales volume exceeds 0.42 million units, making it a benchmark brand in China's hardcore off-road market. The tank brand has high user stickiness, and the user ecosystem has been successfully built. Furthermore, it has a stable position as a leader in the pickup truck business, which is also one of the company's cash cow businesses.

The ecological advantages of going overseas are remarkable, and the ability to withstand risks is stronger when the risk of vehicle trade increases. Great Wall Motor has full-process vehicle production bases in Russia, Thailand, and Brazil. In 2023, Great Wall Motor accelerated the overseas production layout, promoted the signing and commissioning of new projects at the KD plant in Pakistan, the KD plant in Ecuador, and the KD plant in Malaysia. In markets such as Uzbekistan, Great Wall Motor joined partners to actively promote localized production and embark on a new “vehicle manufacturing+supply chain system” to go overseas. The risks faced by vehicle trade going overseas in 2024 are increasing, and we believe that the company's ecological overseas strategy will be more resilient to risks in the future.

The Blue Mountain Smart Driving Edition was launched, using a single-chip Nvidia Orin-X to achieve unmapped city leadership, data-driven instead of rule algorithms, and gradually evolved end-to-end. Great Wall Motor has built an industry-leading supercomputing center in Kyushu, with a total computing power of 1.64EFLOPS, providing a solid computing power base for model training.

We expect that the solution installed in the Blue Mountain Smart Driving Edition will later be extended to other Great Wall Motor brands to achieve technical equality for advanced smart driving solutions.

Profit forecast and investment suggestions: In the context of the automobile industry's sales price and profit pressure in 2024, the company obtained strong resilience to risks with the three longboards of tanks, pickups, and ecological outbound. Combined with the company's latest financial reports, we adjusted the company's net profit forecast for 2024-2026 to 12.7 billion/13.7 billion/15.5 billion yuan (the original forecast value was 10.9 billion/12.3 billion/13.7 billion yuan). The company has strong profitability, and is a pickup truck and off-road brand with a high share+high barriers. It has stable and far-reaching ecological trips and maintains the company's “recommended” rating.

Risk warning: 1) Changes in the international trade environment may have an impact on the import and export business of automobile companies; 2) in the mainstream domestic household products sector, the company's energy transformation efforts still need to be improved; 3) Plug-in and pure electric transformation have led to high cost increases; 4) Competition in the off-road SUV sector has increased.