The gross margin/net margin continued to improve significantly from month to month in the second quarter. Great Wall Motor's net profit for 2Q24 was +224.4%/+19.3% month-on-month to 3.85 billion yuan (RMB, same below), after deducting non-net profit of 3.63 billion yuan, or +275.3%/+79.2% month-on-month. 2Q24 revenue was 48.57 billion yuan, +18.7%/+13.3% YoY.

Revenue and net profit are generally in line with previous performance reports. 2Q24 gross margin/net margin was 21%/7.9%, respectively, +4.0/+5.0 percentage points year over month, and +1.3/0.4 percentage points month-on-month, mainly due to rapid growth in overseas sales and the product structure in the local market supported by high tank sales growth. In terms of expenses, sales/management/R&D expenses were 4.3%/2.1%/4.6%, respectively, -0.1/-0.4/-0.2 percentage points year-on-year, and +0.3/+0.01 percentage points month-on-month. The overall cost rate remained stable during the period.

Relying on export+product structure improvement, performance improvement leads the industry. Great Wall Motor's 1H24 sold 0.55 million vehicles, +7.0% year over year, of which overseas sales volume was 0.2 million vehicles, +62.1% year over year, accounting for 36%, or +12.3 percentage points year on year; sales of new energy models were 0.13 million units, +45% year on year, accounting for 23%, or 6.1 percentage points year on year. 1H24's average bicycle sales price was 0.165 million yuan, +22% over the same period, and the gross profit of bicycles was 0.034 million yuan, +50.4% over the same period. The proportion of high-end models such as tanks continued to increase. The company relied on export+product structure improvement, leading the industry. 1H24 revenue was 91.4 billion yuan, +31% year over year; net profit to mother was 7.1 billion yuan, +420% year over year; net profit after deducting non-return to mother was 5.7 billion yuan, +654% year over year.

Take a different approach outside of the price war; keep buying. In addition to the price war in the domestic passenger car market, Great Wall continued to improve profits by increasing exports and tank brand sales. In August, the Blue Mountain Smart Driving Edition was launched, and the Coffee OS 3+ full-scene NOA was launched, which is expected to drive the Wei brand's sales to pick up. In the second half of the year, the new models of tanks such as the 700 Hi4-T, the new H6 and the new H9 are expected to further optimize the product portfolio. In terms of exports, Great Wall has completed capacity deployment in Russia, Thailand, and Brazil, and KD plants around the world continue to increase. The overseas market covers 170+ countries and regions, and 1,300+ sales channels, supporting the goal of overseas sales of one million vehicles per year by 2030. We maintain our purchase rating and target price of HK$16.3.