Incident: The company released its 2024 semi-annual report: 2024H1's total revenue was 284.69 billion yuan, -12.8%; net profit to mother was 6.63 billion yuan, -6.5% year over year; net profit after deducting non-return to mother was 1.02 billion yuan, -82.0% year over year. 2024Q2's total revenue was 138.1 billion yuan, -21.4% year over month, -0.6% month on month; net profit to mother was 3.91 billion yuan, -9.0% year on year, +44.2% month on month; net profit without return to mother - 1.1 billion yuan, -131.4% year on year, -151.9% month on month.

Revenue was stable month-on-month, and ASP declined slightly. On the revenue side, 2024Q2's total revenue was 138.1 billion yuan, -21.4% YoY, -0.6%; the 2024Q2 listed company group sold 0.993 million vehicles, -15.9% YoY, +19.0% month-on-month, and the revenue growth rate was lower than the sales growth rate, mainly affected by increased terminal discounts and declining bicycle revenue; ASP: 2024Q2 bike ASP was 0.095 million yuan, -6.4% YoY and -16.5% month-on-month. On the gross profit side, the 2024Q2 gross profit margin was 8.2%, -1.3 pct year over month, and -0.6 pct month over month. The main reason for the decline in gross margin compared to the previous month was intense price competition due to increased competition. On the cost side, 2024Q2 sales/management/R&D/finance cost rates were 4.4%/3.3%/2.7%/0.2%, respectively, +0.6/-0.1/-0.5pct compared to the previous month.

SAIC-GM's overall profit performance is under pressure. Investment income: 2024Q2's net investment income was 5.73 billion yuan, of which the investment income for associates/joint ventures was 0.004 billion yuan, -2.29/-2.2 billion yuan year-over-year, respectively, which was mainly affected by GM losses. 2024H1 Volkswagen Bike had a net profit of 0.0017 million yuan, +0.0006/-0.002 million yuan year-over-year, respectively; SAIC GM lost 0.01 million yuan, or -0.0113/-0.0137 million yuan year-over-year, respectively. Furthermore, MG India brought in local Indian investors and obtained 5.13 billion yuan of non-recurrent investment income through equity transfers, capital increases and stock expansion. On the profit side, 2024Q2's net profit was 3.91 billion yuan, year-on-year -9.0pct, +44.2pct month-on-month; net profit without return to mother was 1.1 billion yuan, -131.4% year-on-year, and -151.9% month-on-month. The decline after deducting non-profit was mainly affected by the decline in the performance of SAIC-GM and SAIC-GM Sales companies. Other non-current profit and loss came from non-current asset disposal gains and losses, government subsidies, etc.

Optimize the production and marketing structure and accelerate the transformation of new energy sources. With the 2024H1, SAIC Motor Group made efforts to activate consumer demand and focus on terminal retail. In the first half of the year, it was nearly 0.3 million vehicles higher than wholesale sales, and channel inventory pressure was relieved. At the same time, it successively launched a variety of major new energy products such as the Zhiji L6, Roewe D5X, and Buick GL8. SAIC's NEV terminal deliveries reached 0.524 million vehicles in January-June, an increase of 29.9% over the previous year. Recently, Wuling Starlight S (pure electric+plug-in hybrid) was officially launched. The price of the plug-in version is 0.0998-0.1198 million yuan, and the price of the pure electric version is 0.1198-0.1298 million yuan; on August 30, 2024, Zhiji Auto officially unveiled the first SUV model equipped with both a “smart dragon” digital chassis and a “smart four-wheel steering system” - the “new Zhiji LS6”, with a pre-sale equity price of 0.2299 million-0.2999 million yuan. I'm optimistic about the company's future The transformation of new energy sources is accelerating.

Investment suggestions: The company has solid underlying technology, excellent platforming capabilities, and adjusted profit forecasts. It is estimated that 2024-2026 revenue is 706.7/738.5/779.9 billion yuan, net profit to mother of 14.13/15.3/17.22 billion yuan, corresponding to EPS 1.22/1.32/1.49 yuan, corresponding to the closing price of 12.55 yuan/share on August 29, 2024, PE 10/9/8, respectively Double, maintaining a “recommended” rating.

Risk warning: Joint venture brand downside risk; passenger cars, new energy transformation, and overseas expansion fall short of expectations.