Core views:

The company's net profit for Q2 in '24 was 3.85 billion yuan, and the performance was impressive. According to the company's interim report, in the second quarter of '24, the company achieved revenue of 48.57 billion yuan, +18.7% year-on-year, net profit to mother of 3.85 billion yuan, compared to 1.19 billion yuan in the same period last year; net profit of 3.63 billion yuan after deduction, compared to 0.97 billion yuan for the same period last year. The company's net profit performance after deduction from mother was impressive, mainly due to the increase in export sales volume and the optimization of the domestic market product structure.

The company's gross margin increased sequentially in Q2 in '24, and internal management efficiency continued to improve. The company's gross profit margin and net profit margin for Q2 in '24 were 21.4% and 7.9%, respectively, +3.9/+5.0pct year-on-year, and +1.3/+0.4pct month-on-month, respectively. The company's expense ratio for the Q2 period in '24 was 10.4%, -0.7pct year-on-year, and -0.7pct month-on-month. Specifically, the company's Q2 sales/management/R&D/finance expense ratios were 4.3/2.1/4.6/ -0.5%, respectively, -0.1/-0.4/-0.2/+0.1pct year-on-year, and +0.3/-0.0/ -0.7pct, respectively. The company's internal management efficiency continued to improve.

The company continued to optimize its product structure in Q2 in '24, and the share of export sales continued to increase. According to the China Automobile Association, 24Q2's vehicle sales volume was 0.284 million vehicles, -4.9%/+3.4% year-on-month; among them, the Haval/Tank/Wei Brand/Pickup/Euler brands sold 14.2/6.7/0.01/0.048/0.017 million vehicles, respectively, -15.0/+95.9/-30.4/-10.0/ -43.4% year-on-year, respectively. Tank brands and pickup truck brands accounted for 23.5%/17.0% of sales respectively, up 5.6/1.2pct from month to month, and the company's product structure continued to be optimized. According to data from the China Automobile Association, the company's overall export sales volume in Q2 was 0.109 million vehicles, and exports accounted for 38.2% of total sales, +14.2/+4.5 pct, respectively.

Profit forecast and investment advice: The company has typical characteristics and comparative advantages. Facing industry changes, it is expected to welcome a “new” cycle of upward development suitable for itself. The company's 24-26 EPS is expected to be 1.28/1.39/1.56 yuan/share, maintaining the judgment that the reasonable value of the company's A shares is 32.03 yuan/share, corresponding to the 24-year PE of 25 times, maintaining a “buy” rating; considering AH premium factors, the corresponding reasonable value of Hong Kong stocks is HK$17.36 per share, maintaining a “buy” rating.

Risk warning: Sales fall short of expectations; strategic transformation falls short of expectations; consumer demand changes rapidly.