Incident: 2024H1 achieved operating income of 284.686 billion yuan, -12.82% year over year; realized net profit of 6.628 billion yuan, -6.45% year over year; realized net profit deducted from non-mother of 1.02 billion yuan, -82.00% year over year.

Among them, 2024Q2 achieved operating income of 141.614 billion yuan, or -21.60%; realized net profit attributable to mother of 3.914 billion yuan, or -9.03% year-on-year; realized net profit deducted from non-mother -1.1 billion yuan, or -131.38% YoY.

Market competition intensified, and gross margin declined year-on-year: 2024H1 achieved a gross profit margin of 8.53%, -1.14pct year over year. The main reason for the year-on-year decline in gross margin was increased market competition. In terms of cost ratio, 2024H1 achieved sales expense ratio of 4.01%, up 0.13pct year on year; achieved management cost ratio of 3.30%, -0.03pct year on year; achieved R&D cost ratio of 2.70%, +0.26pct year on year.

Strengthen technological empowerment and strengthen overseas markets: The company strengthens technological empowerment. In June 2024, Saike Travel and Youdao Zhitu obtained the first batch of autonomous driving road licenses in the country. The company became the only car company to obtain two licenses, and plans to achieve small-batch mass production application and commercial ecological operation of L3 level technology in the near future.

In August 2024, Zhiji City NOA successfully launched the “National Map”; the new Zhiji LS6 using VMC technology will debut at the Chengdu Auto Show; the Zhiji L6 equipped with a Lightyear solid-state battery will soon be officially delivered to users, with a range of more than 1,000 kilometers. In addition, SAIC Motor has also signed joint ventures with foreign partners to deepen technical cooperation and jointly develop various pure electric and hybrid products for the Chinese market. In terms of exports, the company strives to consolidate infrastructure markets such as Western Europe and South America, accelerate the expansion of emerging markets such as Eastern Europe, and continue to improve overseas service systems. The number of 2024H1 terminals delivered in overseas markets reached 0.548 million, +12.7% over the same period last year. At the same time, the MG3 HEV, the main product, is fully ahead of Japanese competitors in terms of technical indicators. It is already sold in Europe, and is expected to make a breakthrough in the A-class car head segment.

Investment advice: We expect the company to achieve net profit of 10.976/11.997/12.081 billion yuan in 2024-2026, corresponding PE of 12.43/11.38/11.30 times, respectively, to maintain an “increase in holdings” rating.

Risk warning: New product launch progress falls short of expectations; industry competition intensifies; smart driving technology implementation process falls short of expectations.