Description of the event

The company released its 2024 semi-annual report. The first half of 2024 achieved total operating income of 284.69 billion yuan, a year-on-year decrease of 12.8%; net profit to mother was 6.63 billion yuan, a year-on-year decrease of 6.5%; after deducting non-net profit of 1.02 billion yuan, a year-on-year decrease of 82.0%.

Incident comments

Wholesale sales increased month-on-month, while revenue declined month-on-month. The company sold 0.993 million vehicles in 2024Q2, down 15.9% year on year and up 19.0% month on month. In terms of passenger car caliber, the 2024Q2 Group licensed 0.565 million passenger cars, down 29.2% year on year, down 20.3% month on month, and 2024Q2 channel inventory increased by 0.045 million vehicles (wholesale - licensing - export). Facing a business environment where the industry is deeply internal and under pressure from overseas expansion, 2024Q2 achieved total revenue of 141.61 billion yuan, a year-on-year decrease of 21.6% and a month-on-month decline of 1.0%; achieved operating income of 138.1 billion yuan, a year-on-year decrease of 21.4% and a month-on-month decline of 0.6%.

Profit performance was steady in a competitive market environment, net profit to mother increased sharply month-on-month, and the sales structure continued to be optimized. The company's net profit for 2024Q2 was 3.91 billion yuan, down 9.0% year on year and 44.2% month on month. Industry price competition was intense in the second quarter. The gross profit margin of the company's 2024Q2 automobile business was 8.2%, down 1.3 pct year on year and 0.6 pct month on month; the period cost ratio was 10.4%, up 1.5 pct year on year and 0.2 pct month on month. Among them, sales/management/R&D expenses rates were +0.5pct/+0.3pct, respectively, +0.6pct/-0.1pct. 2024Q2 investment income was 5.73 billion yuan, up 79.5% year on year and 108.0% month on month. Among them, joint venture investment income was 0.004 billion yuan, a sharp decrease over the same period last year. Q2 The company's net interest rate was about 2.8%, up 0.4 pct year on year and 0.9 pct month on month. Corresponding to the sales performance of major joint ventures during the same period, SAIC Volkswagen sold 0.264 million vehicles, -4.7% YoY, +6.4% month-on-month, SAIC-GM 0.114 million vehicles, +2.3% YoY, and SAIC-GM-Wuling sold 0.346 million vehicles, up 5.6% year on year and +54.5% month-on-month. The Group's production and sales structure continued to be optimized in the second quarter, with NEV sales exceeding 0.31 million units, up 49.5% month-on-month; overseas market terminal deliveries reached 0.279 million vehicles, up 3.7% month-on-month, continuing to consolidate infrastructure markets in Western Europe and South America, accelerate the expansion of emerging markets such as Eastern Europe, and continue to improve overseas service systems.

The new development mechanism begins the replacement cycle, the intelligent electric layout continues to advance, overseas continues to improve, and independent restructuring leads to value improvement. Industry-leading technologies such as DMH super hybrid, full-stack 3.0 smart vehicle solutions, vehicle central coordination motion control platform (VMC), and solid-state batteries are being mass-produced and launched at an accelerated pace. The new development mechanism empowers independent brands to start a transformation cycle, accelerate the pace of promotion of new products, target the global market, and accelerate overseas layout. The company has successively launched a variety of major new energy products such as the Zhiji L6, Roewe D5X, and Buick GL8 plug-in hybrid, and the SAIC Volkswagen ID family has repeatedly sold over 10,000 monthly sales.

Strengthening technological empowerment and deepening overseas markets, improving the company's performance is expected to drive valuation repair. Looking back, the decline in performance is the main reason for the decline in net market ratio in recent years. As joint venture sales stabilized month-on-month, it is expected that profit contributions will resume; independent brands have ushered in a cycle of replacement under the new development mechanism, which is expected to reshape popular models, boost sales performance, promote intelligent electric layout, and improve performance is expected to drive valuation repair. The company's net profit for 2024, 2025, and 2026 is estimated to be 14.89, 15.61, and 16.72 billion yuan, respectively, corresponding to PE 9.5X, 9.1X, and 8.5X, maintaining a “buy” rating.

Risk warning

1. Economic recovery is weaker than expected;

2. Increased competition in the industry weakens corporate profits.