Core views

24Q2 revenue and net profit attributable to mother were 48.57 billion yuan and 3.85 billion yuan respectively, +18.7% and +224.4% year-on-year respectively, and +13.3% and +19.3% month-on-month respectively. Q2 Profit elasticity is far stronger than revenue & sales, mainly due to exports, tank sales and increased share, driving up bicycle revenue and profits. In addition, it also benefits from other revenue increases. The company is accelerating its transformation to intelligent new energy sources, boosting sales through new vehicle launches and marketing system changes, and adding high export growth, which is expected to drive continuous optimization of the sales structure and steady improvement of profitability.

occurrences

The company released its 2024 semi-annual report. The first half of the year's revenue, net profit to mother, and net profit after deducting non-net profit were 91.429 billion yuan, 7.079 billion yuan, and 5.651 billion yuan respectively, up 30.67%, 419.99%, and 654.04% year-on-year respectively.

Brief review

Q2 Profit elasticity is far stronger than revenue & sales volume, mainly due to increased share of exports & tank sales.

24H1's revenue, net profit to mother, and net profit after deducting non-net profit were 91.429 billion yuan, 7.079 billion yuan, and 5.651 billion yuan, respectively, +30.67%, +419.99%, and +654.04% year-on-year respectively.

24Q2's revenue, net profit to mother, and net profit after deducting non-net profit were 48.569 billion yuan, 3.851 billion yuan, and 3.627 billion yuan, respectively, +18.66%, +224.40%, and +275.28% year-on-year, and +13.32%, +19.30%, and +79.17%, respectively. On the revenue side, Q2 revenue exceeded 48.5 billion yuan, a record high for the same period, and was more flexible than sales. It mainly benefited from the increase in exports and tank brand sales, which led to an increase in bicycle revenue. On the quantitative side, 24Q2 sold 0.284 million vehicles, -4.9% year-on-year and +3.3% month-on-month. Structurally, it was supported by strong export sales and popular tank brand sales. By region, domestic sales and exports in Q2 were 0.176 million vehicles and 0.109 million vehicles, respectively, of -22.7% and +51.1% year-on-year, and -3.8% and +17.2% month-on-month respectively. Among them, exports were significantly faster than the industry (in Q2, the country's passenger car exports were +29% year over year, +11% month over month). By brand, Q2 Haval, Weipai, Great Wall Pickup, Euler, and Tank sales were 0.142 million, 0.01 million, 0.048 million, 0.017 million, and 0.067 million vehicles, respectively, with year-on-year sales of -15.0%, -30.4%, -10.0%, -43.4%, and +96.0%, respectively. Among the five major brands, tanks had the strongest and most steady growth. On the price side, Q2 bike revenue was about 0.171 million yuan/unit, +24.8% year over year, and +9.7% month-on-month, mainly due to the increase in the share of high-ASP tanks and exports in the sales structure. Q2 tanks and exports accounted for 23.5% and 38.2% of the company's total vehicle sales, +12.1pct and +14.2pct, respectively, and +5.6pct and +4.5pct month-on-month respectively. On the profit side, Q2 profit elasticity was far stronger than revenue & sales volume. After deducting more than 3.6 billion yuan, it reached a record high, mainly benefiting from the structural optimization factors described above. Due to the high overall gross margin of tank brands and exports, on the one hand, their sales volume helps to dilute costs to achieve economies of scale, and on the other hand, it can promote the optimization of the company's profit structure. Corresponding to Q2, the gross profit of bicycles was 0.037 million yuan/unit, +53.2% year-on-year and +17.0% month-on-month. Furthermore, net profit attributable to mother increased sharply year over year, and also benefited from an increase in other income (+0.66 billion yuan year over year, mainly government subsidies and input tax credits) and an increase in net income from fair value changes (+0.22 billion yuan year over year, turning a loss into a profit).

The overall increase in profitability has also benefited from the optimization of the sales structure. 24Q2 gross profit margin and net margin were 21.36% and 7.93%, respectively, +3.95pct and +5.03pct year over year, and +1.32pct and +0.40pct month-on-month respectively. The increase in gross margin is mainly due to the structural optimization factors described above. Net interest rates increased significantly year-on-year, which was also affected by increases in other income and investment income. The Q2 period/sales/management/R&D/finance expense rates were 10.43%, 4.32%, 2.05%, 4.58%, and -0.52%, respectively. The year-on-year ratio was -0.68pct, -0.07pct, -0.42pct, -0.24pct, +0.05pct, -0.29pct, +0.01pct, and -0.74pct, respectively. Fee control remained steady.

The company focuses on the “new energy+intelligence+globalization” development strategy, which is expected to promote continuous improvement in product strength and profitability. 1) New energy: 24H1 sold 0.1298 million new energy models, +44.9% year over year, growing faster than the industry (industry's NEV sales +32% year over year, China Automobile Association caliber).

At present, the company has launched an 800V high-voltage electric drive all-in-one product, developing 6C technology that can be charged for 500 kilometers in ten minutes; at the same time, it is developing solid-state batteries, which are capable of all-solid-state soft-pack batteries. As new models such as the Tank 700 Hi4-T and the Weipai Blue Mountain Smart Driving Edition are launched one after another, the company's product strength is also expected to be further enhanced, continuing to boost sales of new energy models. 2) Intelligence: In the field of intelligent driving, in 2024, the company officially launched and built the largest Kyushu supercomputing center in the automotive industry, with a layout in Hebei, Beijing, and Gansu, ranking first in the industry in terms of total data volume and sample types; it also built an intelligent driving product set covering high, medium, and low full computing power platforms to meet the differentiated needs of different models and users; a new generation of smart driving systems - Coffee PilotUltra can achieve full-scene NOA intelligent driving without high-precision map support. In the field of smart cockpits, Coffee OS 3, the third-generation smart space system developed by Great Wall Full Stack, has achieved comprehensive iterative upgrades in terms of software, hardware, and appearance. In terms of products, the new Weipai Blue Mountain, which was the first to be equipped with the new generation of smart driving and cockpit systems mentioned above, was launched in late August. The delivery volume was over 10,000 in 24 hours. The deepening of Great Wall's intelligent strategy is expected to continue to empower its Weipai and other brand models, driving sales growth and upward bicycle profits. 3) Globalization: 24H1 sells about 0.2 million vehicles overseas, +62.1% year over year, growing faster than the industry (industry exports +30.5% year over year, China Automobile Association caliber). Subsequent companies will focus on the “four new international modernizations” (localization of production capacity, localization of operations, cross-cultural brand and supply chain security), promote comprehensive overseas marketing of research, production, supply, sales, and services, and explore overseas markets such as the Middle East, North Africa, and Europe. On the one hand, the company promotes a full-category, full-scale product matrix to go overseas. On the other hand, based on its competitive advantages in off-road and pickup products, the company accelerates overseas production capacity and strives to break through key markets such as Latin America (the 24H2 Brazilian factory will also be officially put into operation to produce pickups and off-road SUVs, with an eventual annual production capacity exceeding 0.1 million units), with a view to achieving the export target of 0.45 million vehicles in 2024 and the mid-term export target of over one million in 2030. The continuous expansion of the company's export sales helps Great Wall to continuously optimize its sales structure and improve its own profitability.

Investment advice

The company has accelerated its transformation to intelligent new energy sources. New vehicle launches and marketing system changes have boosted sales. Combined with high export growth, it is expected to promote continuous optimization of its sales structure and drive a steady increase in profitability. We expect the company's net profit from 2024-2025 to be 13.1 billion yuan and 16.2 billion yuan, corresponding to current stock prices of 16X and 13X.

Risk analysis

1. The industry boom falls short of expectations. Domestic economic recovery rebounded steadily in 2024, but the exact pace remains to be seen. Demand in the automotive industry may fluctuate accordingly; it will still take time to fully implement the trade-in policy for consumer goods such as automobiles, which will affect the recovery process of industry demand.

2. Export sales fell short of expectations. Exports are affected by various factors such as the international situation, national policies, and exchange rates, and there is a risk of fluctuations in overseas sales growth.

3. The competitive pattern of the industry has deteriorated. Domestic competitors are speeding up product launch. With changes in supply factors such as technological progress and new production capacity investment, future industry competition may intensify, and the company's market share and profitability may fluctuate.

4. The company's channels and sales volume of new models fell short of expectations. The company's channel construction and dealer optimization progress may fall short of expectations. Sales volume of new models is affected by market demand and falls short of expectations