Core views:

1. The trend of purchasing and upgrading is obvious. High-priced models will accelerate to break through 10 million vehicles, and demand for high-priced models is even wider. Regardless of actual sales performance and household disposable income, it has been verified that the share of models over 0.2 million yuan continues to rise, and the trend of replacement and upgrading is obvious; with the advent of the smart electric vehicle era, the user replacement cycle has been further shortened, and sales of models over 0.2 million yuan are expected to exceed 10 million units.

2. Breaking through the main force, Wei Pai - home large space circuit: the six blue seas are still the same, and the Blue Mountains are worth looking forward to. Six-seater SUV competition pattern: Ideal has opened up the large six-seater SUV market, with L9/L sales of around 0.01 million units in August 2023, and the old Blue Mountain sold an average of 2,000 units per month; pre-sales of the new Blue Mountain began in August 2024. After making up for the shortcomings in intelligence and channels, it is still worth looking forward to the next level of sales; the Blue Mountain is an important model of the Wei brand, which is expected to activate the Wei brand and accelerate its transformation to smart new energy sources.

3. The tank that breaks through the main force upward - professional off-road track: the technology builds the moat, and the tank stands alone. Electrification solves fuel consumption pain points. Off-road SUVs are expected to split into the mainstream household market, accounting for 10% of sales of models over 0.2 million yuan (annual sales of 1 million vehicles); compared with the price segment where domestic models are located and the share of foreign off-road models, there is significant room for off-road SUV market share to increase; tank brands use technology to shape the brand moat and remain the number one off-road brand in the high-value market, which is expected to benefit deeply from the incremental dividends of the off-road SUV market.

4. Focusing on the upward trend is expected to achieve the results of doing more with less, and the mass market has endless potential to come to Japan. At this stage, the opportunities left for independent brands are endless. There is room at every price stage, but the strategic focus on the high-price car market is expected to reduce the level of domestic consumption while taking into account profits. Taking the lead in capturing the brand image in the high price range is also helpful in shaping popular brands. Great Wall Volkswagen brands: Haval, Euler, etc. have established a brand image for high-quality products at the same price. A series of models such as the H6, Big Dog, Raptor, and Good Cat already have a reputation. There is no need for a price war to blindly grab sales. In the future, new models and strategies in the mass market will bring new opportunities for the company to fight back against the mass market.

Investment advice: We are optimistic about the success of Great Wall Motor's upward focus breakthrough strategy. Based on this adjustment of profit forecasts, the company expects revenue of 192.964, 250.199, and 275.219 billion yuan in 2024-2026 (previously 233.317, 278.813, 330.394 billion yuan), and net profit of 12.018, 15.377, and 16.989 billion yuan (previously 12.535, 15.001, 17.51 billion yuan). EPS was 1.41, 1.80, and 1.99 yuan (previously 1.47, 1.76, 2.05 yuan); the closing price was 24.30 yuan on September 24, 2024, corresponding to 2024-2026 PE was 17.27, 13.50, and 12.22 times; it was raised to a “buy” rating.

Risk warning: Increased competition in the industry exceeds expectations, technological progress falls short of expectations, sales of new products fall short of expectations, etc.