Incident: On October 23, the company announced results for the third quarter of 2024. In the first three quarters of 2024, it achieved operating income of 27.73 billion yuan, +18.0% year on year, net profit of 1.17 billion yuan to mother, +15.5% year-on-year, net profit of 1.08 billion yuan after deducting non-return net profit of 1.08 billion yuan, or +65.0% year over year. Corresponding to 2024Q3, the company achieved operating income of 9.81 billion yuan, +21.4% year-on-month, net profit of 0.27 billion yuan, net profit to mother of 0.27 billion yuan, -3.4% year-on-year, and -34.5% month-on-month, after deducting net profit of 0.27 billion yuan.

Sales of light buses and light trucks outperformed the industry, and pickup truck exports achieved high growth: 2024Q3 achieved sales of 0.083 million vehicles, +10.4% YoY and -3.3% month-on-month, and 2024Q3 achieved revenue of 9.81 billion yuan, +21.4% YoY and -1.4% month-on-month. The company's sales structure continued to be optimized, driving revenue to outperform sales performance. 2024Q3 achieved sales of 0.022 million, 0.014 million, 0.017 million, and 0.029 million light buses, trucks, pickups, and SUVs, respectively, +1.5%, -2.8%, +43.6%, and +9.7% year-on-year respectively. Light buses and light trucks all outperformed the industry's growth rate. 2024Q3 achieved a high increase in pickup truck sales, mainly driven by exports, with a year-on-year growth rate of over 200%.

Bronco's average monthly terminal sales in the third quarter exceeded 1,200 units, which clearly boosted the company's SUV sales.

Q3 gross margin performance was stable, and other revenue fluctuations affected profits: 2024Q3's gross margin was 14.4%, -2.2 pct year over year, and -0.2 pct month over month. We believe that the year-on-year decline was mainly due to adjustments in accounting standards. Some expenses were classified as a result of cost statistics, and the month-on-month performance was stable. The total expenses of the 2024Q3 company during the period were 7.4%, -4.0pct year-on-year and -0.4pct month-on-month. Expense control continued to be strengthened. 2024Q3 corporate taxes and surcharges increased by 0.05 billion yuan month-on-month, mainly due to the increase in consumption tax brought about by Bronco's increase. Other 2024Q3 revenue decreased by 0.04 billion yuan month-on-month, and VAT input credits are expected to decrease. 2024Q3's net interest rate was 2.8%, -1.4pct month-on-month, and net cash flow from operating activities reached 0.99 billion yuan.

The process of going overseas continues to accelerate, and driverless cars are building a new growth engine: since this year, the company's pickup truck products have made further breakthroughs in the Middle East and South American markets. At the same time, the company has signed a vehicle export cooperation agreement with Ford, and will continue to expand overseas markets based on its global channel advantages. Furthermore, the company has a forward-looking layout in the field of autonomous driving. Driverless trucks developed in cooperation with Wenyuan Zhixing have already been tested in Guangzhou, making it the first fully unmanned remote test project for L4 class autonomous freight vehicles on urban open roads in China. We believe that the company will seize the development opportunities of the autonomous freight and park logistics industry in the same city, continue to promote technological innovation and market expansion, and drive further upward sales growth.

Profit forecast: In 2024-2026, the company is expected to achieve operating income of 37.6/43.49/48.79 billion yuan and net profit to mother of 1.6/1.93/2.24 billion yuan, maintaining the “recommended” rating.

Risk warning: Industry demand falls short of expectations; industry competition intensifies; raw material prices fluctuate.