Description of the event

The company released its 2024 three-quarter report. In the first three quarters of 2024, total operating income was 430.48 billion yuan, -17.7% YoY; net profit to mother was 6.91 billion yuan, or -39.4% YoY; net profit after deducting non-return to mother was 1.05 billion yuan, or -88.9% YoY.

Incident comments

Wholesale sales declined month-on-month, and revenue declined month-on-month. The company sold 0.822 million vehicles in 2024Q3, down 37.0% year on year and 17.2% month on month. In terms of passenger car caliber, the 2024Q3 Group licensed 0.756 million passenger cars, down 9.1% year on year and up 33.6% month on month. Facing a business environment where industry competition is intensifying and overseas expansion is under pressure, 2024Q3 achieved total revenue of 145.8 billion yuan, a year-on-year decrease of 25.9%, and +3.0% month-on-month; achieved operating income of 142.56 billion yuan, a year-on-year decrease of 25.6% and +3.2% month-on-month.

Profits were under pressure in a fierce market competition environment, and net profit to mother declined sharply month-on-month. The company's net profit for 2024Q3 was 0.28 billion yuan, down 93.5% year on year and 92.9% month on month. Price competition in the industry was intense in the third quarter. The gross margin of the company's 2024Q3 automobile business was about 9.6%, up 1.4pct month-on-month, and the main benefiting supply chain cost reduction increased month-on-month; the cost ratio for the period was 11.5%, up 2.1pct year on year, and increased 1.1 pct month-on-month. Among them, the sales/management/R&D expense ratios were +0.7pct/+0.5pct, respectively, flat compared to +0.4 pct/+0.5pct. 2024Q3 investment income was 1.79 billion yuan, a sharp decrease from the same period last month. Among them, the income from joint ventures was 1.06 billion yuan, down -62.3% year on year, a significant increase from month to month. Q3 The company's net interest rate was about 0.2%, -2.0pct year-on-year, and -2.6pct month-on-month. Corresponding to the sales performance of major joint ventures during the same period, SAIC Volkswagen sold 0.26 million vehicles, -21.0% YoY, -1.5% month-on-month, SAIC-GM 0.053 million vehicles, -80.6% YoY, -53.6% month-on-month, and SAIC-GM-Wuling sold 0.27 million vehicles, -26.3% YoY and -22.0% month-on-month.

Production and marketing structure was optimized. In the first three quarters of this year, SAIC Motor delivered a total of 0.886 million vehicles, up 29.5% year on year; overseas market terminal deliveries reached 0.806 million vehicles, up 5.5% year on year, and actively overcoming the adverse effects of EU countervailing investigations, sales in the European market are expected to reach a new high throughout the year; independent brands delivered a total of 1.905 million vehicles, accounting for 59% of overall sales.

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. By the end of this year, SAIC Motor's Roewe and MG brands will also launch a number of major new energy vehicles, covering various types of products such as sedans, MPVs, and SUVs.

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 10.55, 15.38, and 16.34 billion yuan, respectively, corresponding to PE 18.9X, 13.0X, and 12.2X, maintaining a “buy” rating.