1H21 homing net profit or high growth
Guanghui Automobile issued a pre-increase announcement on the performance of 1H21 on July 7. Its 1H21 net profit ranges from 1.503 billion yuan to 1.603 billion yuan, a year-on-year growth rate of 200% to 220%. The non-net profit of its 1H21 is 878 million yuan to 979 million yuan, a year-on-year growth rate of 183% to 204%. We believe that the strong operating performance of the company's 1H21 is mainly due to the growth in demand for 1H21 cars and a low base in the same period last year. We estimate that the company's EPS for 2021-2023 will be 0.38 EPS 0.48pm 0.57 yuan respectively, maintaining a "buy" rating.
Improvement of 2Q21 operation on a month-on-month basis
Based on the pre-increase announcement of the company's 1H21 performance, we estimate that the company's 2Q21 net profit ranges from 852 million yuan to 952 million yuan, compared with 898 million yuan in the same period last year, the company's homing net profit performance is relatively stable, compared with 1Q21's 651 million yuan, the company's operating quarter-on-quarter improvement is more obvious. We believe that the improvement in the company's 2Q21 quarter-on-quarter operation is mainly due to the increase in retail sales and the decline in inventory levels and narrowing retail discounts in the context of chip supply shortages.
Brand structure is expected to be continuously optimized.
The company has been optimizing its brand since 2020. According to the annual report, last year, the company strategically adjusted and closed 43 4S stores, covering Guangzhou Auto Mitsubishi, Dongfeng Citroen, Chevrolet, Guangzhou Auto Fick, Changan Ford and other brands, while seven new 4S stores were built. covering Guangzhou Automobile Toyota, Dongfeng Honda, Lecker, FAW Toyota and other brands. In April 2021, the company reached a strategic cooperation framework agreement with the new car-building force, Polar Fox Automobile Brand. According to the agreement, the number of cooperation cities between the two sides may be expanded to 20 in 2021.
We believe that the continuous optimization of the brand structure will bring better new car sales and profit performance for the company.
Maintain a "buy" rating
We believe that thanks to the optimization of brand structure, the gradual improvement of after-sales business contribution and the rapid development of used car business, the company's homing net profit from 2021 to 2023 is expected to maintain rapid growth. We maintain the 2021-2023 homing net profit forecast unchanged, comparable to the company's 2021 Wind consensus forecast PE average of 29.9x (the previous value of 18x), taking into account the company's strong operating cycle, valuation is closer to GAC GROUP and SAIC Group, we based on 12x 2021E PE, maintain the company target price 4.56RMB unchanged, maintain the "buy" rating.
Risk hint: car demand is lower than expected; second-hand car business development is not as expected.