Wuling's shareholder loss narrowed 27.7 per cent year-on-year to 24.1 million yuan in 2021, weaker than its 58 per cent improvement guidance.
The improvement was worse than we expected, mainly due to weak gross margin. Revenue fell 6.3 per cent year-on-year to 14.41 billion yuan. Income in the second half of 2021 is only 1.2% higher than in the first half, which is relatively weak considering that the second half of the year is the peak season for the industry. Gross profit margin fell 0.3 percentage points year-on-year to 7.5%, due to the impact of inefficient operations caused by soaring raw material costs and chip shortages.
Due to the weaker-than-expected results, we have sharply reduced our shareholder profit forecasts. After adjustment, we expect Wuling Motor to record a net loss of 5.5 million yuan in 2022, a net profit of 28 million yuan in 2023 and 82 million yuan in 2024. Due to the shortage of chips and the persistence of the epidemic in China since March, we have reduced revenue forecasts for the auto power and auto parts departments. We expect logistics electric vehicles to drive faster revenue growth in the commercial vehicle division. At the same time, due to the uncertainty of the supply chain, we also reduce the gross margin assumption for the forecast year.
The instability of the supply chain worsened further in the second half of 2021, which had a negative impact on the production of many mainframe factories and on the company. Gross margins fell short of expectations due to rising raw material costs, which is likely to continue until at least the first half of 2022. However, there are also some bright spots that can not be ignored in 2021, including 112.5% year-on-year growth in logistics electric vehicles and the expansion of non-SAIC GM Wuling customers. At present, the industry has been seriously affected by the deterioration of the epidemic.
We downgraded our investment rating to "neutral" and lowered our target price to HK $1.04, mainly due to a downgrade of our earnings forecast.
Our target price is equivalent to 56.0 times 2023 earnings and 22.6 times 2024 earnings.