Recently, GAC Group released its production and sales report for January 2024: automobile production in January was 157,501 units, up 22.71% year on year; automobile sales volume was 131,970 units, down -10.18% year on year. Commenting on the following, the retail sales of car companies under the GAC Group are all better than wholesale, and channel inventories have declined: the retail sales performance of GAC Group's car companies is better than wholesale sales (sales volume announced by the company). According to the GAC Group's official account, GAC Group's automobile terminal sales volume in January was 19,4423 units, up 45.3% year on year. The terminal sales volume was 62,453 units higher than the wholesale volume, and overall channel inventory declined. Specifically, GAC Toyota's January terminal sales volume was 71,875 units, up 17.6% year on year, 20,845 units; GAC Honda's January terminal sales volume was 56,802 units, up 41% year on year, 21,520 units more than wholesale volume; GAC Aian's January terminal sales volume was 21,938 units, more than the wholesale volume; GAC Trumpchi's January terminal sales volume was 37,850 units, up 67.8% year on year, 4051 units more than the wholesale volume. In January, retail sales of GAC's major car companies were higher than wholesale, and channel inventories declined to varying degrees from month to month, which is conducive to the stability of later business policies.

Trumpchi MPV sales are stable, and Eambu is speeding up its global strategy. According to Trumpchi's official account, the Trumpchi MPV family sold 16,972 vehicles per month, an increase of 121.2% over the previous year. Among them, the M8 and M6 sold 6197 and 4933 units respectively.

MPV1's monthly sales account for 44.8% of Trumpchi's retail sales. We believe that the unit price of MPV products is high, and Trumpchi has a leading edge in this field. The increase in MPV share is conducive to improving the quality of Trumpchi's business. Trumpchi relies on GAC's accumulated technology in the hybrid field (high-efficiency internal combustion engines, electromechanical coupling systems, etc.) to develop PHEV models, such as the Trumpchi E9 and E8. According to Trumpchi's official account, in the first four weeks of January, E8 had the highest sales volume in the medium household MPV sector. AEON sold 11,005 vehicles in January, a year-on-year decrease of 34.11% and a year-on-month decrease of 76%. In January, Aian retail was relatively stable and took the initiative to reduce channel inventory. In 2024, AEON will accelerate its globalization strategy. According to Aian's official account, on January 26, Aian's Thailand factory project officially started in Rayong Industrial Park in Rayong Province, Thailand. The project has a total investment of 2.3 billion baht and an annual design capacity of 50,000 units. It is being built in two phases. The first phase is scheduled to be completed in July of this year. The first model planned to be put into production is the AION Y Plus right-hand drive version, which is currently popular in Thailand. In the future, the Thai factory will take on the heavy responsibility of introducing more localized models.

Company profit forecast and valuation: The company's independent sector has begun the path of recovery. Trumpchi has established an independent leading position in the MPV field by leveraging the hybrid layout of the new energy market. AEON has launched a global strategy. Ryota has an advantage in the fuel and hybrid markets, and we are still optimistic about the company's medium- to long-term development. The company's net profit forecast for 2023-2025 is 59.7 billion yuan, 87.6 billion yuan, and 9.77 billion yuan, respectively, corresponding EPS of 0.57, 0.84, and 0.93 yuan. According to the closing price of A-shares on February 19, 2024, PE is 15, 10, and 9 times, respectively. Maintain a “Highly Recommended” rating.

Risk warning: industry demand is sluggish, the company's new models fall short of expectations, development of new energy vehicles falls short of expectations, and raw material prices have risen more than expected.