Net profit due to mother in 2023 is in line with the forecast range
The company announced its annual report: 2023 revenue +6% YoY to RMB 25.09 billion, net profit +120% YoY to RMB 2.46 billion, net profit +70% YoY to RMB 1.55 billion; of these, 4Q23 revenue was -11%/-10% YoY to RMB 5.52 billion, net profit attributable to mother was -61%/-53% YoY to RMB 180 million, net profit deducted 41%/-59% YoY to RMB 150 million. It is in line with the previously announced performance forecast range.
Development trends
Revenue grew steadily throughout the year, and ASP and profitability increased dramatically. According to ACT Research Institute data, the output of the US semi-trailer industry in 2023 was -0.4% to 375,000 units; with reference to the China Automobile Association, the domestic heavy truck industry's sales volume in 2023 increased 35% year-on-year to 910,000 units. In 2023, the company's global semi-trailer sales volume was -8.5% to 117,000 units, and the total sales volume of special vehicles was +9.6% to 17,000 units, and total sales volume was -8.5% to 139,000 units; we estimated that the annual bicycle revenue was +24,000 yuan to 180,000 yuan, and the non-net profit deducted from bicycles was +5094 yuan to 11,000 yuan year-on-year. In terms of profitability, the company's gross margin in 2023 was +5.7pct to 19.0% year on year, after deducting non-net profit margin +2.3 pct to 6.2% year over year.
Domestic and foreign businesses are progressing hand in hand, awaiting the results of the reforms. By region: 1) In 2023, North American business revenue was -1.7% YoY to 10.9 billion yuan, and gross margin +9.6pct YoY to 25.8%. 2) In 2023, European business revenue was +26.5% YoY to 3.1 billion yuan, and gross margin was +9.1pct YoY to 17.6%. 3) Domestic business revenue in 2023 was +3.5% YoY to 8.63 billion yuan, and gross margin +1.4pct YoY to 11.4%. 4) Revenue in other regions in 2023 was +39% YoY to $2.54 billion, and gross margin +0.2pct YoY to 17.1%. Looking ahead to 2024, we believe that structural reforms in production organizations such as the domestic “Starlink Plan” and the “Strong Crown Growth Plan” and the North American “Deep Space Exploration Program” are progressing steadily, which is expected to increase the company's domestic and foreign market share, production and operation efficiency, and profitability.
An announcement was issued to promote the privatization of Hong Kong stocks. On March 11, 2024, the company announced a conditional cash offer to repurchase all issued H shares (excluding those held by the controlling shareholder CIMC Group and its co-actors) at HK$7.5 per H share. It is recommended that CIMC Motor's H shares be voluntarily delisted from the Hong Kong Stock Exchange. The company plans to use internal cash to repurchase H shares. The value of the company's repurchase of H shares is about HK$1.1 billion. Combined with the company's cash of 6 billion yuan at the end of 2023, we expect the financial pressure to delist the company's Hong Kong stock market will be less.
Profit forecasting and valuation
Considering the ongoing reforms, the 2024/2025 profit forecast was lowered by 10.8%/9.8% to 16.19 billion yuan. Maintaining an outperforming industry rating, the current A/H stock price corresponds to 12.7/8.2 times 2024 P/E. Due to the upward shift in the valuation center of the automotive sector, the target price for A-shares remained unchanged, corresponding to 15.2 times the 2024 P/E, with 19.0% upward space compared to the current period; considering the company's Hong Kong stock repurchase offer price of HK$7.5 and no dividend in 2023, we lowered the target price for H shares by 6.7% to HK$7.5, corresponding 8.5 times the 2024 P/E, with 2.5% upside compared to the present.
risks
The reforms fell short of expectations, global demand for semi-trailers fell short of expectations. CIMC's Thai subsidiary accepted the US EAPA survey results yet to be announced, and there is uncertainty about the risk of potential international trade friction.