2023 fell short of expectations, 1Q24 results met our expectations
The company announced 2023 results: 2023 revenue was 45.016 billion yuan, +23.07% year-on-year; net profit to mother in 2023 was 152 million yuan, turning a year-on-year loss into a profit. Corresponding revenue for 4Q23 was RMB 11.038 billion, +22.97%/-4.60% year over year; net profit to mother was -0.32 billion yuan, and the loss margin narrowed year over year, to -212.82%. The 2023 results fell short of our expectations as impairment charges exceeded expectations. The company released its 1Q24 quarterly report: revenue of 11.282 billion yuan, +4.61%/+2.21% YoY; net profit to mother was 105 million yuan, -28.72%/-425.36% YoY.
Development trends
Passenger car volume drives gross margin optimization, and one-time factors affect 2023 results. In 2023, the company sold 592,500 vehicles and chassis of various types, +18.40% over the same period last year. With the launch of new products such as QX PHEV, Ruifeng E3, M3/M4 CNG and Xingrui pure electric models in the passenger car segment, the company's passenger car sales volume in 2023 was +18.21% to 3571,000 units. The increase in scale effect and export share (up to 25%) led to a gross margin of +5.86ppt to 8.7% year over year. The company's asset disposal revenue of 640 million yuan in 2023 was mainly the disposal of fixed assets and intangible assets at the three passenger car plants and the passenger car company's Shinbashi plant. At the same time, asset impairment preparations totaled 1,094 million yuan, which had a one-time impact on earnings for the full year of 2023.
However, the company's net loss after deduction narrowed to around 10.76 million yuan for the first time in 1Q24. The trend is positive, reaching a new high in recent years.
The domestic market is developing steadily, and the international market is being actively laid out. In 2023, the company's export sales volume was +47.99% to 169,600 units, of which passenger cars reached 89,000 units, and overseas (including Hong Kong, Macao and Taiwan) revenue was +153.20% year-on-year to 26.127 billion yuan, accounting for 58%. Currently, the company's 19 overseas KD factories are located along the “Belt and Road”. Under strategic cooperation with Volkswagen, the first product exported to Europe has been officially mass-produced, and the European market will be further expanded in the future.
Keep abreast of new energy and intelligent development trends, focus on technology research and development, and strengthen external cooperation. In terms of technology research and development, the company plans to invest a total of 20 billion yuan in R&D over the next 5 years, invest 14 billion yuan in fixed assets, and launch 30 new products1. The company continues to expand strategic partners, cooperate with Volkswagen to promote the introduction and production of new energy vehicles, continue to cooperate with NIO to build a world-class smart electric vehicle industry cluster; and cooperate with technology companies such as Huawei, Horizon, iFLYTEK, Black Sesame, and BOE to develop products such as smart cockpits, smart car networking, and intelligent driving. We believe that the company will benefit from mass production of Volkswagen's new energy models and the development and implementation of Huawei's cooperative models to usher in a new growth point.
Profit forecasting and valuation
The profit forecast for 2024 remains unchanged, and a profit forecast of 661 million yuan for 2025 was introduced. The current stock price corresponds to the 2024/2025 net market ratio of 2.6 times/2.5 times. Maintaining an industry rating and a target price of 22.50 yuan, corresponding to 3.6 times the 2024 net market ratio and 3.4 times the 2025 net market ratio, there is 37.03% upside compared to the current stock price.
risks
The sales volume of the new models fell short of expectations, and the restoration of profitability fell short of expectations.