Incident: The company released its 2023 annual report and 2024 Q1 quarterly report. The company achieved total operating revenue of 137.998 billion yuan in 2023, +3.34% year-on-year, and achieved net profit of 392 million yuan. The company achieved total operating income of 27.79 billion yuan in 2024Q1, -11.49% year-on-year, and realized net profit of 71 million yuan, or -86.61% year-on-year.
The gross margin for the whole year improved significantly year on year, and expenses were well controlled: the company's gross profit margin in 2023 was 8.29%, +1.81 pct year over year. Among them, the gross margins of vehicle sales, maintenance services, commission agents, car leasing, and other businesses were 1.65%, 31.34%, 83.00%, 59.27%, and 52.93%, respectively, +1.21pct, -0.38pct, +6.86pct, +2.45pct, and -4.59pct, respectively. The company's sales expense ratio and management expense ratio in 2023 were 3.50% and 1.63%, respectively, -0.33pct and -0.15pct, respectively. Among them, the decline in the sales expense ratio was mainly due to the year-on-year decline in expenses such as advertising fees, vehicle usage fees, and travel expenses. The year-on-year decline in the management expense ratio was mainly due to the year-on-year decline in the company's control expenses, employee remuneration, labor costs, rental property management expenses, business hospitality expenses, and vehicle usage fees.
Continuously optimize the brand structure and improve the efficiency of asset use: The company continues to promote the renovation and revitalization of weak brands and inefficient stores, focusing on increasing the market share of advantageous brands and expanding the sales network for new energy vehicles. In 2023, the company closed 50 less profitable stores and completed brand conversion work for 17 stores. At present, the company has established a passenger car distribution network covering 28 provinces, autonomous regions and municipalities across the country, distributes more than 50 passenger car brands, operates 735 sales outlets (including 695 4S stores), and has a layout of 245 ultra-luxury and luxury brand outlets. In 2023, the company promoted the NEV sales and service network layout in an orderly manner. The company has established close contact and communication mechanisms with more than 20 mainstream new energy brands, including AITO (AITO), Avita, Rantu, Great Wall Euler, Haval New Energy, Xiaopeng, Chery ICAR, Chery Starstar Era, Chery Fengyun, Geely Galaxy, Changan Deep Blue, and Lotus. The coverage of new energy brands has been further expanded. At present, the company has successfully applied for authorization for 54 new energy stores, built and put into operation 26, and is currently applying for 15. In 2023, the company's NEV sales increased by 82.25% year on year.
Investment advice: We expect the company's net profit to be 4.12/4.38/468 million yuan in 2024-2026, respectively. The corresponding PE was 29.55/27.75/26.01 times, respectively, maintaining the “gain” rating.
Risk warning: The recovery in automobile consumption falls short of expectations; competition in the auto dealer industry intensifies; and the expansion of the NEV sales network falls short of expectations.