Investment suggestion
We downgraded the company's Adeband B shares to neutral and lowered the target price to 20 yuan / HK $20.
The reasons are as follows:
Income increased and profit decreased in the first quarter, and net profit continued to decline: the company's revenue in the first quarter was 8.16 billion yuan, up 52.7% from the same period last year, and its net profit was 229 million yuan, down 44.7% from the same period last year.
The company's net profit fell sharply year-on-year, mainly due to changes in product structure, resulting in a 3.3% year-on-year decline in gross profit margin to 20.7%. In the face of a weak market environment, the company's sales expense rate in the first quarter increased by 0.64% year-on-year / month-on-month, which is expected to be related to increased market competition. Benefiting from the substantial increase in revenue brought about by the increase in sales, the rate of 1Q management expenses decreased by 1.84 percentage points compared with the same period last year, and the single-quarter management expenses basically returned to the 15-year level.
As the passenger car market weakens, the subsequent competitive pressure is still severe: the overall passenger car market is relatively weak in the first quarter, resulting in the rapid weakening of sales of the compact SUV Yusheng S330 listed in September last year. In the future, with the weakening of the car market, it is expected that the subsequent passenger car sales will still be poor, while road shakers have entered the Changan Ford dealer channel, but under the pressure of Changan Ford's own sales. Road shakers are not expected to perform better than expected.
The gross profit of Quanshun replacement commercial vehicles is difficult to pay, and there may be a new drag on the listing of heavy trucks in the fourth quarter: last year, the replacement of Quanshun commercial vehicles led to a marked weakening of the company's gross profit margin compared with the previous quarter. At present, it will take some time for the new Quanshun to go public, and the listing of the company's JMC light passengers is also expected to be difficult to bring great profit flexibility to the company's commercial vehicles. In addition, the company's fourth quarter JMC heavy truck will also be officially listed, subject to brand and channel restrictions, it is expected that JMC heavy truck short-term probability may be a drag on the company's profits.
What is the biggest difference between us and the market? We believe that with the end of the blue sea era of the European light passenger market, Jiangling will probably enter a situation of increasing income but not increasing profits this year, and with the intensification of competition in the passenger car market, it is difficult for Yusheng S330 to increase quickly, or become a drag on the company's profits.
Potential catalyst: new Quanshun sales are much better than expected.
Profit forecast and valuation
We lowered the company's 18-year profit forecast for 17Universe by 28% to RMB 140.18 billion, downgraded the company's Aamp B shares to neutral rating, and lowered the target price by 43% to RMB20 / HK $20, corresponding to 12.3gamma 11x 2017e PameE.
Risk.
Sales of Yusheng and Quanshun were lower than expected.