Incident Overview: The company announced 2024Q1 results: GAC's total revenue for 2024Q1 was 21.57 billion yuan, -18.8%/-31.6% year over year, respectively; 2024Q1 gross margin was 8.1%, +3.5 pts/-1.2 pts year over month, respectively; 2024Q1 net profit without return to mother was 690 million yuan, -52.1% year on month, positive month on month.
Profit increased month-on-month, and revenue was under pressure in the short term. Revenue side: The total operating revenue of 2024Q1 was RMB 21.57 billion, or -18.8%/-31.6% YoY, respectively. According to our estimates, the 2024Q1 bike ASP was 1.61 million yuan, -0.3 million yuan, +29,000 yuan year-on-year, respectively. We judge that the short-term pressure on the revenue side is mainly due to changes in sales scale. Profit side: Net profit of 2024Q1 after deducting non-return to mother was 690 million yuan, -52.1% YoY, which was positive month-on-month. We judge that the year-on-year decline on the profit side was mainly affected by 1) the decline in investment income of joint ventures and 2) the increase in sales and management expense ratios. Expense side: 2024Q1 sales/management/R&D/finance expenses were 5.9%/4.7%/-0.2%, respectively, +1.9 pts/+1.6 pts/-0.1 pts/+0.2 pts year over year, and -0.2 pts/+0.5 pts/-0.1 pts/+0.4 pts, respectively.
Under pressure from the joint venture brand, GAC Trumpchi continues to gain strength. By brand, in terms of joint venture brands, GAC Toyota sold 156,000 vehicles in 2024Q1, -29.1% year-on-year; GAC Honda wholesale 117,000 vehicles in 2024Q1, -21.7% year-on-year. In terms of independent brands, GAC Trumpchi performed well, with 2024Q1 sales of 85,000 units, +2.3% over the same period last year. We believe that sales of joint venture products are under some pressure under the trend of independent rise, but GAC New Energy continues to accelerate, and the performance of the Trumpchi series is expected to continue to improve.
The intelligent development of smart driving cockpits has achieved remarkable results. In terms of intelligence, GAC announced the “Smart Drive 2027” action plan to promote intelligent driving and rapid optimization of smart cockpits with the three major technical foundations of the “GAC AI Big Model Platform”, “GAC Xingling Electronic and Electrical Architecture”, and the “GAC Connected Big Data Platform”. The L2++ unmapped city NDA function has been installed on Haobo models, and it is planned to achieve nationwide coverage within 2024. GAC Trumpchi and Huawei focus on in-depth research and development in various fields such as smart chassis and intelligent human-computer interaction. It has become the first brand to be equipped with next-generation Huawei intelligent technology such as Qiankun Smart Driving and Hongmeng cockpits in all fields of cars, SUVs, and MPVs. The first model will be launched and delivered in the first quarter of 2025.
Investment suggestion: As a leading joint venture brand, the company's independent competitiveness continues to improve, accelerating the replacement of fuel vehicles with hybrid and intelligent dual-core drives. Continued verification of independent product strength is expected to take off. We are optimistic about the company's medium- to long-term growth and adjust profit forecasts. The estimated revenue for 2024-2026 is 1,569.4/1,833.3/201.67 billion yuan, and net profit to mother is 58.6/64.1/7.56 billion yuan; corresponding to the closing price of 8.67 yuan/share on April 26, 2024, PE is 16/14/12 times.
Risk warning: Joint venture model sales fall short of expectations; independent brand profits fall short of expectations.