Incident: The company released its report for the third quarter of 2024:2024Q1-3's total revenue was 430.48 billion yuan, -17.7% year over year; net profit to mother was 6.91 billion yuan, or -39.5% year over year; net profit after deducting non-return to mother was 1.05 billion yuan, -88.9% year over year. 2024Q3's total revenue was 145.8 billion yuan, -25.9% YoY, +3.0% month-on-month; net profit to mother 0.28 billion yuan, -93.5% YoY, -92.9% month-on-month; net profit without return to mother 0.029 billion yuan, -99.2% YoY and -102.7% month-on-month.

Revenue was stable month-on-month, and ASP declined slightly. On the revenue side, 2024Q3's total revenue was 145.8 billion yuan, -25.9% YoY, +3.0%; the 2024Q3 listed company group sold 0.822 million vehicles, -35.7% YoY, -17.2% month-on-month. The revenue growth rate was higher than the sales growth rate mainly 1) SAIC Motor's product structure improved ASP; 2) Huayu Auto's Q3 revenue increased. ASP: 2024Q3 bicycle ASP was 0.121 million yuan, +15.4% year over year and +24.3% month over month. The increase in ASP was mainly driven by the increase in the share of expensive new energy products.

SAIC-GM's overall profit performance is under pressure. On the gross profit side: 2024Q3 gross profit margin was 9.6%, -0.8 pct year over month, +1.4 pct month-on-month. The main reason for the year-on-year decline in gross margin was intense price competition due to increased competition, and the month-on-month increase mainly benefited supply chain cost reduction. On the cost side, 2024Q3 sales/management/R&D/finance cost rates were 4.7%/3.8%/2.6%/0.4%, respectively, +0.4/+0.5/+0.0/+0.2pct compared to the previous month. Investment income: The company's net investment income in 2024Q3 was 1.79 billion yuan, of which investment income for joint ventures was 1.06 billion yuan, -17.5/+1.06 billion yuan year-over-year and month-on-month respectively. The improvement was mainly due to improvements in the mass management structure. On the profit side, net profit attributable to mother in 2024Q3 was 0.28 billion yuan, -93.5% year-on-month, and -92.9% month-on-month; net profit not attributable to mother was 0.029 billion yuan, -99.2% year-on-year, reversing losses month-on-month, benefiting from increased gross profit and improvements in mass management structures.

Optimize the production and marketing structure and accelerate the transformation of new energy sources. The 2024Q1-3 achieved wholesale sales of 2.65 million vehicles, and retail sales reached 3.23 million vehicles. By focusing on high-quality delivery of market terminals, the pressure on the industrial chain and supply chain was effectively relieved, and the pressure on channel inventory was alleviated. As the fourth quarter entered the traditional peak sales season in the automobile market, order demand from SAIC Motor's various companies continued to grow during the National Day Golden Week. Among them, orders for the Zhiji LS6 exceeded 8,000 units; orders for SAIC passenger cars Roewe and MG increased by more than 20% year-on-year, and the subsequent recovery in SAIC Motor's production and sales will further increase. On September 26, the new Zhiji LS6 was officially launched. The price of the new model was 0.2169-0.2799 million yuan. Compared with the old model, the new LS6 is equipped with a smart lizard digital chassis equipped with a rear-wheel steering system as standard, which achieves a “turn-around in place” function, and the NOA function has already covered the whole country. On October 26, Zhiji Auto announced that the new Zhiji LS6 has surpassed 33,000 units for 30 days. Demand is rising, and we are optimistic that the company's subsequent new energy transformation will accelerate.

Investment suggestions: The company has solid underlying technology, excellent platforming capabilities, and adjusted profit forecasts. It is estimated that 2024-2026 revenue is 676.9/707.4/747 billion yuan, net profit to mother of 10.44/12.9/14.63 billion yuan, corresponding to EPS 0.90/1.11/1.26 yuan, corresponding to the closing price of 12.87 yuan/share on October 31, 2024, PE 15/12/ 10x, maintaining the “Recommended” rating.

Risk warning: Joint venture brand downside risks; passenger cars, new energy transformation, and overseas expansion fall short of expectations; EU tariffs may have an impact on export sales and profits.