The Zhitong Finance App learned that Orient Securities released a research report saying that in 2024, the State Council's State-owned Assets Administration Commission will include market value management in the performance assessment of central enterprise leaders, and will also separately assess the NEV business of automobile central enterprises, market value management, and NEV business, etc., which are expected to drive the reshaping of the value of central state-owned enterprises. The bank believes that the NEV business transformation of central state-owned enterprises needs to be accelerated urgently. As central state-owned enterprise reforms continue to be implemented and assessment indicators continue to be optimized, it is expected that the innovation and transformation vitality of automobile central state-owned enterprises will be further stimulated, and their competitiveness and profitability within the industry is expected to be further enhanced. It is recommended to focus on listed automobile central state-owned enterprises with strong competitiveness in the segment.

Orient Securities's views are as follows:

The need to reform central and state-owned enterprises in the automobile industry.

Listed companies of central state-owned enterprises in the automobile industry are the backbone of the industry and have contributed to the development of the automobile industry; in recent years, with the rapid development of new energy vehicles in China, private enterprises represented by BYD have welcomed opportunities for self-rise, and a number of outstanding private parts companies have also achieved rapid development through new energy development. The development speed and operating indicators of listed automobile state-owned enterprises have gradually been overtaken by private listed companies, and the valuation level has been at a low level for a long time. In 2024, the State Assets Administration Commission successively proposed new assessment methods such as “market value management assessment included in the performance assessment of central enterprise leaders” and “separate assessment of NEV business”, which is expected to push the listed companies of automobile central state-owned enterprises to strengthen market value management and make every effort to develop the NEV business, and motivate automobile central state-owned enterprises to continue to improve their operating standards.

Listed central state-owned enterprises are still the backbone of the industry.

Overall, the total revenue of state-owned listed automobile companies (classified as SW Auto) remained around 1.8 trillion yuan in 2018-2022. With the rise of private enterprises under the new energy vehicle development wave, the share of listed automobile state-owned enterprises in the industry in the revenue of listed companies declined year by year, gradually falling from 68.0% in 2018 to 52.6% in 2023H1. From a profit perspective, the share of the net profit of listed automobile state-owned enterprises dropped from 74.0% in 2018 to 43.5% in 2023H1. Listed automobile companies account for more than 50% of the revenue and are still the backbone of the industry.

The operating efficiency of listed companies of central and state-owned enterprises needs to be improved.

In terms of operating indicators, in recent years, the gross profit margin, net interest rate, and ROE of listed non-state-owned enterprises in the automobile industry have all been superior to those of listed state-owned enterprises. Listed state-owned enterprises urgently need reforms to improve their operating efficiency. 2023H1 The gross margin of listed state-owned enterprises in the automobile industry was 11.7%, and the gross margin of listed non-state-owned enterprises was 17.9%. The gap between the two was 6.2 percentage points. In terms of net interest rate attributable to mother, listed state-owned enterprises in the automobile industry showed a downward trend year by year until 2023H1; in terms of return on net assets, the return on net assets (TTM) of listed state-owned enterprises in the automobile industry showed a downward trend, falling from 9.2% in 2018 to 4.2% in 2022, and 2023H1 rebounded slightly to 4.5%.

The assessment system for central state-owned enterprises continues to be optimized, which is expected to promote the reshaping of the value of central state-owned enterprises.

Since 2018, the State Council's State-owned Assets Administration Commission has made several adjustments to the central enterprise assessment index system, gradually optimizing it from “two profit and one rate” to “one profit and five rate”. In 2024, the State Council's State-owned Assets Administration Commission will include market value management in the performance assessment of central enterprise leaders, and will also separately assess the new energy vehicle business of automobile central enterprises. Market value management and separate assessments of NEV businesses are expected to drive the reshaping of the value of central state-owned enterprises. The transformation of the NEV business of central state-owned enterprises urgently needs to be accelerated. As central state-owned enterprise reforms continue to be implemented and assessment indicators continue to be optimized, it is expected that the innovation and transformation vitality of automobile central state-owned enterprises will be further stimulated, and their competitiveness and profitability within the industry is expected to be further enhanced.

In terms of investment strategies, after implementing reforms, central state-owned enterprises will improve their operating efficiency and competitive strength, and their profitability will gradually increase. After increasing profits, they will also promote the repair of their valuations and increase their market value.

It is recommended to focus on automobile central state-owned enterprises listed companies with strong competitiveness in the segment: Changan Automobile (000625.SZ), JAC (600418.SH), Sinotruk (000951.SZ), etc.; other high-quality automobile non-state-owned listed companies: Xinquan (603179.SH), Yinlun Co., Ltd. (002126.SZ), Bojun Technology (300926.SZ), etc.

Risk warning: The macroeconomic downturn affects automobile demand, the price war pressure on car companies, the impact of fluctuations in upstream raw material prices, and the reform process of central state-owned enterprises falls short of expectations.