Jinwu Financial News | According to CMB International Development Research Report, Great Wall Motor (02333)'s 1Q24 revenue was 8% higher than the bank's previous forecast, mainly due to bike sales exceeding expectations. Despite the increase in terminal discounts, its gross margin for 1Q24 reached 20%, 1.4 percentage points higher than the bank's previous forecast, partly due to the fact that the gross profit contribution of exports exceeded expectations. Other revenue of 1Q24 was 1.1 billion yuan, which was about 900 million yuan higher than the bank's previous forecast, mainly due to preferential VAT credits and overseas tax rebates, most of which were sustainable. In summary, Great Wall Motor deducted 2 billion yuan of non-net profit in 1Q24, higher than the bank's forecast of about 400 million yuan.
The bank maintained this year's sales forecast of 1.35 million units (up 10% year over year), but raised the bicycle price forecast by 3%. As 1Q24 gross margin exceeded expectations, the bank raised its gross margin forecast for this year by 0.3 percentage points to 18.9%. The bank also raised its other earnings forecast for this year from 900 million yuan to 2.5 billion yuan, as the preferential policy of adding a 5% VAT credit for advanced manufacturing can be extended until 2027. Overall, the bank raised its net profit forecast for this year by 25% to 9.9 billion yuan, an increase of 41% over the previous year.
Despite Great Wall's success in contributing to profits in the off-road vehicle market and overseas markets, the bank believes that as the Blue Mountain and Xiaolong models fell short of expectations last year, the company still lacks a new energy product that is popular in mainstream markets to prove its ability in electrification and intelligence. Since the company plans to expand the pure electric market starting in 2025, the bank believes that PHEVs are still the key this year. Maintain the buy rating and increase the target price from HK$13 to HK$14, based on 11xFY24EP/E. Investors can pay attention to market feedback on the unveiling of new cars at the Beijing Auto Show today.