<Earnings first take> Prelim revenue and margins of 2H23 recorded strong y-o-y growth; beat expectations
- 2H23 prelim revenue +38% y-o-y to Rmb103bn, largely driven by 30% increase in vehicle sales
- Net profit increased 112% y-o-y to Rmb5.6bn in 2H23, with a +1.5ppt improvement in net margins to 5.1%. This implies 4Q23 net earnings of slightly over Rmb2bn, beating expectation by about 5%
- The launch of new models including WEY HighMountain, HAVAL H6 and other NEV products in 2024 will continue boost sales in the coming year. We currently have BUY rating
Great Wall Motor released a strong set of 2H23 preliminary results, thanks to strong volume sales supported by better product mix. Great Wall Motor (GWM) recorded prelim. revenue of Rmb103bn in 2H23 (+38% y-o-y). Total vehicle sales rose 30% y-o-y to 711k units in 2H23. Among them, NEV sales expanded by 153% y-o-y to 172k units, continues to be the strongest growth driver of the Company. Net profit improved strongly by recording a 112% growth y-o-y to Rmb5.6bn, with net margin improvement being the major factor (rose by 1.5ppt y-o-y to 5.1%). This implies its 4Q23 performance has continued to improve despite the challenging market condition; translating to a substantial increase in 4Q23 revenue by c.42% to Rmb54bn and net profit of about Rmb2bn, compared to a net profit of merely Rmb106m a year ago.
NEV transition continues to be focus for investors. With plans to roll out new electric models, such as the new models like WEY Highmountain together with its latest intelligence system, we expect NEV sales for Great Wall Motor to achieve c.40% y-o-y expansion in FY24F, higher than industry NEV projected growth of c.20%. We believe the higher volume and lower EV battery cost should also lend support to its vehicle margins. Besides, the share of TANK (a high-margin brand) to total volume has risen from 6.6% in FY21 to 13.2% in FY23. With new models such as Tank 700 and Tank 800 expected to be released in 2024, this should support GWM’s growth outlook. However, the Chinese industry market is facing greater market competition as the macro environment remains soft and automakers are giving bigger discounts to drive volume sales, which may cause margin pressure to the industry, including GWM. We currently have a BUY rating on Great Wall Motor giving its improving EV sales mix.
