Bocom Int'l has released a research report that maintains its "buy" rating for Great Wall Motor (02333). The gross margin forecast for 2024/25 was raised from 17.6%/17.6% to 20.2%/20.6%, mainly reflecting the increase in tank brand sales and the proportion of overseas sales. Although the sales volume has remained relatively stable, the improvement of the product structure is expected to continue to improve the profitability level in the second half of the year. The bank raised its profit forecast for 2024/25 by 65.5%/77.8%, and the target price was raised from HKD 12.25 to HKD 16.3.
Bocom International's main points are as follows:
Benefiting from improved exports and product structure, Q2 profit was strong.
Great Wall Motor has released its 2024 interim performance forecast, expecting to achieve a net profit attributable to the parent company of RMB 6.5 billion to 7.3 billion in the first half of 2024, a year-on-year increase of 377.5% to 436.3%. The non-net profit is 5 billion yuan to 6 billion yuan, a year-on-year increase of 567.1% to 700.6%. Calculated by the median of its performance forecast, Great Wall Motor's net profit/non-net profit for Q2 was RMB 3.67 billion/RMB 3.47 billion, an increase of 13.8%/71.7% respectively. Although Great Wall Motor's sales remained stable in the first half of the year (cumulative sales increased by 7.79% year-on-year, and Q2 sales increased by 3.3% month-on-month), the sales growth of its high-priced models was relatively high, and the proportion of exports also increased significantly, maintaining strong profitability in Q2.
The strong sales of the Tank brand and excellent export performance are expected to support the improvement of annual profits.
The bank believes that the strong sales trend of the Tank brand will continue to improve the product structure and increase the average selling price. In terms of exports, Great Wall Motor's overseas gross margin is 10 percentage points higher than the Chinese market, and the increase in overseas sales will further enhance the company's profitability. Although Great Wall Motor's sales in June fell by 6.5% year-on-year, the strong sales of the Tank brand continued, with sales of 0.0261 million vehicles in June, a year-on-year increase of 104.0%. The single-quarter sales of the Tank brand in Q2 was 0.0669 million vehicles, an increase of 95.9%/35.9% year-on-year/month-on-month respectively. At the same time, Great Wall Motor sold 0.0381 million vehicles in overseas markets in June, a year-on-year increase of 52.4% and a month-on-month increase of 10.5%, setting a new record for monthly exports. The single-quarter sales in overseas markets in Q2 was 0.1087 million vehicles, an increase of 51.1%/17.2% year-on-year/month-on-month respectively. The bank expects that the increase in overseas sales will further enhance the company's profitability.