Date of Report: October 28, 2024
Broker: UOB Kay Hian
Company Overview
Great Wall Motor, based in Baoding, Hebei province, specializes in the production and sale of pickup trucks, SUVs, and sedans under its proprietary brand. Listed under the ticker 2333 HK, the company operates primarily within the automobile sector. It has a market capitalization of HK$36,111 million (US$4,630 million) and is held significantly by major shareholder Wei Jian Jun, who owns 56.04% of the company.
3Q24 Financial Highlights
The third quarter of 2024 saw steady growth for Great Wall Motor (GWM), with key financial metrics aligning closely with forecasts:
- Revenue: Increased by 3% year-on-year (YoY) and 5% quarter-on-quarter (QoQ) to reach Rmb50.83 billion.
- Gross Profit: Decreased slightly by 1.4% YoY to Rmb10.57 billion.
- EBIT Margin: Recorded at 8.0%, a minor decrease of 0.6 percentage points YoY.
- Net Profit: Fell by 7.8% YoY to Rmb3,350 million.
- Operating Cash Flow: GWM generated Rmb4.79 billion in operating cash flow, representing a 747% YoY increase.
9M24 Performance Overview
For the nine-month period ending in September 2024, GWM reported significant performance improvements:
- Revenue: Achieved Rmb142.25 billion, up 19% YoY.
- Net Profit: Stood at Rmb10,428 million, a notable increase of 109% YoY.
- Sales Volume: Totaled 854,800 units, reflecting a 1.2% decline YoY, offset by a 3.4% QoQ growth in 3Q24.
Key Performance Drivers
The company attributes its positive financial trajectory to several strategic initiatives:
- Optimized Product Mix: Increased Average Selling Prices (ASP) and maintained margins by prioritizing a more lucrative mix of high-demand vehicles.
- Overseas Market Expansion: GWM’s international sales increased significantly by 39.9% YoY, reaching a record 41.7% of its total sales volume. Expansion was supported by new manufacturing facilities and broadened distribution channels in regions such as Southeast Asia and Latin America.
- Focus on High-Quality Models: The company emphasized its commitment to a diverse, high-quality product mix, which has allowed it to avoid price cuts and maintain profitability.
Future Growth Projections (2024-2026)
GWM maintains its projections for robust growth, focusing on market expansion, increased sales, and improved financial metrics:
- Sales Volume: Targets 1.3 million units in 2024, with a 30% YoY growth anticipated in 2025.
- Revenue: Expected to reach Rmb211.55 billion in 2024, with steady growth in subsequent years.
- ASP Assumptions: Estimated at Rmb144,000 for 2024, with slight increases projected for 2025 and 2026.
- Gross Margin: Forecasted to hold steady at 21% through 2026, benefiting from an improved product mix and stronger overseas sales.
Strategic Initiatives for 2025
GWM has outlined a proactive strategy for 2025 to ensure sustained growth:
- New Model Launches: Plans to introduce over ten new vehicle models in the Chinese market, with a focus on plug-in hybrids and electric vehicles under brands like WEY, Tank, and Haval.
- Overseas Market Penetration: Anticipates sales volume of 450,000 units overseas, with >30% YoY growth in 2025. The company plans to expand in the Middle East, North Africa, Southeast Asia, and Latin America by launching new manufacturing plants and distribution networks.
Financial Metrics and Valuation
Key financial estimates indicate solid profitability and valuation stability:
- EBITDA Growth: Projected at Rmb25.49 billion for 2024, increasing to Rmb32.39 billion by 2026.
- Net Margin: Estimated at 5.8% for 2024, gradually increasing to 7.3% by 2026.
- PE Ratio: Maintained at approximately 12x for 2025 forecasted earnings, aligning with historical performance.
Investment Recommendation
Based on consistent financial results and strong future prospects, UOB Kay Hian maintains a “Buy” recommendation with a target price of HK$23.00 for Great Wall Motor, offering a potential upside of 59.9% from the current share price of HK$14.38. The recommendation reflects confidence in GWM’s strategic growth trajectory, driven by its continued focus on overseas expansion and product portfolio diversification.
