20220425-招银国际-长城汽车-02333.HK-1Q22_earnings_beat_on_vehicle_upscaling_4页_834kb

Great Wall Motor (2333 HK) Company Update Summary

Core Content Overview

Great Wall Motor (2333 HK) reported its 1Q22 earnings, which exceeded prior estimates. The company's revenue and gross margin both beat expectations, driven by a higher quarterly average selling price and improved product mix. Despite challenges from lockdowns that affected both supply and demand in 2Q22, the firm's earnings resilience is attributed to its upscaling models such as the Tank 300, Dagou, and Haomao. The firm maintains its BUY rating with a target price of HK$ 20.00, indicating a potential upside of +78.9% from the current price of HK$ 11.18.

Key Financial Highlights

Earnings Summary (RMB mn)

• Revenue (1Q22): 33,619 (up 7% from estimates)
• Gross profit (1Q22): 5,776 (17.2% gross margin, 0.9 ppt higher than forecast)
• Net profit (1Q22): 1,634 (up 63% from estimates, excluding extraordinary items: RMB 1.3bn)
• Net profit (FY22E): RMB 8,235, with full-year forecast largely dependent on recovery in 2H22

Earnings Per Share (EPS)

• EPS (1Q22): RMB 0.49 (excluding extraordinary items: RMB 0.40)
• EPS (FY22E): RMB 0.89, with projected growth of 35.4% in FY23E and 23.3% in FY24E

Valuation Metrics

• P/E (FY22E): 11.4x
• P/B (FY22E): 1.3x
• Yield (FY22E): 2.5%
• ROE (FY22E): 12.4%

Financial Performance Trends

Revenue Growth

• 1Q22: 8.0% YoY
• FY20A to FY22E: 7.4%, 32.0%, 38.3%
• FY23E: 16.9%
• FY24E: 15.5%

Net Profit Growth

• 1Q22: 19.2% YoY
• FY20A to FY22E: 25.4%, 22.4%, 35.4%
• FY23E: 23.3%

Profitability Ratios

• Gross margin: 17.2% (up 0.9 ppt from forecast)
• Operating margin: 4.0% (up 1.6 ppt from QoQ)
• Net profit margin: 4.9%

Balance Sheet and Cash Flow

Key Balance Sheet Metrics

• Total assets (FY22E): RMB 199,309 mn
• Total liabilities (FY22E): RMB 128,369 mn
• Shareholders’ equity (FY22E): RMB 70,940 mn
• Current ratio (FY22E): 1.2x
• Net cash (debt)/total equity (FY22E): 0.2x

Cash Flow Summary

• Net cash from operating (FY22E): RMB 13,191 mn
• Net cash from investing (FY22E): RMB -8,375 mn
• Net cash from financing (FY22E): RMB -10,357 mn
• Net change in cash (FY22E): RMB -5,541 mn
• Cash at the end of the year (FY22E): RMB 22,367 mn

Shareholding and Stock Performance

Shareholding Structure

• Wei Jianjun: 56.4%
• Others: 43.6%

Stock Performance

• 1-mth: -13.6%
• 3-mth: -55.2%
• 6-mth: -68.5%

Market Cap

• Current: HK$ 103,255 mn
• Avg 3 mths t/o: HK$ 572 mn
• 52-week range: HK$ 39.00 (High) / HK$ 10.32 (Low)

Key Risks and Outlook

Key Risks

• Lower sales volume and margins
• Slower than expected tech transformation
• Sector de-rating

2Q22 Outlook

• The quarter may be more challenging due to lockdowns impacting supply and demand
• Earnings resilience is crucial for investor confidence

Full-Year Forecast

• FY22E Net profit: RMB 8.2bn
• Depends on: Recovery pace in 2H22
• Achievability: If Great Wall Motor delivers all-time high sales volume in 2H22

Analysts and Ratings

• Analysts: SHI Ji, CFA and DOU Wenjing, CFA
• Ratings: BUY for Great Wall Motor, based on 18x FY22E P/E
• CMBIGM Ratings:
  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10%
  • SELL: Potential loss of over 10%

Additional Information

• Auditor: Deloitte
• Related Reports: "Great Wall Motor - 1Q22 under pressure; less bumpy road ahead" (4 Apr 2022)
• Disclosure: The report is not an offer to buy or sell any securities and should not be relied upon for investment decisions without consulting a professional financial advisor.

Important Disclosures

• The report is for the use of intended recipients only and may not be reproduced, reprinted, sold, redistributed or published without prior written consent.
• CMBIGM does not provide individually tailored investment advice and recommends independent evaluation of investments.
• There are risks involved in transacting in any securities, and past performance does not guarantee future results.