20230131-招银国际-广汽集团-02238.HK-We_expect_4Q22_NP_to_fall_on_equity_income_4页_851kb

GAC Group (2238 HK) Summary

Core Content Overview

This report provides an equity research update on GAC Group (2238 HK), highlighting financial performance, valuation, and market outlook for the company and its segments. The analysts maintain a BUY rating with a target price of HK$8.00, suggesting the stock has potential for a +38.2% return over the next 12 months. The report outlines key financial metrics, earnings revisions, and valuation models, emphasizing the impact of joint ventures and the Aion brand.

Main Financial Highlights

Revenue

• FY20A: RMB 63,157 million
• FY21A: RMB 75,676 million (+19.8% YoY)
• FY22E: RMB 111,911 million (+47.9% YoY)
• FY23E: RMB 113,076 million (+1.0% YoY)
• FY24E: RMB 113,722 million (+0.6% YoY)

Net Profit

• FY20A: RMB 5,964 million
• FY21A: RMB 7,511 million (+25.9% YoY)
• FY22E: RMB 9,691 million (+29.0% YoY)
• FY23E: RMB 9,193 million (-5.1% YoY)
• FY24E: RMB 10,491 million (+14.1% YoY)

Earnings Per Share (EPS)

• FY20A: RMB 0.58
• FY21A: RMB 0.73
• FY22E: RMB 0.93
• FY23E: RMB 0.88
• FY24E: RMB 1.00

Valuation Metrics

• P/E (FY23E): 5.7x
• P/B (FY23E): 0.5x
• Yield (FY23E): 3.8%
• ROE (FY23E): 8.9%
• ROA (FY23E): 5.1%

Key Views and Projections

• 4Q22 Net Profit: Expected to fall 21% YoY to RMB 1.6 billion due to a 6% YoY decline in sales volume and a 13% YoY decline in equity income from joint ventures and associates.
• 4Q22 Gross Profit: Projected to decline 7% YoY, with flat QoQ due to rising battery costs offsetting economies of scale from higher Aion sales.
• Aion Sales: Expected to rise 18% YoY in FY23E to 0.32 million units, despite a 57,000 unit inventory increase in FY22, which led to a more than doubling in FY22 to 0.27 million units.
• FY23E Gross Margin: Projected to widen by 2.1 ppts YoY due to higher Aion sales and possible battery price drops.
• Net Profit (FY23E): Projected to fall 5% YoY to RMB 9.2 billion, mainly due to reduced equity income.

Valuation and SOTP

• SOTP Valuation:
  • Aion HK: Valued at HK$3.8 per share based on 1.0x FY23E P/S.
  • JVs & Associates HK: Valued at HK$4.2 per share based on 3.0x FY23E P/E.
  • Trumpchi: Valued at HK$0.
  • Total Target Market Cap: RMB 74,381 million.
  • Target Price: HK$8.00.

Key Risks

• Lower sales volume and margins, especially for Aion.
• Sector de-rating.
• The impact of battery cost fluctuations on gross margins.
• Uncertainty in the valuation of JVs and associates.

Share Performance

• Current Price: HK$5.79
• 1-Month Return: +14.0%
• 3-Month Return: +47.1%
• 6-Month Return: -9.8%
• 12-Month Price Performance: Not provided, but a chart is referenced.

Shareholding Structure

• Guangzhou Automobile Industry: 53.1%
• Others: 46.9%

Analysts

• SHI Ji, CFA: Contact: (852) 3761 8728, Email: shiji@cmbi.com.hk
• DOU Wenjing, CFA: Contact: (852) 6939 4751, Email: douwenjing@cmbi.com.hk

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%.
• NOT RATED: Stock not rated.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in-line with the market.
• UNDERPERFORM: Industry expected to underperform the market.

Important Disclosures

• The report is not investment advice and should not be relied upon for making investment decisions.
• CMBIGM is not a registered broker-dealer in the United States or Singapore, and the report is not intended for general distribution.
• The information is based on publicly available data and is subject to change without notice.
• The analysts have not traded the stock in the 30 days prior to the report's issue and will not do so for 3 business days after.

Summary

The report maintains a BUY rating for GAC Group, citing an attractive valuation and defensive positioning in a volatile market. It projects a 4Q22 net profit decline of 21% YoY and FY23E net profit decline of 5% YoY, primarily due to reduced equity income from JVs and associates. Aion is expected to drive growth in FY23E with a 18% YoY sales increase, while the company faces risks from sector de-rating and margin pressures. The SOTP valuation model is used, with a target price of HK$8.00. The report includes financial statements, key ratios, and disclosures to ensure transparency and compliance with regulatory requirements.