Shenwan Hongyuan Securities·2025-06-29 09:06Investment Rating - The report initiates coverage with a "Buy" rating for Dongfeng Group [2][10]. Core Views - Dongfeng Group is transitioning from reliance on joint ventures to focusing on its own passenger vehicle production, with a significant increase in profitability expected from its self-owned brands [5][6]. - The commercial vehicle segment is anticipated to enter a mild recovery phase, benefiting from market expansion and infrastructure improvements [6][7]. - The company's financial performance is projected to improve significantly, with a forecasted net profit of 1.33 billion yuan in 2025, marking a substantial recovery from previous losses [8][30]. Summary by Sections 1. Continuous Layout of Self-Owned Passenger Vehicles - Dongfeng Group has gradually reduced its dependence on joint ventures since 2007, focusing on self-owned passenger vehicles, which has led to a projected gross margin increase to 12.9% by 2024 [5][6]. - The company has established a collaborative structure with four major self-owned brands, enhancing its market presence across various segments [6][27]. 2. Joint Venture Brands Experience Turmoil - The joint venture brands have faced challenges due to slow product updates and a lack of electrification, leading to declining sales and profitability since 2020 [6][40]. - Dongfeng's self-owned brands, particularly high-end models like Lantu, are expected to contribute significantly to profitability, with a focus on the premium electric vehicle market [6][27]. 3. Comprehensive Layout of Commercial Vehicles - The commercial vehicle segment includes heavy trucks, light trucks, and vans, with a market expansion forecast to reach 4 million units by 2025 [6][7]. - Dongfeng is well-positioned to maintain its market share and achieve profitability as the commercial vehicle market recovers [6][7]. 4. Profit Forecast and Valuation - The report estimates revenue growth from 99.31 billion yuan in 2023 to 134.42 billion yuan in 2025, with a significant increase in net profit expected [8][30]. - The valuation is based on a price-to-book (PB) ratio of 0.25x for 2025, indicating a potential upside of 45% from current levels [10][11]. 5. Key Assumptions - Passenger vehicle sales are projected to reach 595,000 units in 2025, with commercial vehicle sales expected to be 364,600 units [11]. - The gross margin is anticipated to stabilize and improve due to the launch of new self-owned models [11][33].