Minsheng Securities·2024-04-28 03:00Investment Rating - The report maintains a "Recommended" investment rating for GAC Group (601238.SH) with a current price of 8.67 CNY [1][2]. Core Insights - GAC Group's Q1 2024 performance shows total revenue of 21.57 billion CNY, reflecting a year-on-year decrease of 18.8% and a quarter-on-quarter decrease of 31.6%. The gross margin for Q1 2024 is 8.1%, which is an increase of 3.5 percentage points year-on-year but a decrease of 1.2 percentage points quarter-on-quarter. The net profit attributable to the parent company, excluding non-recurring items, is 690 million CNY, down 52.1% year-on-year but showing a quarter-on-quarter recovery [2][5]. - The report highlights that while revenue is under short-term pressure due to changes in sales volume, the profit margin has improved quarter-on-quarter. The decline in net profit is attributed to reduced investment income from joint ventures and increased sales and management expense ratios [2][5]. - GAC's joint venture brands are facing challenges, with GAC Toyota and GAC Honda experiencing significant declines in wholesale volumes, down 29.1% and 21.7% year-on-year, respectively. In contrast, GAC's own brand, GAC Trumpchi, has shown resilience with a 2.3% year-on-year increase in sales [2][5]. - The company is advancing its smart driving and cockpit technologies, with the "Smart Driving 2027" initiative focusing on AI platforms and data integration. GAC plans to implement advanced driving features across its vehicle lineup by 2025 [2][5]. - The investment outlook remains positive, with projected revenues for 2024-2026 at 156.94 billion CNY, 183.33 billion CNY, and 201.67 billion CNY, respectively. The net profit attributable to the parent company is expected to be 5.86 billion CNY, 6.41 billion CNY, and 7.56 billion CNY for the same period [2][5]. Financial Summary - For 2023, GAC Group's total revenue is reported at 129.71 billion CNY, with a projected growth rate of 17.6%. The net profit attributable to the parent company is 4.43 billion CNY, reflecting a significant decline of 45.1% year-on-year [5]. - The financial forecasts indicate a gradual recovery in profitability, with net profit growth rates of 32.3%, 9.4%, and 17.9% for 2024, 2025, and 2026, respectively [5]. - Key financial metrics include a projected PE ratio of 21 for 2023, decreasing to 12 by 2026, indicating an improving valuation outlook as earnings recover [5].