As of the end of December 2021, GAC Group's cumulative vehicle sales from January to December 2021 totaled 2,144,400 units, up 4.92% year-on-year, and 95.38% of the annual sales target of 2,248,200 units
Lu Gong, a researcher at Investment Times
On January 27, a news about GAC FCA attracted much attention.
According to the news, Stellantis Group announced on its official website that it plans to increase its shareholding in GAC FCA, a joint venture with Guangzhou Automobile Group Co., Ltd. (hereinafter referred to as GUANGZHOU AUTOMOBILE Group, 601238.SH 02238.HK), from 50% to 75%. GAC Group and Stellantis have agreed to the relevant procedures for the transaction, but they still need to be approved by regulatory authorities.
However, subsequently, GAC Group issued an announcement that the two sides have not yet signed a formal agreement on the equity adjustment of GAC FCA. Regarding foreign joint venture cooperation, the company will strictly abide by the national policies and regulations to perform the corresponding procedures, adhering to the principle of mutual trust and win-win results.
Behind the possible change in gac and FCA's share ratio is the official "opening of the floodgates" after the passenger car joint venture share ratio restriction has been implemented for nearly 30 years. At the end of 2021, the National Development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Edition), announcing that from 1 January 2022, the mainland will abolish the restrictions on foreign ownership in passenger car manufacturing and the restriction that the same foreign investor can establish two or less joint ventures in China to produce similar vehicle products.
This may mean that in 2022 and beyond, foreign car companies can increase their share ratio to more than 50%, and they can also establish more than two joint ventures, which will have a huge impact on traditional joint venture car companies.
In addition, just a few days before the announcement, GAC Group also disclosed its 2021 annual performance forecast. According to the announcement, GAC Group's net profit attributable to shareholders of listed companies in 2021 is expected to be about 6.6 billion yuan to 7.6 billion yuan, an increase of about 11% to 27% year-on-year, and after deducting non-recurring gains and losses, it is expected to be about 5.6 billion yuan to 6.7 billion yuan, an increase of about 16% to 39% year-on-year.
For the reasons for the growth of performance, GAC Group said in the performance forecast that in 2021, the company overcame the impact and challenges of chip shortage, rising raw material prices, repeated epidemics and other aspects, and achieved steady growth in production and sales throughout the year. At the same time, through measures such as product structure adjustment and strengthening cost control, the steady improvement of operational efficiency has been achieved.
The researchers of the Investment Times noted in combination with the performance of GAC Group in recent years that in 2018, the growth rate of GAC Group's performance fell into a slowdown trend, and the year-on-year growth rate of revenue and attributable net profit both fell from the previous double digits to single digits. Although there has been a rebound in 2020 and 2021, there is still a gap compared with the previous performance growth rate.
Specifically from the perspective of production and sales, the performance of the subsidiaries of GAC Group has been polarized. Among them, the overall performance of the joint venture brands that still occupy the majority of production and sales is not ideal, and the sales of GAC Honda, GAC Mitsubishi and GAC FCA in 2021 have declined year-on-year; the independent brands have performed strongly, especially GAC Aian, whose annual production and sales have increased by more than 100% year-on-year.
It is worth noting that since the second half of 2021, GAC Group has successively deliberated and passed the "Proposal on the Mixed Reform of Subsidiary GAC Aean and the Introduction of Strategic Investors" and the "Proposal on the Asset Restructuring and Capital Increase of GAC E-An". So in the future, can GAC Aeon help GAC Group gradually shift from fuel vehicles to new energy vehicles and take on the responsibility of improving the company's valuation?
Performance growth slowed
GAC Group was founded in June 2005, formerly known as Guangzhou Automobile Group Co., Ltd., which was established in June 1997. The headquarters of GAC Automobile Center is located in Zhujiang New Town, Tianhe District, Guangzhou.
As a state-controlled joint-stock enterprise group listed on A+H shares, GAC Group's existing main businesses include research and development, vehicles (automobiles, motorcycles), parts, business services, and finance, forming a complete closed loop of the automotive industry chain. Among them, the vehicle segment is mainly produced through its subsidiaries GAC Passenger Vehicles and the joint ventures GAC Honda, GAC Toyota, GAC FCA and GAC Mitsubishi.
According to the latest performance forecast disclosed by GAC Group, the company expects that the net profit attributable to shareholders of listed companies will increase by about 11% to 27% year-on-year in 2021, about 6.6 billion yuan to 7.6 billion yuan, and after deducting non-recurring gains and losses, it will increase by about 16% to 39% year-on-year, reaching about 5.6 billion yuan to 6.7 billion yuan.
"Investment Times" researchers combed the company's financial report data in recent years and found that as early as after entering 2018, the performance growth rate of GAC Group suddenly showed a sharp slowdown trend, and the year-on-year growth rate of revenue and attributable net profit plummeted from 44.84% and 71.53% in 2017 to 1.13% and 1.08% in 2018, respectively. In 2019, the two increased and decreased, with revenue falling by 17.51% year-on-year and net profit attributable to the mother falling by 39.30% year-on-year.
In 2020 and 2021, the performance growth rate of GAC Group has rebounded, but there is still a significant gap compared with the previous high-speed growth.
The year-on-year growth rate of GAC Group's operating income and attributable net profit
Source: Company earnings
The performance of each subsidiary is polarized
Today, GAC Group's annual automobile production and sales have exceeded two million units, according to the latest production and sales report data, the company's cumulative automobile production from January to December 2021 was 2.1381 million units, an increase of 5.08% over the same period of the previous year, and the cumulative sales of automobiles increased by 4.92% year-on-year to 2.1444 million units. However, compared with the annual sales target of 2,248,200 units, there is still a gap of 103,800 units.
Specifically from the perspective of the company's automobile production and sales composition, in recent years, the joint venture car companies have long occupied the majority of the production and sales of the GAC Group, of which the two Japanese joint ventures of GAC Honda and GAC Toyota are the mainstay.
According to the data disclosure, in 2021, the cumulative production and sales of GAC Group from "Two Fields" were about 1.6104 million units and 1.6083 million vehicles, respectively, accounting for more than 70% of the company's total production and sales in that year, reaching 75.32% and 75.00% respectively. At the same time, the cumulative production and sales of the company's own brands are less than 30%.
It is worth noting that in terms of the production and sales results of GAC Group in 2021, the performance of each subsidiary shows a polarizing trend. The overall performance of the joint venture brand was not satisfactory, among them, GAC FCA's annual production and sales fell by 57.78% and 50.33% year-on-year, respectively; GAC Mitsubishi also handed over the report card that the production and sales volume of the same year fell by more than 10%, down 19.70% and 11.99% respectively.
In addition, GAC Honda, which accounts for more than 30% of GAC Group, also experienced a decline in production and sales in 2021, with year-on-year declines of 2.29% and 3.17% respectively. Affected by the shortage of chips, from January to September 2021, the cumulative production and sales of the company's "two fields" have slowed down.
Correspondingly, the performance of GAC Group's own brands is relatively strong. In particular, GAC Aeon's production and sales in 2021 increased by more than 100% year-on-year, reaching 102.51% and 101.80% respectively. The production and sales of GAC Passenger Cars also maintained a year-on-year growth rate of 13.30% and 10.35% respectively in the case of the overall decline of the joint venture brand.
In recent years, with the rapid outbreak of the new energy vehicle market, GAC Group, which has both production and sales in the leading ranks of the industry, the company's market value has also been recognized by many companies in the industry, such as BYD (002594. SZ), Great Wall Motor (601633. SH), new car-making forces NIO, Xiaopeng Automobile (9868. HK) and so on.
Can EIAN take on the burden of raising valuations?
During the 2020 Guangzhou Auto Show, GAC Group officially changed its name to GAC Aean New Energy Automobile Co., Ltd., operated independently, and became an independent brand of GAC Group together with GAC Trumpchi.
"Investment Times" researchers noted that after entering the second half of 2021, GAC Group has disclosed two announcements about GAC Aeon in succession. First, on August 30, 2021, GAC Group deliberated and passed the "Proposal on the Mixed Reform of subsidiary GAC Aean and the Introduction of Strategic Investors", which will combine the overall situation of GAC Eian's development and intend to promote the mixed ownership reform of GAC Aean through the restructuring and integration of new energy vehicle research and development capabilities, business and assets, increase its capital and share, and introduce strategic investors.
The other is that on November 29, 2021, GAC Group deliberated and passed the "Proposal on the Asset Restructuring and Capital Increase of GAC Aean". According to the plan, GAC Aegon will undertake R&D personnel in the field of pure electric new energy of the Automotive Engineering Research Institute of GAC Group, and implement internal asset restructuring through cash capital increase, asset injection, cash purchase and capital reserve conversion to increase registered capital.
In the latter announcement, GAC Group said that the transaction will provide more powerful support for the development of the company's main business and further enhance its competitiveness and profitability. In the subsequent operation, GAC Aeon will further promote employee shareholding and the introduction of strategic investors, make full use of the capital market, actively seek to list at an appropriate time, and build an independent capital market platform and a market-oriented incentive mechanism, so as to promote the sustainable development of GAC Group and GAC Aeon.
For the news of the above asset restructuring, some insiders believe that the mixed reform is an opportunity for GAC Aean, and after the completion of the asset restructuring, it marks the completion of the preliminary basic work of its mixed ownership reform and officially enters the mixed reform stage. In the future operation, GAC Aeon will fully realize the integration of "research, production and marketing", which will greatly broaden the imagination space for its development.