Dongfeng Group: This profit indicator fell for five consecutive | annual report (82)

Text/Leju Finance Jin Wenyu

On the last day of March, Dongfeng Lantu announced on the official micro that the price of its Lantu FREE model will be adjusted, of which the pure electric model will be raised by 10,000 yuan, and the extended range model will remain unchanged for the time being, effective from May 1. After the price adjustment, the price range of the Lando FREE pure electric version model became 343,600-373,600 yuan.

The reason for the price increase, Lantu admits, is affected by the recent sharp rise in raw material prices. Obviously, this is not just a problem for Lantu. According to Dongfeng Motor Group Co., Ltd. (00489. HK, hereinafter referred to as Dongfeng Group) 2021 annual report, its gross profit margin hit a new low in five years, and the return on net assets has fallen for five consecutive years. Profit indicators have continued to decline, and Dongfeng Group has had to maintain a stable profit margin by raising prices.

According to the financial report, Dongfeng Group's revenue in 2021 was 113.008 billion yuan, an increase of 4.2% year-on-year, gross profit was 14.19 billion yuan, and net profit attributable to the mother was 11.387 billion yuan, an increase of 5.8% year-on-year.

In terms of sales, Dongfeng Group sold a total of 2.7751 million vehicles in 2021, down 3.3% year-on-year. Zhu Yanfeng, chairman of Dongfeng Motor Group, said that in 2021, the development of the domestic automotive industry has been greatly challenged, the new crown epidemic continues, the shortage of automotive chips, the rise in raw materials for bulk commodities and other issues have a great impact on the automotive industry.

In addition, according to the statistics released by the China Association of Automobile Manufacturers, according to the total sales volume of domestic commercial vehicles and passenger cars, Dongfeng Group's market share in 2021 is about 10.6%.

Sales of joint venture brands have declined significantly

Despite the growth of both revenue and profit, dongfeng group's excessive dependence on joint venture brands and commercial vehicle business has not changed for a long time.

According to the sales data revealed by the official, Dongfeng Group sold about 2.7751 million new vehicles in 2021, down 3.3% year-on-year. Affected by the switch of national regulations and the decline in industry demand, Dongfeng Motor Group's commercial vehicle sales were about 522,600 units, a year-on-year decrease of about 5.8%.

Dongfeng Group's overall passenger car sales were 2.2525 million units, down 2.6% year-on-year, accounting for more than 80% of the overall sales, while autonomous passenger car sales for the whole year were 377,000 units, accounting for only 16.7% of the passenger car business.

In terms of joint venture brands, the two major Japanese joint ventures of Dongfeng Nissan and Dongfeng Honda both experienced a certain degree of sales decline last year.

Affected by the shortage of chips, Dongfeng Group's joint venture passenger car business will sell about 1.8751 million units in 2021, a year-on-year decrease of about 8.8%.

Dongfeng Group co., Ltd. pointed out in the financial report that the joint venture passenger car business is facing a huge impact of lack of cores, and Dongfeng Honda's cumulative terminal sales in 2021 are 793,300 units, down 6.7% year-on-year. In 2020, this figure exceeded 850,000 units; Dongfeng Nissan's terminal sales in 2021 were 1.135 million units, a drop of more than 10%. In the whole of 2021, the wholesale volume of the Peugeot and Citroën brands in China was only 100,000 units.

At the same time, the decline of Dongfeng Infiniti is more obvious, with only 8697 vehicles sold in the whole year of 2021, a year-on-year decline of 66.15%. In addition to the impact of chip shortages, the lack of rich product matrix has also made Infiniti's market share constantly being eroded by other brands.

Dongfeng Peugeot and Dongfeng Citroen) sold a total of 100,600 vehicles last year, an increase of 100% year-on-year, although the growth rate is gratifying, but the market sales base of Dongfeng Peugeot Citroen itself is small, and it is not the main profit point of Dongfeng Motor Group.

In addition, Dongfeng Motor completely withdrew from the shareholder status of Dongfeng Yueda Kia at the end of last year, further compressing the brand's revenue source. It is understood that in the face of Dongfeng Yueda Kia's very weak sense of market presence, as well as huge losses, Dongfeng Motor Group, as one of the shareholders, publicly listed and sold its 25% stake in Dongfeng Yueda Kia in November 2021.

In January 2022, Dongfeng Motor Group completed the equity transfer for 297 million yuan, officially withdrawing from the tripartite shareholding model. After the withdrawal of Dongfeng Motor Group, Dongfeng Yueda Kia officially changed its name to "Kia Automobile Co., Ltd." in March this year.

Gross margin fell to its lowest level in five years

According to the financial report, the revenue growth of Dongfeng Group mainly came from passenger car companies, Dongfeng Citroen, Dongfeng Liuqi, Lantu and Dongfeng Finance Company.

Overall, Dongfeng Group's autonomous passenger car sector has developed relatively rapidly. In 2021, the sales volume of Dongfeng Fengshen, Dongfeng Fengxing, Dongfeng Fengguang/Xilisi increased by 71.4%, 26.8% and 2.3% respectively year-on-year. Among them, Dongfeng Fengshen's Yixuan series and Dongfeng Fengxing's T5EVO have the best sales, with annual sales of more than 50,000 vehicles.

According to the financial report data, in 2021, the sales revenue of Dongfeng Group's passenger car business was about RMB32.548 billion, an increase of approximately RMB15.607 billion, or about 92.1%, compared with approximately RMB6.941 billion in the same period of 2020. Sales revenue from the commercial vehicle business was approximately RMB71,250 million, a decrease of approximately RMB12,302 million, or approximately 14.7%, from approximately RMB83,552 million for the same period in 2020.

Dongfeng Group said that the decrease in revenue of commercial vehicle business was mainly affected by the switch of China VI regulations and the decline in industry demand.

It is worth noting that the total cost of sales of Dongfeng Group in 2021 was about 98.818 billion yuan, an increase of about 6.189 billion yuan or about 6.7% compared with 92.629 billion yuan in the same period last year. Gross profit totaled approximately MOP14,190 million, a decrease of approximately MOP1,622 million, or approximately 10.3%, from MOP15,812 million in the same period last year.

In 2021, the consolidated gross profit margin of Dongfeng Group was about 12.56%, down 1.94 percentage points from 14.5% in 2021. This is also the lowest gross profit margin of Dongfeng Group in the past five years.

In addition, Dongfeng Group's return on net assets has continued to decline for five years, from 13.7% in 2017 to 8.04% in 2021.

Focus on the development of autonomous passenger cars

Dongfeng Group has always owned many independent passenger car brands, including Fengshen, Fengxing, Scenery and past demeanor, but due to lack of competitiveness, the market performance is sluggish. For Dongfeng Group, the current main business is undoubtedly the independent passenger car sector, as well as the creation of high-end new energy independent brands.

It is understood that in 2022, Dongfeng Group's sales target will increase by 25% year-on-year, of which commercial vehicle sales will increase by 10% and passenger car sales will increase by 28%.

In terms of commercial vehicles, Dongfeng will launch 4 new products; in terms of passenger cars, Dongfeng Group will launch more than 13 new products, including 5 independent brands, including key models such as Lantu Dreamer and Fengshen Haoji; 8 joint venture brands, including Dongfeng Nissan ARIYA, Dongfeng Honda e· NS1, next-generation CRV, DPCA D78 and other models.

According to the "14th Five-Year Plan" released by Dongfeng Group, by 2025, Dongfeng commercial vehicles, autonomous passenger cars and new energy vehicles are all planned to reach 1 million units. Among them, the scale of Dongfeng's own brand passenger cars should enter the top three in the industry.

There is no doubt that to boost the independent passenger car business, Dongfeng Group will focus on the Lantu brand, M high-end electric off-road and Dongfeng Fengshen.

Leju Finance learned that on April 7, Lantu's second model, Lantu Dreamer MPV, has begun pre-sale. Dongfeng Group announced the launch in September last year, and another new high-end electric off-road M brand parallel to the Lantu Automobile brand will also be released in June this year.

For Dongfeng Group, completing a series of development goals for autonomous passenger cars will face considerable challenges and require a lot of investment. It is understood that in terms of R & D investment, Dongfeng Motor Group will grow to 100 billion yuan during the "14th Five-Year Plan" period, of which the R& D investment intensity of independent brands is not less than 6%.

Source: Leju Finance