Great Wall Motor's total sales fell by 16% in the first three months of the cost pressure, and the market value evaporated by hundreds of billions

"Investor Network" Ge Fanmei

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Like many of its peers, Great Wall Motor Co., Ltd. (hereinafter referred to as "Great Wall Motor", 601633.SH) is facing supply chain tests.

According to the news released by the tank brand, affected by the epidemic in many places, the tank 300 model involved a total of 8 supplier partners to stop work and stop operation, and the current tank 300 model was suspended from April 14.

"Tank" is one of the brands of Great Wall Motors. According to the March sales data released by Great Wall Motors, the sales volume of the Great Wall Motor tank brand in the month was 8922 units, an increase of 78.26% year-on-year; the cumulative sales volume from January to March was 25753 units, an increase of 79.8% year-on-year.

In the first three months of this year, tanks were the brand with the largest sales growth of Great Wall Motors, and now they have suffered production suspensions, which may further drag down the company's overall sales. In fact, Great Wall Motor's total sales in the first three months of this year have declined to 283,500 units, down 16.32% year-on-year.

At present, Great Wall Motors is not only facing the embarrassment of weak sales growth, but also the company's operating performance has been tested. In 2021, Great Wall Motor's net profit was 6.726 billion yuan, of which the subsidy for new energy was 1.626 billion yuan, and the amount of subsidy increased by 722 million yuan year-on-year. At the same time, the cost of Great Wall Motors is also under pressure, or it will drag down the performance.

Sales of the main brand pickup truck and Haval declined

According to the 2021 annual report, Great Wall Motors has three major products, namely SUVs, pickup trucks, and cars (mainly new energy vehicles), and it has five major vehicle brands: Haval, Weipai, Euler, Tank and Great Wall Pickup Truck.

Among them, haval brand focuses on the field of SUV products; Wei brand creates a new category of "0 anxiety intelligent electric" and comprehensively advances to high-end new energy brands; Euler is positioned in the new track of the new energy vehicle women's market; tank is a tide play off-road SUV brand launched by Great Wall Motors for the new trend of SUVs, and only began to officially operate in 2021; Great Wall pickup trucks have ranked first in domestic and export sales for 24 consecutive years, and the cumulative global sales have exceeded 2 million.

The "matrix" composed of five major brands of Great Wall Motors supports the company's automobile sales. According to the annual report, in 2021, Great Wall Motors achieved cumulative sales of 1.281 million units, an increase of 14.79% year-on-year, of which overseas sales reached 139,900 units, an increase of 102.98% year-on-year; this is the sixth consecutive year that Great Wall Motors has exceeded the sales scale of one million vehicles. However, in the first three months of this year, Great Wall Motor's sales fell overall, achieving sales of 283,500 units, down 16.32% year-on-year.

Among the Great Wall Motor brands, the Haval brand is the main sales force. According to the data, in 2021, the sales volume of the Haval brand was 770,000 vehicles, accounting for 60% of the total sales, but the year-on-year increase was only 2.64%, while in the first three months of 2022, the sales volume of the Haval brand fell by 25.13% year-on-year to 166,700 vehicles.

As the second-largest selling brand of Great Wall Motors, Great Wall Pickup trucks are also facing the dilemma of weak growth, with sales of 233,000 units in 2021, an increase of only 3.56% year-on-year. In the first three months of 2022, the sales volume of Great Wall pickup trucks was 59,400 units, down 27.68% year-on-year.

The brand sales ranked second, respectively, Euler, Tank and Wei brand, with sales of 135,000 units, 85,600 vehicles and 58,400 units in 2021, respectively. Among them, Euler's sales increased by 140% year-on-year, while Weipai's sales volume fell by 25.65% year-on-year. It is worth noting that from January to March 2022, Euler's sales volume was 30,700 vehicles, an increase of only 10%, and the growth rate slowed down.

The transformation of new energy has a long way to go

Today, the two main brands of Great Wall Motors are facing the problem of declining sales, and there is still a big gap from the company's target of 4 million vehicles.

As early as June 2021, Great Wall Motor released the "Great Wall Motor 2025 Strategy", the company set a target sales target of 4 million vehicles in 2025, of which 80% are new energy vehicles, and the expected operating income is 600 billion yuan.

However, in 2021, Great Wall Motor's new energy vehicle sales will only be 139,000 units, accounting for less than 11% of total sales.

At present, due to the impact of the epidemic in Shanghai, Jiangsu, Jilin and other places, many parts suppliers of Great Wall Motor have been affected, resulting in limited production capacity of factories. At present, the tank brand has announced the discontinuation of production. In this regard, Great Wall Motor said: "Great Wall Motor is working with its supply chain partners to actively solve related problems and try to minimize the impact. ”

In fact, in addition to the impact of the epidemic, the lack of core in automobiles also has a greater impact on Great Wall Motors. Public information shows that the Great Wall Yongchuan Factory, which previously mainly produced tank 300 and pickup truck brand Great Wall guns, also reduced production due to lack of cores.

Affected by the shortage of supply chain, great wall motor's production and sales have fluctuated a lot. In the first three months of this year, Great Wall Motor's production volume was 285,900 units, down 14.16% year-on-year.

Among them, in February, Great Wall Motor sold 70,800 new vehicles, down 36.6% month-on-month and 20% year-on-year. As for the reasons for the decline in sales, Great Wall Motors said that bosch is the exclusive supplier of ESP configurations for Great Wall Motors' main models, mainly due to insufficient supply of body electronic stability systems (ESP) produced by Bosch Automotive Components (Suzhou) Co., Ltd.

It is worth noting that Great Wall Motors has also raised the price of products. On April 12, Great Wall Motor's Weipai official Weibo announced that it was affected by the sharp increase in the prices of raw materials, chips and core components. Weipai will adjust the official guidance price of some models on sale in the coffee series, with an increase of 5,000-12,000 yuan, and the price adjustment will take effect on April 15. Weipai also said that consumers who buy cars at the Wei APP's "spot car purchase" entrance and pay a deposit before the price adjustment officially takes effect will not be affected by the price adjustment.

Cost pressures drag down performance

Great Wall Motor raised the price of products, or to improve the company's performance.

From the performance point of view, in 2021, Great Wall Motor achieved a total operating income of 136.405 billion yuan, an increase of 32.04% year-on-year; net profit of 6.726 billion yuan, an increase of 25.43%.

Great Wall Motor said that the increase in net profit was mainly due to the increase in vehicle sales. During the reporting period, Great Wall Motors firmly determined the transformation of global intelligent technology companies, concentrated on electrification, intelligent technology innovation and global development, deepened category innovation and user operation, and improved system strength and ecological construction. During the year, sales increased and model structure improved, which contributed to the increase in performance.

However, it is worth noting that in 2021, Great Wall Motor's non-net profit was 4.303 billion yuan, an increase of only 9.55% year-on-year, and the net profit of 6.726 billion yuan, a difference of 2.323 billion yuan. Among them, in the fourth quarter of 2021, Great Wall Motor's net profit attributable to the mother was 1.781 billion yuan, a year-on-year decrease of 35.82%, and the net profit after deduction of non-attributable net profit was 550 million yuan, a year-on-year decrease of 71.93%.

Northeast Securities believes in the research report that Great Wall Motor's profit decline in the fourth quarter was affected by the accrual of equity incentive fees and Euler compensation rights expenses on the one hand, and on the other hand, caused by chip shortages and rising raw material costs.

Specifically, the 2021 annual report shows that the amount of government subsidies included in the profit and loss of the current period in 2021 of Great Wall Motors is close to 2.2 billion yuan, nearly 1 billion yuan more than in previous years, of which the subsidy for new energy is 1.626 billion yuan, an increase of 722 million yuan year-on-year. It is worth mentioning that this year is the last year of new energy subsidies, if the new energy subsidies are cut, the profitability of Great Wall Motor's main business is worrying.

In fact, from 2018 to 2020, Great Wall Motor's non-net profit was 3.889 billion yuan, 3.987 billion yuan and 3.836 billion yuan, respectively, with a year-on-year change of -9.53%, 2.52% and -3.77%.

In 2021, Great Wall Motors' labor costs will increase significantly. According to the annual report data, the number of employees of Great Wall Motors increased from 63,200 at the end of 2020 to 77,900 at the end of 2021, an increase of 14,700, an increase of 23.3% year-on-year, and the total cost of employees was 10.528 billion yuan. From the perspective of peer enterprises, Geely Automobile will only increase by 6,000 people in 2021, with 44,000 employees, an increase of 15.8% year-on-year.

In addition, Great Wall Motor's management expenses in 2021 were 4.043 billion yuan, an increase of 58.39% year-on-year, mainly due to the increase in the number of managers and the increase in equity incentive expenses. Looking at the equity incentive announcement issued by Great Wall Motors, Great Wall Motors has indeed distributed a lot of shares to employees in the past few years. For example, in Great Wall Motor's first employee stock ownership plan in 2020, 281 employees were granted 49.3035 million restricted shares and 1651 people were granted 87.0653 million stock options.

At the same time, Great Wall Motor's R&D expenses are also surging, increasing by 46.36% year-on-year to 4.489 billion yuan. The company said that it was mainly due to the increase in investment in research and development of intelligent, electrified and new model projects. Great Wall Motors also said in its annual report that from 2021 to 2025, Great Wall Motors is expected to invest about 100 billion yuan in research and development.

In the secondary market, Great Wall Motor's A-share stock price fell from a peak of 69.8 yuan per share in October 2021, closing at 24.23 yuan per share on April 21, a drop of more than 65%; the market value evaporated by more than 270 billion yuan, leaving only 176.3 billion yuan; PE (TTM) was 33 times. (Produced by Thinking Finance)■