"Changan Automobile (SZ000625), which you are concerned about, reached 11.52 on 2022-05-05 09:32:51, an increase of 10.03%, which is already up and down."
At the moment of the weak market, Changan Automobile has risen and stopped for two consecutive days, rising by more than 30% in five days, which has attracted much attention.
From April 28 to 29, Changan Automobile released its 2021 financial report and 2022 first quarter report.
In 2021, Changan Automobile's revenue reached 105.142 billion yuan, an increase of 24.33% year-on-year; net profit attributable to the mother was 3.552 billion yuan, an increase of 6.87% year-on-year; net profit after deduction of non-profit was 1.653 billion yuan, an increase of 150.85%. Basic earnings per share were RMB0.47. It is proposed to distribute 2.33 yuan (including tax) for every 10 shares to increase by 3 shares.
In the first quarter of 2022, Changan Automobile's revenue reached 34.576 billion yuan, an increase of 7.96% year-on-year, and net profit was 4.536 billion yuan, an increase of 431.45% year-on-year. Deducting non-net profit was 2.27 billion yuan, an increase of 215.24% year-on-year.
The financial report shows that Changan Automobile's non-net profit in the first three years before the end of the year was negative, returning to the "right track" of the main business profit, the total revenue exceeded the level of 100 billion yuan for the first time, the profitability continued to improve, and the profit in the first quarter of 2022 exceeded the whole of 2021.
The performance exceeded expectations, and smart money bought wildly. Driven by curiosity, I carefully flipped through the 226 pages of Changan Automobile's financial report and found that there were indeed many highlights.
Highlight 1: Deduction of non-net profit turned positive
Unlike BYD, which has automobile, mobile phone, battery and photovoltaic business, Changan Automobile's main business is automobiles, covering the research and development, manufacturing and sales of complete vehicles (including passenger cars and commercial vehicles) and the research and development and production of engines.
Looking at the financial reports of such car companies, in addition to looking at the net profit attributable to the mother, we must also look at the deduction of non-net profit, and the deduction of non-net profit is the net profit after the dehydration of a company. How much money Changan Automobile makes from selling cars is clear at a glance.
Changan Automobile's performance before 2017 was good, but in the three years of 2018, 2019 and 2020, the deduction of non-net profit was negative, and the deduction of non-net profit in 2021 turned positive.
What happened in those three years? Let the once-prosperous Changan Automobile lose money?
The reason for this is that its associated companies and joint ventures have experienced poor management and sales have plummeted.
According to the data, in 2016, Changan Ford sold 943,800 vehicles, reaching a record high. From 2017 to 2019, Changan Ford's sales were 828,000 units, 337,800 units, and 184,000 units, down 12.27%, 54.37%, and 51.3%, respectively.
In addition to Changan Ford, the performance of Changan Suzuki and Changan PSA is not good, and only Changan Mazda can maintain profitability.
Unlike private car companies such as Geely and Great Wall, Changan operates in a similar way to state-owned car companies such as Shangqi, Dongfeng and FAW, and the profits of enterprises mainly come from associated companies and joint ventures, and after earning money, they are allocated to their own brand business for research and development and production to support their development.
What should be done with the huge losses of associates and joint ventures?
The pain changes, and the next dose is "strong medicine".
On April 23, 2018, Changan Automobile launched the "Third Entrepreneurship - Innovation and Entrepreneurship Plan", which comprehensively optimized the group. The joint venture business should be broken, and it should be done well.
In September 2018, Japan's Suzuki, which has been a joint venture with Changan Automobile for 25 years, officially withdrew from the Chinese market, and Changan Automobile acquired 50% of the equity of Changan Suzuki held by Japanese companies for 1 yuan in cash.
In September 2019, Changan Automobile and Ford Motor began a comprehensive and deepening strategic cooperation. In 2020, Changan Ford's sales picked up and sold 253,300 vehicles in the whole year, an increase of 37.67% year-on-year. In 2021, the company sold 305,000 units, up 20.3% year-on-year. Although sales volume was less than one-third of the peak, the operating income reached 61.765 billion yuan and the net profit was 2.284 billion yuan.
In May 2020, Changan PSA changed hands to Baoneng Automobile, with a transfer amount of 1.63 billion yuan.
In October 2021, FAW Mazda was merged into Changan Mazda, further expanding Changan Mazda's product line and sales network. In 2021, Changan Mazda's operating income was 17.459 billion yuan and net profit was 859 million yuan.
In the past three years, Changan Automobile has shut down and transferred 960,000 complete vehicles and 870,000 engines of backward production capacity. By 2021, Changan Automobile will have a design capacity of 2.05 million vehicles, and the capacity utilization rate will reach 67%. After this operation, the investment income of the associated companies and joint ventures will turn into profits in 2021, and the non-net profit will be positive.
Highlight 2: Independent brands make profits for the first time
Changan Automobile is a joint venture and an independent enterprise, and the deduction of non-net profit in 2021 will turn positive, which has a great relationship with the rapid development of Changan's own brand in recent years.
At present, Changan Automobile has a total of three brands, namely Changan Passenger Brand, Auchan Brand and Kaicheng Brand. The Avita brand and the deep blue brand are nominally independent brands, but they are not sole proprietorships and belong to associated companies.
As far as I know, in addition to SAIC Motor, the associated companies and joint ventures of other car companies are accounted for in accordance with the equity method, and the parent company enjoys profits or losses according to the proportion of shareholding, and is included in the income statement under the "investment income" account.
Looking at the income statement of Changan Automobile's parent company, by comparing the net profit and investment income, we can know the operation of the parent company (independent brand).
Net profit represents the sum of operating profit and investment income for the year.
It is not difficult to find that in the financial reports of the calendar years except 2021, the net profit of changan automobile's parent company is less than the investment income, which shows that Changan's own brand has not yet made a profit.
In 2021, the net profit of Changan Automobile's parent company was greater than the investment income for the first time, and the operating profit was 1.47 billion yuan, which was a little more than the investment income of the associated company and the joint venture company, which was the first profit of Changan Automobile's own brand, and the contribution to the group's profit was comparable to that of the joint venture brand.
According to the financial report, in 2021, Changan Automobile achieved sales of 2.301 million units, and the annual cumulative sales of Changan Chinese brand vehicles exceeded 1.755 million units, an increase of 16.7% year-on-year, of which Changan Passenger Brand and Auchan Brand achieved sales of 966,000 units and 228,000 units, respectively, an increase of 20.0% and 49.0% year-on-year.
However, it should be noted that the gross profit margin of Changan Automobile's parent company is 14.5%, the net profit margin is low, and the operating profit of its own brands is mainly achieved by volume.
The second-generation CS75PLUS, Changan's main sales model, has two kinds of power, 1.5T and 2.0T, both of which are equipped with Aisin's 8-speed manual transmission. The SUV of the same level is basically equipped with 6DCT, 7DCT, or 6AT, CVT gearbox. For example, honda CR-V is CVT, Great Wall Haval H6, Geely Boyue 7DCT, there are individual models of 2.0T version to provide 8AT, but 1.5T with 8AT transmission, the second generation CS75PLUS is the only one.
Highlight three: A large wave of the world's advanced level of research and development results will soon be productized
For consumers who intend to buy a car, Changan Automobile is higher and more affordable than its peers. But for a business, a business that doesn't make money can't be sustained.
Therefore, how to optimize the product structure and increase the product premium has become a problem that corporate executives need to face directly.
Changan Automobile's approach is to strengthen research and development, build core competitiveness, and build a "moat".
In terms of R&D investment, Changan Automobile's R&D expenses increased by 24.51% to 4.827 billion yuan in 2021, and R&D accounted for 4.59% of revenue; the number of R&D personnel rose from 6636 in the previous year to 7269, accounting for more than 17% of the total number of employees.
However, it should be reminded that we can not only look at R & D investment, but also look at the results of research and development, and it will take time for the results to be transformed into commodities that are sought after by the market. And the market has peaks and troughs, when the blockbuster results just happen to meet the market peak, that is, sales have risen sharply. On the contrary, it is silent.
For example, when BYD DM-i was launched, the new energy vehicle market began to explode, and BYD's sales rose all the way. In fact, this kind of series parallel hybrid system, the first to be put into production is GAC, called GMC electromechanical coupling system, GAC got up early to catch up with a late set, not lost in technology, but in timing.
Reviewing the strong performance of Changan Automobile in 2021, CS75, CS55, CS35, Yidong, UNI-T, behind the star models one after another, the biggest contributor is the Blue Whale NE engine, which exceeded 1 million models throughout the year, and the Blue Whale NE engine is an important research achievement of Changan Automobile in 2019.
So next, whether Changan Automobile can go further does not lie in the number of new cars, but in the technical content at this stage.
Compared with individual ALL IN pure electric car companies, Changan Automobile is an internal combustion engine, pure electric, plug-in hybrid, range extender and hydrogen, multi-way.
I think it's a reasonable technical path because we have a hard time predicting how things will evolve next.
Just like the car companies that bet on pure electric vehicles, if they knew that today, the price of battery-grade lithium carbonate has risen by 12 times, and there is no hope of replacing fuel vehicles with "affordable" pure electric vehicles, will they only develop pure electric vehicles?
At present, stronger car companies, such as Toyota and BMW, are multi-way.
The financial report shows that at this stage, Changan Automobile has the world's advanced level of research and development results.
In the field of pure electric, Changan Automobile plans to mass-produce a new generation of seven-in-one ultra-collector electric drive in 2022, which can not only meet the needs of front-drive, rear-drive and four-wheel drive applications, but also its biggest highlight is the world's first high-frequency pulse heating technology for electric drive, which can heat the battery at 4°C per minute in the -30°C environment, significantly improving low-temperature power and charging performance.
Electric vehicles that are not suitable for use in the colder regions of the north are disrupted by this technology.
In terms of batteries, Changan Automobile conducts technical research from the two dimensions of active and passive safety, effectively avoiding the thermal runaway of the entire battery package and zero fire in the assembly. At the same time, the new platform battery adopts 590 modules, which can cover 400-700km endurance requirements by adjusting the number of modules, and the system energy density ≥ 180wh/kg.
In the field of plug-in hybrid, the Blue Whale iDD system independently developed by Changan has evolved to the second generation. In March this year, the first UNI-K iDD with the Blue Whale iDD hybrid system was launched. It is worth mentioning that the UNI-K iDD, which weighs 2 tons, has a low fuel consumption of 5L/100km, a pure electric endurance of 130km, and a comprehensive endurance of 1100km. The fuel-saving effect is comparable to that of Toyota and Honda, leaders in the field of hybrids.
UNI-K iDD
There are not many manufacturers with their own plug-in hybrid systems, and even fewer manufacturers with their own modular architecture, but Changan Automobile has more than three architectures, MPA architecture (also known as Ark architecture), EPA architecture and CHN platform.
Ark architecture
In the field of hydrogen fuel cells, which is regarded as the "ultimate environmental protection solution", Changan Automobile has launched China's first mass-produced hydrogen fuel cell car C385, which has a cruising range of more than 700 kilometers under the comprehensive CLTC standard of the hydrogen version, and the hydrogen consumption of feed is as low as 0.65 kg/100km or less, which can achieve 3 minutes of ultra-fast energy replenishment.
C385
In terms of intelligence, Changan Automobile has mastered more than 200 core technologies such as visual perception and multi-mode fusion, of which 26 technologies such as integrated adaptive cruise (IACC), remote parking (APA5.0), and remote intelligent parking (APA6.0) have been first launched in China.
Some people say that the current new energy market is already a red sea, but in my opinion, it is actually a blue ocean, because there are not many truly excellent new energy sources. The new energy market also needs star models such as the Corolla, Civic and Camry in the field of fuel vehicles to be truly activated. Changan Automobile, which has strong technical strength, has a great chance of winning in the new energy market.
Written in the end: In terms of other indicators, Changan Automobile's total assets in 2021 are 135.4 billion yuan, 17.2 billion yuan more than in 2020. Among them, 55.9 billion of the 135.4 billion yuan are their own, and 79.5 billion yuan are borrowed. Borrowings in 2020 were $64.8 billion. Therefore, of the 17.2 billion yuan of assets added in 2021, 14.7 billion yuan is newly borrowed, and 2.5 billion yuan is earned by themselves (net profit is 3.52 billion, and the difference is partially dividended).
Of the 79.5 billion liabilities, 76.1 billion are normal current liabilities in production and operation. Non-current liabilities were $3.4 billion, $1.2 billion more than in 2020. According to the financial report, the non-current liabilities and long-term payables related parties due within one year are Chongqing Changan New Energy Automobile Technology Co., Ltd.
According to the financial report, the net profit of Chongqing Changan New Energy Automobile Technology Co., Ltd. in 2021 was -2.77 billion yuan. I think it's a loss caused by a big investment, not a loss caused by operation. From another aspect, whether Changan New Energy can sell well in the future will indeed have a great impact on enterprises.
In addition, Changan Automobile's operating net cash flow in 2021 was 22.972 billion yuan, an increase of 115.17% over the same period in 2020, and the net cash inflow increased significantly year-on-year.
In 2021, Changan Automobile received a total of 1.336 billion yuan in various financial incentives from the government, which can be seen as the "buy" rating given by the government to Changan Automobile.
Based on the above analysis, I am optimistic about Changan Automobile's next market performance.
Text | Li Jianbo
(This article is the author's personal opinion only and does not represent the position of DearAuto.) )
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Mr. Li Guoyong of Guangdong Green Law Firm