GAC (2238 HK) New Energy Vehicles Accelerate the Development January 13, 2022 142

PSR Recommendation: BUY Status: Maintained
Target Price: HKD10.30

Company Profile
Currently, GAC’s major segments cover R&D, vehicle (automobiles and motorcycles), parts,
commerce services, financial services, and mobile travel service, developing a complete
cycle of the automotive industry chain. By adhering to the strategy of “joint ventures + selfowned brands”, the Company owns six major brands including GAC Honda, GAC Toyota, GAC
Motor, GAC Aion, GAC FCA, and GAC Mitsubishi, as well as many best-selling models. GAC
currently has a market share of 8.1% in China, ranking first in the market share of mid-tohigh-end sedans.
Investment Summary
FY20 Profit Decreases by 10% yoy, Mainly Due to Impairment
In 2020, GAC recorded operating revenue of RMB63,157 million, up by 5.78% Y-o-Y; net
profit attributable to the parent company was RMB5,966 million, down by 9.85% Y-o-Y; in
addition to the impact of COVID-19 pandemic, the decline in results was mainly due to the
large accrued expenses in the fourth quarter (provision for asset impairment of RMB720
million in a lump sum). After deducting non-recurring gains and losses, net profit
attributable to the parent company was RMB4,807 million, up by 25.17% Y-o-Y. Self-owned
brands achieved loss reduction. After deducting non-recurring gains and losses and return
on investment, net loss attributable to the parent company was RMB5.1 billion, down by
12% Y-o-Y. EPS was RMB0.58, down by 11% Y-o-Y. The final dividend was RMB0.15 per share.
Combined with the interim dividend of RMB 0.03 per share, the dividend payout ratio was
31%.
Gross margin decreased by 0.38 ppts Y-o-Y, mainly due to the negative effect of scale caused
by the decline in sales volume of self-owned brands. The period expense ratio for the whole
year decreased by 2.1 ppts Y-o-Y, mainly because the sales expense ratio fell by 1.86 ppts,
and other expense ratios remained flat Y-o-Y. The R&D expenses totaled RMB5.1 billion, of
which 17% was expensed. Joint ventures had a good profitability. The annual return on
investment was RMB9,911 million, up by 2.96% Y-o-Y. Specifically, the return on investment
in associates and joint ventures was RMB9,571 million, up by 1.83% Y-o-Y. At the end of
2020, monetary funds were RMB28.5 billion and interest-bearing liabilities were RMB14.8
billion.
Japanese JVs Remain Strong Momentum While Self-owned Brands Make Continuous
Improvemen

About the author

Profile photo of Zhang Jing

Zhang Jing
Phillip Securities (HK)

Bachelor Degree in Tongji University of Engineering; Master Degree in East China Normal University of finance. Currently covering the automobile and air sectors. She has years of experience in investment research and is good at combining analysis for the companies with industry prospects.

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