Tianfeng: First coverage of WULING MOTORS (00305), giving a "buy" rating with a target price of 0.77 Hong Kong dollars.

Tianfeng released a research report stating that based on WULING MOTORS (00305) continuous investment and innovation in the field of new energy research capabilities and the construction of a complete independent industrial chain, future performance is expected to continue to grow. The company is expected to achieve total operating revenue of 8.866/9.724/10.672 billion yuan from 2025 to 2027, a year-on-year increase of +12%/10%/10%; and the net profit attributable to the mother is expected to be 80 million/110 million/144 million yuan from 2025 to 2027, with a year-on-year increase of 58%/38%/31%. The company's target price is set at 0.77 Hong Kong dollars by the bank, with a "buy" rating. Tianfeng's main points are as follows: Company layout of the industrial chain, enhancing industrial synergy WULING MOTORS Group Holding Limited is a Chinese Hong Kong-listed company focused on the automotive industry chain business. The company inherits the nearly one hundred years of manufacturing experience of its controlling shareholder, Guangxi Automobile Group, focusing on automotive parts, power systems, and commercial vehicle design and development, including new energy vehicles. The company provides high-value parts products to dozens of domestic and foreign OEMs; power systems to over 10 million end customers; and quality commercial vehicles and travel services to over 1 million users. Transformation effects are showing, the company's revenue growth is expected in 2025 The business model of WULING MOTORS' commercial vehicle section has changed, with total revenue reaching 7.949 billion yuan in 2024 and operating costs of 7.089 billion yuan, a decrease of 24.96% year-on-year. The company's profit side is growing against the trend, with a significant increase in gross profit margin. In 2024, the company achieved a net profit of 111 million yuan, a year-on-year increase of +60.19%; and a net profit attributable to the mother of 51 million yuan, a year-on-year increase of +115.59%. The main reason for maintaining the growth of net profit is the adjustment of the commercial vehicle business and the increase in the proportion of high-margin products within the parts. The company's gross profit margin reached 9.89% in 2023 and 10.82% in 2024. Focus on parts business, layout of the new energy track The controlling shareholder, Guangxi Automobile Group, has proposed the "Lingshi Project" strategy, planning to promote the "131" strategy from 2025 to 2027. The company will cultivate 3 national manufacturing industry champions, including the national champion of small and medium displacement energy-saving hybrid power systems, the national champion of light-duty drive shafts, and the national champion of automotive chassis. The company will focus on the development of automotive parts business, driving product competitiveness through technological breakthroughs; while simultaneously building an automotive industry ecosystem, developing automotive service and trade industries, and cultivating strategic emerging industries such as automotive digitization and high-end intelligent equipment. Improvement in the company's parts business margins: upgrading product structure to the mid-to-high-end, successfully developing high-value-added products such as thermoplastic blow molding, miniaturized integrated electric axles, supporting the company's entry into the supply chain of mid-to-high-end models of companies like BYD Company Limited and Great Wall Motors; optimization of customer structure, sales growth of SAIC-GM Wuling drives core business development, while breakthroughs are made in expanding new customers such as BYD Company Limited. In terms of overseas layout, the company continues to operate overseas production bases in Indonesia, India, etc., promoting the internationalization of parts business. The company actively lays out the new energy industry, forming a product layout of "upgrading traditional power technology + integrating new energy power development." The company continues to develop efficient low-emission engines, promote new energy products including engines for electric vehicles, electric vehicle control systems and related parts, and different types of hybrid vehicle models. The company established Liuzhou Wuling New Energy Automobile Co., Ltd. as a joint venture company to integrate new energy vehicle business, which will be the main customer for the company's parts and other products in the future. In the future, the company will continue to lay out the new energy track and achieve strategic transformation to meet market demand.