CIMC Vehicles: Leading New Development of the Industry!

In the first half of 2024, against the backdrop of continued industry adjustments and a weakening external macro environment, CIMC Vehicles (301039.SZ) demonstrated strong resilience and robust operating capabilities, and its market competitiveness continued to increase.

As an important strategy for the company's third entrepreneurial venture, the "Starlink Project" has effectively enhanced the company's core competitiveness through innovative design, technology application, organizational change and resource allocation optimization. Since the top-level design was completed at the beginning of the year, the plan has been rapidly promoted and implemented in depth, and the company has achieved remarkable results in improving production efficiency and market expansion: Specifically, CIMC Vehicles has optimized the entire process from procurement to production through digital transformation, improving production efficiency and product quality. At the same time, the company promotes modular products, reduces product types, improves production standardization, and accelerates market response. In addition, the optimization of the organizational structure has also improved decision-making efficiency and execution, enabling the company to better respond to market changes. Looking to the future, CIMC Vehicles will continue to adhere to technological innovation and organizational reform, continuously improve its competitiveness, and continue to create new quality productivity to adapt to the new normal of macroeconomic development. CIMC Vehicles is expected to lead the semi-trailer industry into a new stage of development.

Gross profit margin reached 14.91% in the first half of the year, maintaining an upward trend

According to the announcement, CIMC Vehicles achieved operating income of RMB 10.70 billion (the same below) in the first half of 2024, and realized a net profit of RMB 563 million attributable to shareholders of the listed company, and a net profit of RMB 551 million after deducting non-recurring gains and losses. At the same time, the company disclosed the 2024 interim profit distribution plan: based on 1.874 billion shares, it plans to pay a cash dividend of RMB 2.80 (including tax) per 10 shares to all shareholders. Although the net profit has been adjusted due to the return of North American business to normal levels and the high base investment income in the same period last year, the core indicator of the company's profit quality, gross profit margin, has been eye-catching with its outstanding performance. In the first half of the year, the company's gross profit margin reached 14.91%. This figure not only exceeded the average gross profit margin of 13.53% in the same period of the past three years, but also roughly reflected that CIMC Vehicles maintained an overall upward trend in gross profit margin during the first half of 2021-2024, showing the company's advantages in refined management and product pricing. The upward trend of gross profit margin is the result of CIMC Vehicles' efforts in production, products and market. The company has improved efficiency through technological innovation, optimized product structure to meet market demand, and accurately positioned the market. These efforts have laid a solid foundation for the company's sustainable development and consolidated its leading position in the industry.

Analysis of CIMC Vehicles' Three Alpha Growth Points

Wind data shows that in the past year, a total of 8 analysts have given CIMC Vehicles a "buy" or "overweight" rating. Judging from the consensus expectations, industry analysts have "unanimously" conveyed similar positive views or opinions on the company's future development.

In the context of the overall industry and the external environment showing no obvious signs of recovery, the analysts' optimism is not based on the beta effect of the industry trend, but on CIMC Vehicles' own unique alpha advantage - that is, the unique competitiveness that exceeds the market. Logically speaking, the author summarizes the following points: First, CIMC Vehicles has an unrivaled and super competitive advantage in the field of semi-trailers and special vehicle upper parts, whether in the entire track or in multiple sub-tracks.According to the 2023 Global Semi-trailer OEM Ranking List released by Global Trailer, CIMC Vehicles was selected as the world's number one semi-trailer manufacturer, ranking first for eleven consecutive years. In the first half of 2024, CIMC Vehicles' various business groups continued to achieve market leadership in their respective segments: Starlink Lighthouse Pioneer Group achieved counter-cyclical growth in sales and revenue in China and the "Belt and Road" market through modular product upgrades and iterations and order center operation optimization, and China's market share ranked first for five consecutive years. The Qiangguan Business Group has continuously consolidated its market leadership in the tank truck market through technological innovation and marketing model innovation, such as the research and development of head-mounted integrated hybrid semi-trailer traction mixer trucks. In North American business, the "Great White Bear Plan" was implemented to actively explore the new development pattern of the global supply chain of North American refrigerated semi-trailers and deepen local operations. Europe and other businesses have improved production efficiency by optimizing manufacturing processes and flexible production lines. SDC has maintained its first market share in the UK, and LAG has maintained its leading position in the European tank truck market. The special vehicle body business is at the forefront of China's dump truck modification industry. Through lean management and the layout of new energy products, this business has achieved a significant increase in market share in the urban muck truck market. At the same time, CIMC Vehicles has also explored innovative business models in new energy and autonomous driving scenarios, and promoted its leading strategic layout in the fields of autonomous unmanned trucks and new energy intelligent logistics and transportation.

Second, CIMC Vehicles has created a diversified and international source of growth based on its leading advantages in multiple segments. Unlike companies that rely on a single source of business, CIMC Vehicles relies on the growth potential of multiple business groups, which are released successively in different time periods, laying a solid foundation for the steady expansion and sustainable growth of the company's business scale. In the first half of 2024, the revenue share of each business group of CIMC Vehicles is shown in the figure below. One thing that can be quickly captured is that the revenue share of North American business was 35.8%, far lower than 46.9% in the same period last year and lower than 43.3% recorded at the end of last year. It is worth noting that although the North American business, which was in a high boom in the first half of the year, has gradually returned to normal, other endogenous growth forces have been demonstrated within the company. This is mainly reflected in the rapid performance of Starlink Lighthouse Pioneer Group and Qiangguan Business Group, as well as the maintenance of the basic market by European and other businesses, and the emergence of the Australian market. This is also an important reason why the company's revenue and profits can continue to show resilience.

The third point is that building new quality productivity will inject continuous power into the overall competitiveness of CIMC Vehicles.

Regarding how to build and strengthen its own new quality productivity in the future, CIMC Vehicles will closely follow its strategic planning and adopt differentiated and precise strategies based on the specific needs and focus of each business group.

For Starlink Lighthouse Pioneer Group, the key lies in the continuous and rapid advancement of the "Starlink Project", accelerating the structural reform of the semi-trailer production organization, seizing the policy window period of the new round of "old for new" for transportation equipment, and achieving breakthrough growth in the domestic semi-trailer business; for the Qiangguan Business Group, it is necessary to actively promote product modularization, explore overseas markets, incubate innovative businesses, and strengthen the second growth curve. ; For the North American business, the focus will be on resuming the operation and delivery of container skeleton vehicles, implementing the strategic plan, and promoting the upgrade of the North American refrigerated semi-trailer business; Europe and other businesses will leverage the advantages of the global supply chain, improve the layout of LoM manufacturing plants, and improve production efficiency, while exploring new businesses and products and embracing new development opportunities; the special vehicle body business will maintain its leading position in the market segment, focus on cost reduction and efficiency improvement, leverage the advantages of LTP+LoM delivery, and increase market share and profitability.

Create new quality productivity and achieve cycle crossing

The latest performance announcement also provides a detailed explanation of the path for CIMC Vehicles to create new quality productivity in the future. After summarizing, the following views can be used as a reference for investors.
Facing the new normal of the global economy and industry challenges, CIMC Vehicles is fundamentally getting rid of the low-quality competition in the industry through the construction of new quality productivity, and realizing a leapfrog transformation from low-quality competition to high-quality development. Can it be done? It mainly depends on whether the company can achieve breakthroughs in the following five aspects in the future:

1) Fully implement the "Starlink Project": The company takes the "Starlink Project" as the core, improves production efficiency and market response speed through innovative design, technological innovation, organizational structure optimization and resource allocation, and consolidates and expands its market leading position.
2) Deepen innovation of new energy products: Establish a new energy head-mounted integrated train platform, promote electrification research and development, achieve comprehensive improvement in economy, power and safety, and lead transportation mode innovation.
3) Improve transoceanic operation efficiency: Adhere to the "transoceanic operation, local manufacturing" strategy, deepen global supply chain management, attract international companies to participate in the Chinese market, and improve transoceanic operation efficiency.
4) Reform of the Strong Crown Business Group: Launch the "Strong Crown Rise" plan to promote the structural reform of cement mixer truck production organization, optimize the allocation of production capacity resources, and consolidate the leading position in the tank truck market.
5) Upgrade the top-level design of organizational development: Carry out top-level organizational design, build a corporate governance structure, set up a technical headquarters, enhance technology research and development and innovation capabilities, respond to transoceanic operation challenges, and ultimately provide organizational guarantees for the comprehensive creation of new quality productivity.

In general, these five series of powerful measures of CIMC Vehicles correspond to the more basic core capabilities such as market adaptability, technological innovation capability, globalization strategy, resource allocation efficiency and organizational execution.

First, market adaptability. Whether the company can accurately grasp market demand and respond quickly to market changes is the key to the success of its strategy.
Second, technological innovation capability. Continuous technological research and development and innovation are the core of getting rid of low-quality competition and improving product competitiveness.
Third, globalization strategy: To effectively deploy in the global market and realize "transoceanic operation and local manufacturing", the company needs to have cross-cultural management capabilities and global resource integration capabilities.
Fourth, resource allocation efficiency: Optimizing resource allocation and improving production and operation efficiency are crucial to reducing costs and improving profitability.
Fifth, organizational execution: The optimization of organizational structure and the improvement of governance structure require strong execution to ensure the implementation of various plans.

Once the above capabilities are clarified and further summarized and attributed, they will not only help CIMC Vehicles to reshape its moat and consolidate the company's core competitiveness in the new era, but will also set a new benchmark for the high-quality development of the semi-trailer industry, indicating that the company will continue to lead the industry in the new development stage and achieve sustainable development and cycle crossing in the long term.
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China Special Vehicle Adivsor