Tianfeng: Maintains a "buy" rating for WULING MOTORS (00305) with a target price of 0.80 Hong Kong dollars.

Tianfeng released a research report stating that based on WULING MOTORS' research capabilities in the new energy field and its continuous investment and innovation in building a complete independent industry chain, the future performance is expected to continue to grow. It is predicted that the company's total revenue for 2025-2027 will reach 8.866/9.724/10.672 billion yuan respectively, with a year-on-year growth rate of +12%/10%/10%; based on the company's better-than-expected interim report, it is judged that the second half of the year can maintain the trend of the first half of the year, therefore the forecast for 2025-2027 net profit attributable to shareholders is adjusted from 800 million/1.1/1.44 billion yuan to 870 million/1.1/1.44 billion yuan, with a year-on-year growth rate of +72%/27%/31%, adjusting the target price to 0.80 Hong Kong dollars, maintaining a "buy" rating. The main points of Tianfeng are as follows: As of the interim report ending on June 30, 2025, the company achieved operating income of 4.03 billion yuan, up by 2.0% year-on-year; profitability significantly improved, with a net profit of 85.809 million yuan, up by 306.2% year-on-year; net profit attributable to shareholders reached 39.416 million yuan, up by 2385.2% year-on-year. The bank believes that the overall performance of the company is remarkable, and the improvement in profitability is mainly due to the optimization of product structure, cost control effectiveness, and increased investment in research and development. With the continued optimization of product structure in the future, the company is expected to further enhance its performance. Performance of business segments: Core business steady, power system turning losses, commercial vehicles driven by innovation Automotive components and other industrial services as the company's core source of income achieved revenues of 2.84 billion yuan, up by 5.2%. The business steadily expanded its market, with a total of 125 projects secured from 46 clients in the first half of the year. While consolidating existing clients such as SAIC-GM Wuling, Great Wall Motor, the company also successfully expanded to new clients such as SAIC passenger vehicles, Zhengzhou Yutong. The automotive power system business made a significant breakthrough, with adjusted EBIT turning losses into profits, achieving 6.61 million yuan. This is mainly due to the company improving its product structure, with high value-added products such as castings seeing rapid revenue growth. Adjusted EBIT for commercial vehicles increased by 6.2% year-on-year to 27.97 million yuan. The company achieved good results in the road vehicle market, such as firefighting vehicles, vending vehicles, while actively expanding into the low-speed unmanned driving field, laying the foundation for future growth with the industry-first narrow-body high payload vehicle-grade line control chassis. Profitability and cost control: Gross profit margin improvement, cost structure optimization In the first half of 2025, the company's gross profit margin increased to 12.0%, an increase of 1.2 percentage points year-on-year, indicating enhanced product added value and cost control capabilities. The sales and management expense ratio decreased by 1.3 percentage points year-on-year to 5.4%, reflecting improved operational efficiency of the company. The research and development expense ratio increased by 1.3 percentage points year-on-year to 4.6%. The bank believes that the company continues to increase its investment in technology upgrades and new product development, injecting momentum for long-term development. New energy and intelligence: Joint ventures growing rapidly, clear strategy for the parent company The joint venture company's "Lingshi Auto" brand performed well, with sales in the first half of 2025 increasing by 9% year-on-year, and reaching cooperation with top enterprises such as HuocheLala, SF Express, continuously improving market recognition. The parent company, Guangxi Automobile Group, proposed the "Lingshi Project" strategy, focusing on building the "Lingshi" whole vehicle brand, and striving to become a champion in the fields of hybrid powertrain, drive axle, and chassis, constructing an automobile industry ecosystem. At the same time, the company set up a Low Air Economy Business Unit, actively deploying low-altitude and low-altitude travel-related products. In addition, SAIC-GM Wuling, as the company's largest client, upgraded its strategic partnership with Huawei across auxiliary driving, intelligent cockpit, and intelligent manufacturing, providing long-term competitiveness. Risk warnings: 1. The penetration rate of the new energy vehicle market is lower than expected; 2. Intensified competition in the automotive components market; 3. Macroeconomic fluctuations affecting commercial vehicle demand; 4. Risks of dependence on major clients.