Orient: The overall profitability of the automotive industry is weak, but high-quality companies have strong risk resistance.

Orient released a research report stating that the first quarter automobile industry sales were under pressure, market competition intensified, and external factors such as rising raw material prices and exchange rate fluctuations led to weak overall performance in profitability and gross profit margin of automobile industry companies. However, after excluding the impact of exchange rate fluctuations, some companies with strong competitiveness and high operational efficiency still achieved year-on-year improvement in net profit and gross profit margin; it is expected that the marginal improvement in demand in the second quarter of the automobile industry and the marginal weakening of the impact of exchange rate fluctuations will help promote the improvement in performance of automobile industry companies on a quarter-on-quarter basis, and it is recommended to continue to focus on some companies with strong competitiveness in the areas of overseas complete vehicles, gas generator/diesel engine industry chains, liquid cooling industry chains, and humanoid Siasun Robot & Automation chains. Key points from Orient include: Stable revenue growth in the first quarter, but pressure on profits year-on-year By 2025, the annual revenue of the automobile industry (including listed and unlisted companies) is expected to reach 11.18 trillion yuan, a year-on-year growth of 5.0%; the total profit is expected to be 461.02 billion yuan, a year-on-year decrease of 0.3%. In the first quarter of 2026, the revenue of the automobile industry is estimated to be 2.41 trillion yuan, a year-on-year growth of 0.4%; the total profit is expected to be 783.5 billion yuan, a year-on-year decrease of 17.2%. With the gradual implementation of the 'replace old cars with new' policy and the release and launch of several key new models around the April Beijing Auto Show, it is predicted that consumer wait-and-see sentiment will ease in the second quarter, leading to a marginal improvement in automobile consumption demand and the profitability of the industry. Profitability Overall weak profitability in the first quarter, with significant differentiation among companies; some high-quality companies, when excluding exchange rates, have better profitability than the average level. In the first quarter, the total revenue of the automotive industry (SW passenger car + SW commercial vehicle) was 514.808 billion yuan, a year-on-year increase of 1.4%; the revenue of the auto parts industry was 376.281 billion yuan, a year-on-year increase of 4.1%. In the first quarter, there was a differentiation in revenue performance among automotive companies, with most auto parts companies experiencing a year-on-year increase in revenue. The net profit margin of the auto parts industry in the first quarter decreased year-on-year, but it was better than that of the auto industry as a whole. In the first quarter, the profitability of passenger car companies was generally under pressure year-on-year, while commercial vehicle companies showed an overall improvement in profitability. In the first quarter, due to external factors such as exchange rate fluctuations and rising raw material prices, the profit growth rate of most auto parts companies slowed down. However, it is expected that after excluding the impact of exchange rate fluctuations, the profitability of some auto parts companies will significantly improve year-on-year, outperforming the average level of the automotive parts industry. Inventory In the first quarter, the proportion of inventory of complete vehicle companies increased, leading to a decline in industry turnover. At the end of the first quarter, there was some growth in inventory of complete vehicles, mainly due to the increase in inventory levels of some vehicle companies; the proportion of inventory to total assets in the auto parts industry remained relatively stable at 22.1% month-on-month. The average inventory turnover days of passenger car companies at the end of the first quarter increased year-on-year slightly, while the turnover of inventories for truck and bus companies remained generally stable, with varying levels of turnover among auto parts companies. Cash flow In the first quarter, there was a differentiation in cash flow among complete vehicle companies, with improvements in cash flow for auto parts companies. The operating cash flow of complete vehicle companies in the first quarter improved year-on-year, while the cash flow of auto parts companies significantly improved. Key players in the complete vehicle industry BYD Company Limited, GEELY AUTO, SAIC Motor Corporation, Anhui Jianghuai Automobile Group Corp., Ltd., Chongqing Sokon Industry Group Stock, etc.; key players in the liquid cooling industry: Shenzhen Envicool Technology, Zhejiang Yinlun Machinery, Ningbo Tuopu Group, Feilong Auto Components, Sichuan Chuanhuan Technology, etc.; key players in the gas generator industry: Zhejiang Yinlun Machinery, Weichai Power, ZYNP Corporation; key players in the Siasun Robot & Automation industry: Jiangsu Xinquan Automotive Trim, Ningbo Tuopu Group, Zhejiang Yinlun Machinery, Shanghai Daimay Automotive Interior, Zhejiang Sanhua Intelligent Controls, Changzhou Xingyu Automotive Lighting Systems, Zhejiang Rongtai Electric Material, Ningbo Xusheng Group, Jiangsu Rongtai Industry, Zhejiang Sling Intelligent Drive Group, IKD Co., Ltd., Jiangsu Pacific Precision Forging, Jiangsu Bojun Industrial Technology, Kunshan Huguang Auto Harness, etc.; key players in the intelligent driving industry: Jingwei Hengrun, Bethel Automotive Safety Systems, Huizhou Desay SV Automotive, etc. Risk warning The downturn in the macroeconomy may affect automobile demand, fluctuations in upstream raw material prices, and pressure from price wars among car companies.