China's leading bus manufacturer has once again witnessed explosive performance.

Recently, Yutong Bus announced that it expects its net profit attributable to shareholders of listed companies in 2024 to range between 3.82 billion yuan and 4.27 billion yuan, marking an increase of 110% to 135% year-on-year. In 2024, the company sold a total of 46,918 buses, a 28.48% increase from the previous year. Among these, exports totaled 14,000 units, a 37.73% year-on-year increase, while domestic sales reached 32,918 units, up 24.91% from the previous year.

Market analysts attribute this success to Yutong Bus's robust performance in overseas markets, as well as its focus on new energy and high-end fields.

As an industry leader, Yutong Bus has faced performance bottlenecks since 2016. Notably, in 2020, its net profit plummeted by 73.43% to 516 million yuan.

However, in 2023, Yutong Bus achieved a net profit of 1.817 billion yuan, a year-on-year increase of 139.36%, nearing the scale seen in 2019. In the first quarter of 2024, it continued to surge ahead, realizing revenue of 6.616 billion yuan, an 85.01% year-on-year increase, and a net profit increase of over 440% to 657 million yuan. This growth rate ranked first among the six listed bus companies.

It's worth noting that in the first quarter of 2024, Yutong Bus's net profit reached an all-time high, surpassing the previous high of 379 million yuan in the same period of 2016 by 73.35%. Based on the growth momentum seen in the 2024 mid-year report, achieving a new high and maintaining high growth in annual performance will not be difficult.

For traditional bus leaders like Yutong Bus, its recent "explosive" performance has led to significant gains in stock prices and a market value gap compared to peers. Currently, Yutong Bus's market value exceeds 60 billion yuan, while the market value of the other five listed bus companies is less than 10 billion yuan.

From a market share perspective, according to the China Bus Information Network, Yutong Bus accounted for 36% of the large and medium-sized bus market share in 2023, occupying an absolute leading position. Following changes in market value over the past two years, the industry situation of "one superpower and multiple strong players" has emerged.

The primary driver of Yutong's performance is the overseas market.

Overall, the current domestic bus market is still recovering, with sales volumes lagging behind 2021 levels. Moreover, domestic competition remains fierce, involving not only traditional leaders such as Yutong, Zhongtong, and King Long but also strong vehicle manufacturers like BYD, as well as numerous local brands like Haige, Shenlong, and Golden Dragon.

Therefore, the current domestic bus industry is more focused on stock competition, making the overseas market a new point of contention for enterprises.

The overseas market is a highlight of Yutong's performance and has become the "engine" of its growth.

From 2016 to 2023, Yutong Bus's domestic sales revenue continued to shrink, from 29.91 billion yuan to 13.7 billion yuan, with its revenue share dropping significantly from 87.9% to 50.7%. In contrast, overseas revenue increased from 4.12 billion yuan to 10.41 billion yuan, a 1.5-fold increase, with its share of overall revenue rising from 12.1% to 38.5% in 2023. It is expected to soon surpass domestic revenue, effectively offsetting the impact of declining domestic demand.

In terms of sales volume, Yutong sold a total of 36,500 buses in 2023, including 26,400 domestically sold buses (a 7.5% year-on-year increase) and 10,100 exported buses (a 78.87% year-on-year increase). The export growth rate in the first five months of 2024 also reached 64%, making exports a crucial driver of the company's sales growth.

When discussing overseas markets, new energy buses cannot be overlooked. Amid the new energy transformation in the automotive industry, new energy buses are an emerging force driving industry growth.

However, unlike the new energy transformation of passenger vehicles, domestic new energy buses are primarily used for urban buses. Previously, due to government subsidy policies, the demand for new energy buses was released prematurely. With the phasing out of these policies, demand for new energy buses has slowed down.

According to Guosheng Securities statistics, new energy city bus sales exceeded 100,000 units in 2016 but shrank to only 35,000 units by 2023. Therefore, the focus of new energy buses remains on overseas markets.

Currently, the overseas new energy bus market is still a blue ocean. According to Guosheng Securities statistics, sales of overseas new energy buses increased from 1,000 units in 2017 to 19,000 units in 2023, with a compound annual growth rate of about 63% during this period. The penetration rate rapidly increased from less than 2% to over 10% in 2023, leaving considerable room for future growth.

In the overseas market for new energy buses, Europe is the largest region, primarily benefiting from the rapid development of local new energy technologies, environmental protection regulations, and support for the new energy industry. From 2020 to 2023, the compound annual growth rate of new energy bus sales in Europe reached 39%.

Leveraging the advantages of the new energy industrial chain, shorter delivery cycles, and higher product quality, domestic auto companies occupy a "dominant" position globally. In 2022, China's new energy bus production and sales accounted for over 95% of the global total.

For the substantial European new energy bus market, major auto companies have accelerated their expansion. Among them, BYD leads the way. According to Sustainable BUS data, BYD's market share was 13% in 2023, down from 2022, while Yutong's market share was 8%, ranking second. Zhongtong Bus ranked third with a 4% share. Meanwhile, the share of overseas auto companies has increased.

In terms of overall overseas market share, Yutong Bus performs outstandingly in medium and large buses. According to Guosheng Securities research, Yutong's export volume was 5,000 units from January to May 2024, with a market share of 28.6%, ranking first and surpassing the King Long series. During the same period, Yutong's market share in new energy bus exports reached 24.3%, nearly doubling compared to 12.4% in 2023. The gap with the 25.9% share of the King Long series has further narrowed, making it only a matter of time before Yutong catches up.

Additionally, according to securities trader research, Yutong exported a total of 4,921 buses in the first five months of 2024, including 941 new energy buses, a 96% year-on-year increase. The export share reached 24% and is expected to continue increasing in the future.

Yutong Bus's ability to form a huge overseas advantage is inseparable from its deep cultivation of sales models, channels, localized operation models, and after-sales systems.

On one hand, Yutong Bus has a first-mover advantage in overseas layout, achieving its first bus export as early as 2002. In terms of sales models, it adopts a "direct sales + distribution" model, achieving comprehensive coverage of six major regional markets, including the Commonwealth of Independent States, Asia-Pacific, and Europe, through a diversified channel layout of over 60 subsidiaries, dealers, and direct sales teams.

Simultaneously, Yutong implements a localized cooperation model of KD assembly in more than ten countries and regions, such as Kazakhstan and Pakistan, which has less cost pressure compared to directly building factories overseas.

From a cost reduction and efficiency enhancement perspective, Yutong Bus's position as the "super leader" in the industry remains unshakable.

For bus companies, the importance of overseas markets lies not only in opening up incremental markets but also in higher product profitability.

According to Guosheng Securities research, in 2023, the average selling price of Yutong Bus in overseas markets was 1.02 million yuan, far higher than Zhongtong's 620,000 yuan, which ranked second. Among them, the average selling price of overseas new energy buses is estimated to reach 2.2 million yuan. Even Yutong's traditional buses exported overseas have an average export price of 830,000 yuan, significantly higher than the unit price of 730,000 yuan for domestic new energy buses.

The higher average selling price in overseas markets has also boosted Yutong Bus's overall profitability. In 2023, the company's gross profit margin in overseas markets reached 32%, higher than the 23% in China. It's worth mentioning that Yutong's gross profit margins for both domestic and international businesses are the highest among listed companies in the industry.

It can be said that the overseas bus market is still in a period of rapid development and dividends. Yutong's high performance growth is closely tied to the "increase in both price and volume" in overseas markets.

Given the asset-heavy nature of the bus industry, examining a company's profitability cannot solely be reflected in gross profit margin; the soft power of cost control is equally important.

In terms of cost control, Yutong Bus is also significantly better than other auto companies. With the decline in battery costs combined with scale effects, the proportion of raw material costs in revenue has continued to decline, falling below 50% in 2023. In contrast, the proportion of raw material costs for other bus companies is around 70%.

It's worth noting that the expansion of Yutong Bus's scale has also brought certain negative effects. In 2022 and 2023, Yutong Bus's asset and credit impairments were 570 million yuan and 890 million yuan, respectively, accounting for 75% and 48.98% of the net profit for the period, exerting some pressure on profitability.

Yutong Bus's debt cost is another major advantage. Over the years, Yutong Bus's asset-liability ratio has been maintained at around 50%. Although this number is not low, the interest-bearing debt ratio has been close to zero for many years, an unmatched advantage in the industry.

Based on Yutong's high gross profit margin and strong cost control ability, the company's net profit margin is significantly ahead of its peers.

In the first quarter of 2024, Yutong's net profit margin was 10.03%, ranking first among the six listed bus companies, significantly higher than Zhongtong Bus's 3.31%, which ranked second. Higher profitability is also a crucial factor in attracting investors.

Under the development trends of industry globalization, high-endization, and new energy transformation, Yutong holds leading advantages. Unlike the previous situation where the domestic market dominated performance, the overseas market has now opened up new imagination space and provided support for the company's valuation.

Due to the huge growth expectations in overseas markets, as a super leader, Yutong will further highlight the industry situation of "one superpower and multiple strong players" under the head brand effect.

Disclaimer

The content related to listed companies in this article is based on the author's personal analysis and judgment, derived from information disclosed by listed companies in accordance with their legal obligations (including but not limited to temporary announcements, periodic reports, and official interaction platforms, etc.). The information or opinions in the article do not constitute any investment or other business advice. Market value observation does not bear any responsibility for any actions taken as a result of adopting this article.

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