GAC’s 1H21 net profit decreased by 64.7% yoy to RMB947 million. In 1-3Q21, net profit increased by 5.6% yoy to RMB5,284 million, roughly in line with our expectation. Revenue increased by 19.6% yoy to RMB20,942 million in 3Q21, thanks to strong sales of self-owned brand. In this period, Aion received income from new energy vehicle credit, which drove blended ASP to increase by 11.6% yoy in 3Q21. Gross margin improved by 3.2 ppts yoy to 8.5% in 3Q21, and also improved 0.5 ppts QoQ. Share of profits from joint ventures and associates decreased significantly by 50.9% yoy to RMB1,676 million, as sales from major Japanese brands were particularly hit hard in 3Q21 and a one-off relocation expense from GAC FCA.
We decrease our net profit forecast by 7.7% in 2021 but increase by 16.9% and 19.1% in 2022 and 2023, respectively. After adjustment, we forecast net profit to increase yoy by 17.2%/ 45.1%/ 22.1% in 2021 to 2023, respectively. Decline in current year has mainly been affected by sales decline of JV brands, but partly offset by gross margin improvement. The strong sales expectation and margin improvement pushes up our net profit forecast in 2022 and 2023.
We believe that better NEV sales are supporting fundamental recovery of the self-owned business. Despite a weaker outlook for Japanese brands in 4Q21, we would expect a strong rebound in 2022 for GAC Toyota and Guangqi Honda upon stabilizing chip supply and the launch of new models.
We upgrade our rating to "Buy", and increase TP to HK$9.28. Our TP represents 11.1x 2021 PER, 7.9x 2022 PER.