Incident: On November 23, Xiaopeng Motor released its financial report for the third quarter of 2021. Q3 achieved revenue of 5.720 billion yuan, year-on-year and month-on-month increases of 187.42% and 52.07%, respectively, and net loss of 1,595 billion yuan.
The scale of delivery in Q3 reached a record high. The Q3 company delivered a total of 25,666 vehicles, a year-on-year and month-on-month increase of 208.45% and 47.52% respectively. The single-quarter delivery volume was close to the delivery level for the full year of 2020. The delivery scale reached a record high, and won the quarterly championship among new car builders. P7 delivered 19731 vehicles in the third quarter alone, an increase of 71.25% over the previous quarter, of which 99% of deliveries supported XPILOT 2.5 or XPILOT 3.0. The company delivered a total of 56,404 vehicles in the first three quarters of 2021, more than double the volume delivered in the full year of last year.
The performance was outstanding, with record revenue and gross margin. The Q3 company achieved revenue of 5.720 billion yuan, an increase of 52.07% over the previous year, mainly due to an increase in automobile deliveries and an improvement in the sales structure after P7, and an increase in bicycle sales price of 6,700 yuan; Q3's gross margin was 14.4%, another historical record, benefiting from product structure optimization (P7 accounts for 77% of sales, 11 pct increase over the previous month) and manufacturing efficiency improvements, which increased 9.8% and 2.5% year on year and month on month, respectively; Q3 R&D expenditure was 1,264 million yuan, up 99.0% and 46.4% year on year, respectively. This is due to the doubling of the number of personnel compared to the end of 2020, the increase in R&D expenses for new models G9 and P5, and related software technology to support future growth; Q3 S&G's expenses were 1,538 billion yuan. Affected by the increase in automobile marketing and the expansion of the sales network, the year-on-year and month-on-month increases were 27.8% and 49.3%, respectively.
New products+technology+production capacity+marketing+overseas go hand in hand, and Xiaopeng Motor is ready to go. In October, the company delivered 10,138 vehicles, and the P5, a new car launched in September, was fully ordered. Delivery was already scheduled until after the Spring Festival holiday. According to the company's official website, Q4 expects to deliver 34500-36,500 vehicles, with revenue reaching 71-7.5 billion yuan. According to the company's official website, the G9, the new car launched by the company next year will be equipped with an 800 volt high-voltage SiC platform and the X-EEA 3.0 electronic and electrical architecture newly developed by Xiaopeng, supporting XPILOT 4.0. The advantages of self-developed software and hardware are expected to increase significantly throughout the stack; Furthermore, after the second phase of the Zhaoqing plant and the Guangzhou plant are put into operation in 2022, the company's production capacity will increase to 300,000 vehicles to ensure product delivery; Xiaopeng's sales and service network is also rapidly expanding. As of September 30, Xiaopeng's 271 sales stores cover 95 cities, and it is expected that by the end of 2021, the number of sales stores will exceed 350. Following the launch of the P7 in Norway in October, Xiaopeng is actively laying out the Norwegian and other European markets, and continuously improving the local sales and delivery service system, and is expected to be ready to go.
Investment suggestion: As one of the full-stack self-developed car companies, Xiaopeng Motor is leading in terms of local R&D and closed-loop data. Judging from the company's current layout and progress, the company is expected to gradually open up the gap with other car companies and take the lead in entering the era of advanced smart cars. Divided into three major businesses, including automobile sales, software revenue, services, etc., we estimate that the company's total revenue from 2021-2023 will be 187.02, 35.401, and 52.192 billion yuan. The company was given 8.5 times PS in 2022, corresponding to a target price of HK$211.66, maintaining the company's “buy-A” rating.
Risk warning: R&D progress and results fall short of expectations; sales volume falls short of expectations; frequent accidents related to autonomous driving; low consumer willingness to pay for software, etc.