Key points of investment
Exceeding expectations factor 1: Domestic sales of new models exceed expectations
The company's new model C10 officially debuted at the Guangzhou Auto Show on November 17, 2023. Pre-sales are expected to begin in January 2024. At the same time, the company plans to launch 7 new pure electric models in 2023-2025, covering various sizes of cars, SUVs and MPVs, to meet the needs of different mainstream target markets. The company's sales volume in the domestic market is expected to grow rapidly in the next two years.
Factor 2: Overseas sales and profits of the joint venture “Zero Run International” exceeded expectations. In 2022, Stellantis Group launched the “Dare Forward 2030” ten-year plan to actively launch and sell electric vehicles. It plans to sell 5 million pure electric vehicles worldwide by 2030. The company and global automobile group giant Stellantis formed a joint venture to establish “Zero Run International”. With the extensive commercial assets, strength and accumulation of the Stellantis Group around the world, the joint venture will accelerate and expand global sales of the high-tech content of zero sports cars and extremely cost-effective products. The first overseas model, the Zero Sport C10, was unveiled at the Munich Auto Show in Germany, and Zero Sport is expected to begin delivering vehicles in Europe in the third quarter of 2024. We believe this will greatly increase the company's sales volume. At the same time, the company is expected to use scale effects to further reduce production costs, thereby increasing bicycle profitability. Compared with Stellantis's main models in Europe, the e-208 and Fiat 500e, the company's models have obvious cost performance advantages. The product competitiveness is strong, and the company's sales volume and profit are expected to exceed expectations.
Stock price catalytic factors
1) The domestic sales volume of the new models in 2024 exceeded expectations, the growth rate was higher than the industry average, and the market share continued to rise; 2) The overseas sales volume of the joint venture “Zero Run International” exceeded expectations, due to cost reductions and profit increases brought about by scale effects.
Profit forecasting and investment advice
Zero Sports Cars continued to increase sales volume in 2023 based on cost performance advantages. We believe that Zero Sports Auto's 2023-2025 new car cycle based on its own planning + joint venture with Stellantis to help overseas sales help the company's performance and valuation increase beyond expectations. We expect the company's revenue for 2023-2025 to be 213.99/551.95/76.766 billion yuan, with a year-on-year growth rate of 73%/158%/39%; gross margin of -1%/10%/15%, respectively; net profit of -50.53/-47.32/487 billion yuan; EPS of -3.78/-3.54/0.36 yuan, corresponding PE of -9.08/-9.70/94.29 times, PS 2.14/0.83/ 0.60 times.
Combining the 2024 average PS of comparable companies, and the company's 2024 revenue and current number of shares, the company gave a “buy” rating based on the target price of HK$60.17 (HK$1 = RMB 0.9090).
Risk warning
The growth rate of the NEV industry fell short of expectations, the development of new models fell short of expectations, and market competition intensified.