The gross margin was successfully corrected in the fourth quarter, and the net loss improved beyond expectations. The company's 4Q23 revenue was 13.05 billion yuan, +153.9% YoY, +53% month-on-month; of which, automobile revenue was 12.23 billion yuan, +162.3% YoY, +55.9% month-on-month; gross profit margin was 6.2%, and automobile gross profit margin was 4.1%, reversed month-on-month losses, thanks to platform-based R&D, technology cost reduction and operational improvements. The company's 2023 revenue was 30.68 billion yuan, +14.2% year over year; automobile revenue was 28.01 billion yuan, +12.8% year over year; gross profit margin was 1.5%, -10% year over year; automobile gross profit margin was -1.6%, which turned into a year-on-year loss. 4Q23 R&D expenses were 1.31 billion yuan, +6.3% YoY, +0.1% month-on-month; annual R&D expenses were 5.28 billion yuan, +1.2% YoY. Non-GAAP net loss was $1.92 billion, 4Q22 was $2.37 billion, 3Q23 was $3.04 billion; full-year non-GAAP net loss was $10.37 billion, and 2022 was $8 billion. The year-end balance of cash and cash equivalents was $45.7 billion, an increase of $9.2 billion over the previous year.
The drastic reform of sales channels and models is expected to stabilize profits. Total Q4 deliveries increased to 60,158 vehicles, an increase of 50.4% over the previous quarter. The company expects to deliver 21,000-22,500 vehicles in 1Q24, +15.2% to 23.4% year over year; corresponding revenue of 58-62 billion yuan, +43.8% to 53.7% year over year, continuing changes around organizational marketing and category innovation. Starting in 2Q23, the company introduced an innovative dealer cooperation model to establish short-term channel inventory for about half a month, accelerate terminal delivery, and fully activate the enthusiasm of dealers. More than 130 stores were eliminated at the end of last year, and the “Jupiter Project” introduced more than 160 dealers, covering 40 new low-tier cities. The company expects its sales stores to increase to 600 in Q3, and will continue to expand after the new brand is launched. Changes in diversified marketing strategies are expected to lead to increased sales.
Joining forces with Nvidia AI to mass-produce large models and launch vehicles, the big product cycle begins to strive to break through the NEV knockout race. Recently, Nvidia's 2024 GTC conference announced a partnership with Xiaopeng Motor. Xiaopeng will be equipped with the latest generation DRIVE Thor chip, and will be the first car company to mass-produce large AI smart driving models starting in 2Q24. The company plans to invest 3.5 billion yuan in intelligent R&D and recruit 4,000 people to join the team. On the technical side, the company will implement end-to-end perception and motion planning to accelerate profit expectations and reduce hardware costs. In addition, the company officially announced that it has officially entered the big product cycle and will launch more than 10 new models in the next 3 years. The Beijing Auto Show will launch 10-15 thousand new brands and launch AI smart driving cars for young people, which are expected to be launched and delivered in the third quarter. In addition, the company plans to launch a new model under the main brand in the second half of the year, develop strategic technical cooperation on platforms and software, and joint procurement with Volkswagen. Starting this year, the impact of platform and software service revenue will be reflected in reports, bringing them considerable and continuous benefits. At the Electric Vehicle 100 Forum last week, Xiaopeng proposed that China's NEV industry will enter the knockout stage. We believe that 2024 will be a critical year for the company. Strategic upgrades, new product launches and technical advantages can be realized will determine the company's revenue and profit trends, as well as whether it can start a positive cycle of high growth.
Profit forecast and investment rating: After the launch of the new brand Mona, it is expected to be the backbone of delivery in the second half of the year, and the incremental contribution of To B end Didi is expected to be released in Q4. We expect 276,000 vehicles to be delivered this year, and forecast the company's 2024-26 revenue of 591.8/900.7/115.04 billion yuan (3% down/ 4% increase, new introduction). Referring to new domestic and foreign car builders, the company was given 1.5 times PS in 2024, corresponding to a target price of HK$51.1 (corresponding to an EV/sales of 1.2 times in 2024, which is at a reasonable level; HK$1 = Rmb0.9206; original target price: HK$66.33, corresponding to 1.8 times PS in 2024, HK$1 = Rmb0.928; reduction of 23%). Maintain a “neutral” rating.
Risk warning: New models and technology iterations are lower than expected, and the macroeconomy is declining.