Description of the event

In 2023, the company achieved revenue of 30.676 billion yuan, +14.23% year-on-year, net loss of 10.376 billion yuan. Losses increased by 1,237 billion yuan year-on-year, non-GAAP net loss was 9.444 billion yuan, and losses increased by 1,016 billion yuan year-on-year. Among them, 2023Q4 achieved revenue of 13.05 billion yuan, +153.88% year over month, net loss of 1,348 billion yuan, loss narrowing by 1,014 billion yuan year on year, 2,539 billion yuan month on month, non-GAAP net loss of 1,771 billion yuan, loss narrowing by 441 million yuan year on year, and narrowing by 1,019 billion yuan month on month.

Incident comments

Revenue reached a record high in the fourth quarter. Benefiting from improved product structure, bicycle revenue rebounded month-on-month. The company achieved revenue of 13.05 billion yuan in 2023Q4, a record high, of which automobile sales revenue was 12.228 billion yuan, +162.34% year over month, +55.89% month on month, delivery volume of 60,200 vehicles over the same period, +170.93% year on month, and +50.36% month over month, corresponding to the automobile business's bicycle revenue of 21,900 yuan, -6.29% year over month, and +1.75% month over month. Looking at the delivery structure, G9's share increased from 7.2% in 2023Q3 to 27.3% in 2023Q4, driving a month-on-month improvement in bicycle revenue.

The scale effect was enhanced, the product structure improved, and the cost reduction results were remarkable. The gross margin for the fourth quarter exceeded expectations, and cash reserves reached an all-time high. The company's gross profit margin for 2023 was 1.47%, -10.03pct year on year, -1.6% for the automobile business, and -11.04pct year on year. After reverting the impact of losses in inventory provisions and procurement commitments related to G3i and existing model upgrades, the gross margin of the automobile business was 0.8%. Among them, the gross profit margin for 2023Q4 was 6.20%, -2.46pct year-on-year, +8.88pct, and the gross profit margin of the automobile business was 4.05%, -1.61pct year-on-year, and +10.11pct month-on-month. Among them, inventory provision and procurement commitment losses related to G3i and existing model upgrades are expected to be 246 million yuan, which had a negative impact of 2.0pct on gross margin in a single quarter. After restoration, the gross margin of the Q4 automobile business reached 6.07%. The 2023Q4 bicycle lost 22,400 yuan, and the loss narrowed by 84,000 yuan year on year and 75,000 yuan from month to month, which was a significant improvement. As of the end of 2023Q4, the company's cash on hand reached 45.7 billion yuan, a net increase of 9.22 billion yuan over the previous month.

Channel and marketing changes have been implemented at an accelerated pace, and cost reduction and scale effects have brought about upward profitability. 2024Q1 expects delivery volume of 21—22,500 vehicles, up 15.2%-23.4% year on year, and expected revenue of 58-62 billion yuan, up 43.8%-53.7% year on year. In the short term, demand for terminals recovered after the holiday season, the X9 climbed rapidly, and sales are expected to gradually increase. The company is leading the way in the opening of Smart Driving. The combination of channel and marketing changes will strongly mobilize channel enthusiasm, enhance the competitiveness of model terminals, and gradually launch new cars at mainstream prices to promote the popularization of smart driving. At the same time, the company is actively promoting supply chain and technology cost reduction work, formulating joint procurement plans with Volkswagen, adding contributions to model structure improvements, and achieving cost reduction goals with strong certainty. The company will also actively explore overseas markets and contribute more by going overseas.

Intelligence is gradually becoming an important decision-making factor in consumers' car purchases, and technology leaders are expected to fully enjoy the dividends of the transformation period as intelligent driving continues to be upgraded. Currently, smart driving is in a period of accelerated popularity, and scale is needed to raise user awareness, form market reputation, and accelerate data accumulation. With the improvement of the product matrix and the advancement of channel layout, the company's sales volume is expected to continue to rise. At the same time, as the scale increases, the cost reduction effect of the platform and technology will be further reflected. Combined with the expansion of the business model for future software profits, the company's future profits will also be highly flexible. I am optimistic that the intelligent penetration rate will accelerate, and the company will fully enjoy the dividends as a technology leader. The company is expected to sell 247,000 vehicles in 2024, maintaining a “buy” rating.

Risk warning

1. Economic recovery is weaker than expected;

2. Increased competition in the industry weakens corporate profits.