Key points of investment
The gross margin for the whole year was corrected. The gross margin for the Q4 quarter reached 6.7%. The advantage of technical cost reduction highlights the company's disclosure that it had achieved annual revenue of 16.747 billion yuan, sold 144,200 vehicles, and achieved a gross margin of 0.5% for the whole year, which was corrected for the first time. Among them, the gross margin for the Q4 single quarter was as high as 6.7%. In the fourth quarter, when pressure to reduce automobile prices was high, the company was able to achieve a continuous increase in gross margin, highlighting the company's advantages of adhering to full-stack self-development and technology cost reduction. Along with future sales growth, the company's gross margin is expected to reach a new high, further improving profits.
Operating cash flow is positive, with sufficient capital on hand. Future development has sufficient capital to guarantee that the company's net cash from operating activities will reach 1.08 billion yuan in 2023, with on-hand capital reaching 19.39 billion yuan, and maintaining a healthy balance and liability structure. Competition in the NEV industry is fierce. Competition for innovation requires continuous investment. The company can achieve positive operating cash flow and hold nearly 20 billion dollars in cash. This will help the company continue to invest in R&D and production, and further expand its competitive advantage.
Together with European giants, they are about to start overseas sales. There is huge room for growth. In October 2023, Zero Run and Stellantis Group formed a global strategic partnership. The two sides will form a zero-run international joint venture to promote globalization as quickly as possible using the commercial resources of Stellantis's global sales network and after-sales service system. As the first global SUV flagship model, the C10 is scheduled to enter major European and global markets at the end of the third quarter of 2024. Meanwhile, according to Reuters, Zero Sports will start producing the T03 small electric car at Stellantis's Tychy plant in Poland as early as the second quarter. Overseas markets will open up huge room for imagination for Zero Run's growth.
Profit forecasting and valuation
Zero Sports will continue to increase sales in 2023 based on cost performance advantages. We believe that Zero Sports Auto's planned new car cycle and joint venture with Stellantis to help overseas sales help drive the company's performance and valuation to exceed expectations. We expect the company's revenue for 2024-2026 to be 343.0, 540.0 billion yuan, and 77.35 billion yuan, respectively, with year-on-year growth rates of 104.8%, 57.4%, and 43.2%; gross margin of 8%, 13%, and 16% respectively; net profit to mother of -45.3, -29.9, and 1.28 billion yuan respectively; EPS of -3.4, -2.2, and 1.0 yuan, respectively, corresponding PS of 0.8, 0.5, and 0.4 times, respectively, maintaining the “buy” rating.
Risk warning
New energy vehicle price war risks, overseas trips fall short of expectations