Core views

Zero Sports Auto announced its 2023 financial report. Annual revenue reached 16.75 billion yuan, +35.2% year on year. In '23, gross margin was corrected for the whole year, reaching 0.5%, and net profit to mother was 4.216 billion yuan, achieving a significant reduction in losses. In-depth self-research supports cost reduction, and continues to be realized at the level of product strength. The company continues to reduce costs. The core is in-depth self-research capabilities with high efficiency and high conversion rate. The centralized E/E architecture Clover is a concentrated expression of self-research capabilities. The company's overseas route has been further clarified. It is expected that it will start entering major markets in Europe and the world in 24Q3. Stellantis is the only brand collection store model among leading international automobile groups. In terms of channel form, it is the most suitable partner for new brands to go overseas. It can smoothly reuse mature channels to achieve rapid expansion. It is optimistic that the company will gradually increase in domestic and overseas markets with strong product strength.

occurrences

Zero Sports Auto announced its 2023 financial report. Annual revenue reached 16.75 billion yuan, +35.2% year on year. In '23, gross margin for the whole year was corrected to 0.5%, and net profit to mother was 4.216 billion yuan, achieving a significant reduction in losses.

Brief review

Zero Sports Auto Announces 2023 Financial Data to Achieve Positive Gross Profit:

The company's deliveries continued to reach new highs, with sales volume of 144,000 vehicles in '23, +29.7% year-on-year, of which the C series accounted for 73%;

The company's revenue in '23 was 16.75 billion yuan, +35.2% year on year. The increase was at the forefront of the new forces, and net profit to mother was 4.216 billion yuan.

The gross margin for the whole year was corrected in '23, reaching 0.5% (if the impact of dealer rebates is deducted, the annual gross profit margin is 11.6%);

Net cash flow from operating activities continued to flow in '23. Net cash from operating activities was $1.08 billion, and sufficient capital in hand reached $19.39 billion.

23Q4 gross margin continued optimization:

23Q4 sold 55,000 units, +134.8% year over year, revenue of 5.28 billion yuan, +75% year over year; 23Q4 achieved gross profit optimization while product prices fell further. 23Q4 gross profit of 356 million, gross margin reached 6.7%, +5.5 pct month-on-month;

In-depth self-development supports cost reduction and continuous implementation at the level of product strength

1) The company's in-depth self-research covers three electrics+smart driving+smart cabin. Self-developed and self-built capabilities can already cover parts that account for 70% of the vehicle's cost. The centralized E/E architecture four-leaf clover is a concentrated expression of self-developed capabilities;

2) The company continues to reduce costs. The core is in-depth self-research capabilities with high efficiency and high conversion rate. In addition to reducing costs by improving self-control rates, it is more important to reduce BOM costs through integration on the design side. For example, the number of four-leaf clover architecture controllers has been reduced from 42 to 28.

The route to go out to sea was further clarified, and major markets in Europe and the world began in 24Q3:

1) The Zero Run International executive team has been established, and the overseas business will officially commence. The C10 will be the first model to be imported overseas through the Stellantis Group. The EU overseas market certification process is being carried out simultaneously, and it is expected to land in major European and global markets in 24Q3; 2) Stellantis's “Dare Forward 2030” plan. By 2030, the group will sell only pure electric models in Europe by the end of 2030, demonstrating the Group's determination to transform, and introducing Zero Run is of great strategic significance; 3) Stellantis is international The only brand aggregation store model in the leading automobile group. In terms of channel form, it is the most suitable partner for new brands to go overseas. It can smoothly reuse mature channels to achieve rapid expansion.

4) In the simultaneous layout of overseas production capacity, according to reports, Stellantis's plant in Tychy, Poland will produce the T03 model, which will begin in 24Q2 as soon as possible; at the same time, Stellantis is planning to use its factory in Turin, Italy as a production base for Zero-Run Europe, with an estimated annual output of 150,000 vehicles, and will be put into operation as early as 2026 or 2027.

Investment advice: We expect the company's 24-26 revenue to be 331.9/613.1/81.49 billion yuan, net profit - 34.1/-11.4/8.8 billion yuan, and corresponding PS of 0.96/0.52/0.39x, respectively, to maintain a “buy” rating.