Event: Zero Sports Auto announced its 2023 annual results. Revenue of 16.8 billion yuan was achieved in 2023, +36% year-on-year; net loss was 4.2 billion yuan, and losses narrowed year-on-year.
Operations are improving, and gross margin and cash flow from operating activities are positive. The company delivered 144,000 new cars in 2023, +30% over the same period; bicycle revenue was 116,000 yuan, an increase of 40,000 yuan over the previous year, mainly due to the increase in the share of the C-series models that are overpriced. The company's gross margin was 0.5% in 2023, and the gross margin for the whole year was corrected for the first time. According to the company's 2023 results announcement, this is due to improved product structure, continuous cost reduction and efficiency, and the advancement of technology cost reduction. It is expected that future gross margin will be further improved as cost control and operational efficiency are improved. In 2023, for the first time, the company achieved a positive annual operating cash flow of 1.08 billion yuan, working capital of 19.39 billion yuan, and sufficient capital on hand.
The asset-light model cooperates with Stellantis Group in overseas sales, and the first model is expected to go overseas at the end of 24Q3. In October 2023, the company established a global strategic partnership with Stellantis Group and plans to form a joint venture, Zero Run International. The company will rely on the Stellantis Group's global sales network and after-sales service system to launch Zero Run brand new energy vehicles globally. According to the company's 2023 annual results announcement, the C10 will be Zero Run's first global SUV flagship model and is scheduled to enter major markets in Europe and the world at the end of 24Q3.
Profit forecast and investment advice: The company's revenue for 2024/2025/2026 is estimated to be about 337/540/75.3 billion yuan, respectively, and net profit to mother is about -29/-15/200 million yuan. We used the PS method to value the company. The company's closing market value on April 8, 2024 was 0.95/0.60/0.43 times the 2024/2025/2026 PS. Referring to comparable companies, we gave the company 1.0-1.2 times PS in 2024, with a corresponding reasonable value range of HK$27.81-33.38 (converted at the exchange rate of HK$1 = RMB 0.9062).
The first coverage gave it an “superior to the market” rating.
Risk warning: NEV sales fell short of expectations; raw material prices rose sharply; overseas sales fell short of expectations.