Q4 Sales reached new highs, and 2024Q1 guidance is temporarily under pressure. Thanks to the launch of products such as 1) G6 and the new G9, and strategic and organizational adjustments, Xiaopeng Motor's delivery volume increased quarterly in 2023. Q4 sales exceeded 60,000 units, up 171%/50% year over year, and revenue increased 154%/53% year over year to 13.05 billion yuan.
The company's gross profit reversed its losses month-on-month in 2023Q4, and gross margin recovered to 6.2%. Among them, automobile gross margin improved from -6.1% in Q3 to +4.1%. The major improvement in the company's gross margin was mainly due to 1) platform-based R&D and economies of scale, and 2) initial results in technology cost reduction and operational improvements. Q4 non-GAAP net loss was 1.77 billion yuan, and the non-GAAP net profit margin was -13.6%, an improvement of 19 pcts compared to Q3, mainly due to 1) gross margin increase of 8.9 pcts month-on-month, and 2) along with rapid revenue growth, R&D expenses and SG&A expenses both decreased by 5 pcts month-on-month.
Looking ahead to 2024Q1, the company's performance is expected to be temporarily under pressure. 1) Guidance Q1 delivered 210-22,500 vehicles, up 15.2%-23.4% year on year; 2) Target revenue of 58-62 billion yuan, up 43.8%-53.7% year on year.
Sales side: Competition is expected to be fierce in 2024. Product iteration, leading smart driving, and channel changes will support sales growth.
1) On the model side, Xiaopeng X9 was officially released on January 1. The starting price is 359,800. It comes standard with rear-wheel steering, flexible interior space, and an unmapped XNGP function. The product is extremely cost-effective. We expect steady monthly sales to reach 3000-4,000 units. In addition, the company expects the first model of the new MONA brand to be launched and delivered in Q3, and another new model of the Xiaopeng brand will also be delivered in 2024H2. In the next 3 years, the company will launch more than 10 new models, and the number of SOP models will reach nearly 30. Therefore, starting in the second half of this year, Xiaopeng Motor will once again enter a strong model cycle. 2) In terms of smart driving features, Xiaopeng Motor's number of XNGP cities in 2023 reached 243, exceeding the company's previous target of 200 seats. On February 29, Xiaopeng announced that it will immediately launch the unlimited XNGP intelligent driving assistance function to users with smart driving experience, expanding the scope of use to “can be operated anywhere with navigation coverage”. We believe that Xiaopeng Motor's intelligent driving experience is ahead of its peers and is expected to gradually transform its leading smart driving technical capabilities into actual car sales. 3) On the channel side, the company eliminated more than 130 stores in 2023 and introduced 160 dealers through the “Jupiter Plan”. The total number of stores reached the target of 500 by the end of the year.
The company expects the number of stores to increase to 600 in 2024Q3. We expect that with the continuous expansion of stores and the gradual increase in sales capacity, Xiaopeng Motor is expected to greatly enhance channel sales capabilities and support sales growth.
Profit side: Joint procurement with Volkswagen to improve costs and target new vehicle XNGP hardware costs by 50%. 1) On the Maori side, joint procurement between the company and the public has been fully carried out, and strategic synergy effects have begun to show. Through modularization of design and integration of supply chain partners, the generalization rate of Xiaopeng models has increased. We expect the company to accelerate the achievement of the previously mentioned goals of “reducing BOM costs for new vehicles by 25%” and “reducing XNGP hardware costs by 50%”. 2) On the cost side, we expect R&D expenses to be between 7 to 75 billion dollars this year. With various marketing and channel optimizations, the SG&A fee rate is expected to decrease significantly.
Investment advice: We expect the company to sell approximately 17/26/360,000 vehicles in 2024-2026, total revenue of 501/817/104.7 billion yuan in 2024-2026, and a non-GAAP net profit margin of -12%/-4%/1%. Considering the strong competitive pressure in the 2024 200,000,000 price band, we gave Xiaopeng Motor a target valuation of US$10.4 billion, corresponding to 1.5x 2024e P/S, with a target price of HK$43.1 (9868.HK) and US$11 (XPEV.N), maintaining a “buy” rating.
Risk warning: Risk that sales of new models fall short of expectations, risk of improving autonomous driving capabilities and implementation of functions falling short of expectations, and risk of falling short of expected gross margin increase.