[Core Conclusion] The company's revenue for 2024-2026 is expected to be 37.622 billion yuan, 62.4 billion yuan, and 74.250 billion yuan, respectively, up 125%, 66%, and 19% year-on-year. The current stock price corresponding to 2024-2026 PS is 0.82/0.50/0.42, respectively. First coverage, giving a “buy” rating.
[Report Highlights] The market believes that the cost-effective advantage of Zero Run is difficult to maintain under fierce competition, and expectations for overseas exports are low. We believe that the company's core executive team is stable and has a strategic vision and execution ability. The company has high capital utilization efficiency and strong control over core components. In the long run, it can continue to operate in fierce market competition, and overseas exports are expected to exceed expectations.
Main logic 1: Cost-effective performance+smart driving leading at the same price. Zero Sports Auto products are mainly positioned in the price range of 100,000 to 200,000 yuan, have an advantage in the customer base, and are characterized by “high cost performance+leading smart driving at the same price”, and are highly competitive. In terms of smart driving, there is a clear difference between new energy vehicles of 200,000 yuan and cars of 200,000 yuan or more on the market at the level of intelligent driving. The Zero Sport C10 breaks this difference and provides smart driving configurations and functions that can only be found in cars over 200,000 yuan at a price within 200,000 yuan. In terms of high cost performance, the 2024 C11 is superior to competitors in terms of interior space and battery life, and has upgraded smart driving features while maintaining a lower price, leading the competition in the same price. Sales are expected to be close to 300,000 units in 2024, or 105% year-on-year.
Main logic 2: Self-research on core technology, high R&D efficiency, and a certain advantage in controlling one's own costs. Since its inception, Zero Run has clearly defined the strategic policy of developing and producing the three major components of “battery, motor, and electronic control”, as well as intelligent driving, software, Internet of Things, and AI chips. Currently, the self-developed part covers 70% of the total vehicle cost. With more than 10 years of R&D and technology accumulation in the field of security monitoring and smart transportation, as well as the team's rich manufacturing experience, Zero Run has launched a number of leading technologies.
Main logic 3: Accelerate overseas development and start a second growth curve. In October 2023, Zero Sports Auto partnered with international automobile group Stellantis to explore overseas markets. The Stellantis Group is the second-largest car company in Europe (after VW) and dominates the European electric vehicle market. Taking advantage of Stellantis's influence in Europe, Zero Sports's cost-effective models are expected to bring considerable growth after exports in the third quarter of 2024.
Risk warning: risk of export progress falling short of expectations; risk of new vehicle sales falling short of expectations; risk of rising costs, etc.