Matters:
The company announced that starting from April 22, 2024, the 2024 Ideal L7\ L8\ L9 and Ideal MEGA series will be reduced in price, reaching 18,000 to 30,000 yuan. Among them, the price of the L7 and L8 Pro versions was reduced by 18,000 yuan, the price of other L series models was reduced by 20,000 yuan, and the price of MEGA was reduced by 30,000 yuan.
Ping An's point of view:
After the price reduction, L7\ L8 will be suspended as standard, causing configuration differences with the newly launched L6. On March 12, the company announced that it will launch the Air version (non-air suspension version) among the 2024 ideal L7 and L8 models, but after this price reduction, the price of the Pro model has already covered the Air model that was originally planned to be launched, which means that the L7 and L8 will be equipped with air suspension as standard. Previously, the market feared that L6 would cause the loss of intended orders for L7 after its launch, but through this price and configuration adjustment, while maintaining a certain price difference between the L7 and L6, the configuration gap has also increased markedly. Users who need a “non-suspended version” can choose L6, and users with a slightly higher budget and need an air suspension can choose L7.
In the context of the price war, it is normal for the company to cut prices. After the price reduction, the discount compared to the 23 L series terminals was still recovered. Looking at other car companies in the industry, most of the 2024 new models use a “price reduction and allocation” strategy to cope with market competition. Recently, Tesla and other car companies also announced price cuts. When the 2024 model of the Ideal L7\ 8\ 9 was launched, it was clearly recovered compared to the 2023 model in terms of discounts on terminals, so we think this ideal price reduction is a normal measure to gain market share. The market is worried that the price reduction of the Ideal L Series will have a big impact on bicycle profits, but according to the terminal discount data collected by Geran Road, the 2023 Ideal L Series terminal discount range reached 33,000 to 36,000 yuan in early '24. The current price reduction of the L Series is still lower than the discount margin of the previous 23 L Series terminals. At the same time, considering the increase in sales volume after price adjustments, the scale effect can also make up for the decline in bicycle profits.
The competitive situation in the company's segment is still good. We believe that the competitive environment facing the company's 24-year sales base L series products is still relatively good. There aren't many plug-in hybrid (including growth range) models with a certain sales volume within the 20-30,000 yuan price band. Before the ideal L6 was launched, the L6 was mainly dominated, and the addition of the L6 is expected to break this pattern; within the 30-400,000 yuan price band, the competitiveness of the L7 and L8 will be further enhanced after the price reduction. Currently, there are not many hybrid (including growth) models in this price band, mainly the MPV Tense D9 DM-i; in the price range above 400,000, only the M9 and L9 competes two times after the L9 price drop. The starting price of the model is already 60,000 yuan different .
Profit forecasting and investment advice: Car companies need to balance the scale of sales with bicycle profits. The competitive situation in the segment where the Ideal L Series is located is relatively good. The current price reduction and configuration adjustments of Ideal Auto are conducive to achieving its annual sales target. The company currently maintains a healthy level of gross margin and sufficient cash on hand, and back-up preparations are still sufficient. We maintain the company's net profit forecast for 2024-2026 at 14.56 billion/ 25.47 billion/ 35.62 billion yuan, and still maintain the company's “recommended” rating.
Risk warning: 1) Market competition is becoming more intense. If other car companies follow up with price cuts, the company's potential orders may be lost; 2) L series sales fall short of expectations, causing the company's basic sales to be unstable in 2024; 3) The company will also launch 3 pure electric models in the second half of the year, and sales may not meet expectations.