Q1 Earnings fell short of expectations. The company's Q1 sales volume reached 80,000, +53% YoY/-39%, bicycle ASP decreased by 4,720 yuan; revenue was 25.6 billion yuan, up 36% year on year. Q1 gross profit reached 5.3 billion, with a gross profit margin of 20.6%. Compared with the same period, it is stable and in line with expectations. Due to the significant increase in the number of employees compared to 2023Q1, and the overall sales scale in 2024Q1 was far less than 2023Q4, the company's operating expenses ratio in Q1 increased significantly year-over-year/month-on-month, affecting the company's overall performance. Q1 Net profit attributable to mother was 590 million, and non-GAAP net profit was 1.28 billion yuan, a decrease of 9% year-on-year, falling short of expectations. The non-GAAP net profit margin was 5%, down 2.5pct/month-over-month by 2.5pct/5.8pct. Looking ahead to 2024Q2, the company expects to deliver 105-110,000 vehicles, up 21.3% to 27.1% year on year; revenue is estimated at 299-31.4 billion yuan, up 4.2%-9.4% year on year.
The release of pure electric SUV models has been postponed, and the number of store booths is actively sinking and increasing the number of booths in stores. 1) Model side: The company released a five-seater luxury SUV for the family on April 18, with strong orders. However, there was a shortage of new cars in the second half of this year. The company originally planned to release 3 pure electric SUVs in the second half of this year. Due to insufficient energy supplementation facilities and few store booths, etc., the plan was delayed until 2025H1. Taking into account the company's new car delays, we lowered our expected sales volume to 460,000 units in 2024. 2) Price side: Faced with fierce market competition, the company lowered L7/L8/L9/MEGA car prices on April 22, by 18,000 to 30,000. At the 2024Q1 performance meeting, the company stated that there are currently no plans to reduce prices. 3) Sales network side: The company has now achieved 100% coverage of first-tier, new first-tier and second-tier cities, and 89% coverage of third-tier cities. In the future, it is expected that it will continue to sink into low-tier cities as L6 gradually increases. In addition, while expanding stores, the company is also actively adjusting the size and structure of stores, increasing the overall number of store booths while gradually increasing the proportion of stores in the Auto Mall.
Energy replenishment continues to advance, and the target number of overcharged piles will exceed 10,000 by the end of the year. According to the ideal performance conference, the MEGA, its first pure electric flagship model, had an average charging time of only 12.8 minutes during the May 1st period, achieving ultra-fast charging. In terms of charging networks, as of May 19, Ideal Auto has opened and operated 404 ideal overcharging stations, equipped with 1,770 supercharging stations. The company aims to open more than 10,000 supercharged piles at highways and cities across the country by the end of this year. It is hoped that when new models are launched, it will provide consumers with excellent infrastructure, thereby providing strong support for sales.
Q2 Profitability is under pressure for the time being, and we expect cost reduction and efficiency. The company cut prices significantly in Q2. Despite shifting some of the pressure to the upstream supply chain, gross margins are still under some pressure. Looking forward to the future, the company has no plans to reduce prices, and is still expected to achieve high gross profit through large-scale cost reduction and production efficiency improvement. We expect the company's gross profit to reach 19% for the whole year, of which the gross margin from automobile sales is close to 18%.
Investment advice: Maintain a “buy” rating. Due to delays in the release of the company's subsequent pure electric models, we have lowered our profit forecast appropriately. We expect the company to sell about 46/67,104 million vehicles in 2024-2026, with total revenue reaching 1320/1854/292.5 billion yuan, non-GAAP net profit of 84/11.9/161 billion yuan, and a non-GAAP net profit margin of 6.3%/6.4%/5.5%. We gave it a target market value of 177.8 billion yuan, corresponding to a target price (2015.HK) of about HK$91 and (LI.O) of about $23, corresponding to 15x 2025 P/E, maintaining a “buy” rating.
Risk warning: risk of model development and sales falling short of expectations, risk of fluctuations in upstream parts supply, risk of iteration of intelligent driving technology falling short of expectations.