The company's Q1 performance fell short of expectations: the company achieved revenue of 25.63 billion yuan in the first quarter of '24, up 36.4% year on year, down 38.6% month on month; delivery volume of Q1 automotive products was 80,400 vehicles, up 52.9% year on year, down 39% month on month. The year-on-year increase in revenue was mainly due to an increase in product variety, an increase in delivery volume, and partly offset by a decline in bicycle ASP; the month-on-month decline was mainly due to seasonal sales effects and the impact of the high sales base at the end of '23. The company achieved net profit of 591 million yuan in Q1, down 36.7% year on year and 89.7% month on month.
Automobile products maintained high gross profit: The company's Q1 gross profit margin was 20.6%, up 0.2 percentage points year on year, down 2.9 percentage points month over month. The month-on-month decline was mainly due to the decline in vehicle gross margin. The gross profit margin for vehicles in the first quarter was 19.3%, down 0.5 percentage points year on year, and 3.4 percentage points month on month. Facing the fiercely competitive NEV market, the company released low-cost products and adjusted its pricing strategy, and the average sales price of vehicles decreased.
The blockbuster product L6 was released, and sales are expected to pick up: the company released the new L6 product ahead of schedule, shouldering the heavy responsibility of stabilizing sales. The price of the L6 starts at 249,800 yuan. As of May 5, cumulative orders have exceeded 41,000 units. We expect L6 orders to grow rapidly in the short term, and the cumulative sales volume of all the company's models will rise to 50,000 units in a single month in the second half of the year. The company's sales guide for the second quarter was 105,000 to 110,000 units, up 21.3% to 27.1% year on year, up 30.6%-36.8% month on month; it is expected to achieve revenue of 299-31.4 billion yuan, up 4.2%-9.4% year on year, and 16.7%-22.5% month on month.
The release of pure electric products has been postponed to accelerate the construction of supercharging piles: The company's pure electric SUV products have been postponed until the first half of 2025. The company will continue to return to user value and promote the construction of a fast charging service network. The company will build more than 2,000 overcharging stations and 10,000 charging piles by the end of 24 to actively prepare the next pure electric products to enhance users' pure electric travel experience.
Target price of $33.37/HK$130.67, purchase rating: We forecast that the company's sales volume will reach 504,000 units, 705,000 units, and 856,000 units respectively in 2024-2026, with revenue of 148.3 billion yuan, 2028 billion yuan and 244.3 billion yuan respectively, and net profit to mother of 8.72 billion yuan, 13.7 billion yuan and 18.8 billion yuan respectively, maintaining profit levels for the next three years. We used free cash flow discounting to value the company. WACC was 11%, with a sustainable growth rate of 3%. To obtain a reasonable share price, the share price should be US$33.37/HK$130.67. There is room for an increase of 64.31%/60.72% compared to the current price, maintaining the buying rating.