Q1 gross margin increased slightly, and the performance was in line with expectations: the company achieved revenue of 124.9 billion yuan, +4% year on year; realized gross profit of 27.3 billion yuan, +27.4% year on year; comprehensive gross margin was 21.9%, +0.7 pct year on year; net profit to mother was 4.57 billion yuan, +10.6% year over year. In 2024, a new round of price war began in the automobile industry. In order to rapidly expand its market share, the company launched a number of lower-priced “Honor Edition” models, which had a negative impact on profits. At the same time, as Q1's high-end brands and share of international sales increased, the company's overall gross margin for new cars remained steady. Overall performance is basically in line with market expectations

The “Honor Edition” model drove Q1 sales, and the DM 5.0 model is expected to become a new hit: in March, the company's NEV sales volume returned to a high level, with a total sales of 320,000 units, +46% over the same period, mainly due to the launch of the lower-priced Honor Edition model. Among them, there were 162,000 plug-in hybrids, +56% year over year; 140,000 pure electric vehicles, +36% year over year. Q1's cumulative sales volume was 624,000 units, +14% year over year. The high-end brand Tense+Equation Leopard+ has sold a total of 135,500 vehicles, accounting for 21.7%. Export sales showed a steady growth trend. In the first three months, the company exported 3.6/23,000 vehicles, with a cumulative total of 176,000 vehicles, +153% over the same period last month. On May 28, the new generation hybrid platform DM5.0 was released. DM5.0 is fully optimized from the previous generation. The engine thermal efficiency is as high as 46.06%, and is equipped with a second-generation hybrid special blade battery. As a result, the energy consumption level of the vehicle has been drastically reduced, fuel consumption for 100 kilometers has been reduced to 2.9 l, and the maximum driving range has reached 2,100 km. The new Qin L and Seal 06DMI, equipped with the DM5.0, were launched at the same time, priced at 998-139,800 yuan. They will fill the gap in the company's B-Class and become the company's new hot model. In 2024, it is expected that all of the company's dynasty and marine hybrid models will complete the DM 5.0 switch, and the company's annual sales volume will continue to reach a record high of 3.6 million units.

Net bicycle profit declined month-on-month, and is expected to improve quarterly: excluding BYD's electronics business in Q1, automobile business revenue was about 36.48 billion yuan, +38% year over year. The average bicycle price was about 141,700 yuan, down about 30,000 yuan year on year. The main factors contributing to the decline were Seagulls with a unit price of less than 100,000 yuan and an increase in the share of sales of low-priced “Honor Edition” models. Despite the decline in average prices, bicycle profits fell by only 300 yuan year over year due to factors such as prominent advantages in scale, increased overseas sales, and an increase in the share of high-margin models. Q1 The net profit of bicycles was 6,700 yuan. After entering Q2, the company's monthly sales volume is expected to stabilize at more than 30,000 units, and the high capacity utilization rate will bring the company a better gross profit margin, and as models with higher DMI 5.0 prices are launched one after another, it is expected that the average unit price of a vehicle will increase, driving bicycle profits. It is expected that the company's bicycle profit will increase quarterly.

Target price is HK$276, purchase rating: 24 is the company's new car year. With the release of DM 5.0, the company's sales volume for various brands and overseas is expected to increase further in the second half of the year, and sales volume is expected to exceed 3.6 million units throughout the year.

The upgrading of the company's models and the increase in the share of export sales are expected to continue to increase the net profit of bicycles, and the net profit of bicycles will improve quarterly. We expect the company's consolidated net profit for 2024-26 to be RMB 346.7/454.8/5554 billion yuan. The distributed valuation gave the company 20 times PE for the automotive business and 15 times PE for the electronics business, a comprehensive valuation of HK$744.9 billion, and adjusted the company's target price for 2024 to HK$276. There is room for an increase of 33.6% compared to the current price, and the purchase rating.