Incident: On May 21, the company released its 2024 quarterly report. In the first quarter of 2024, the company's total revenue was 6.548 billion yuan, up 62.3% year on year, of which automobile sales revenue was 5.544 billion yuan, up 57.8% year on year; gross profit margin was 12.9%, up 6.7 pct from the previous quarter, up 11.2 pct from the same period last year; gross profit margin of automobile sales was 5.5%, up 1.4 pct from the previous quarter, up 8.0 pct from the same period last year; quarterly net loss to mother narrowed by 41.5% year on year, and non-GAAP net loss narrowed 36.2% year on year.
X9 led to an increase in sales in the first quarter, and a rich product matrix is expected to boost sales. In the first quarter, Xiaopeng Motor's sales revenue was 5.544 billion yuan, up 57.8% year on year. The year-on-year increase in sales revenue was mainly due to higher deliveries in the first quarter of this year. The MPV Xiaopeng X9, which was launched at the beginning of the year, had the highest sales volume for three consecutive months among all the company's models, and had a significant increase in sales in March, which was the biggest contributor to the year-on-year increase in sales. The main reason for the month-on-month decline in delivery volume was the decline in G6 and G9 deliveries against the backdrop of seasonal factors and intensified market price wars. Automobile sales cost was 5.242 billion yuan, up 45.9% year on year. The gross profit margin of automobile sales was 5.5%, up 1.4 pct from the previous quarter and 8.0 pct from the same period last year. The month-on-month increase was mainly due to lower costs and improved model product portfolios. However, part of the increase was offset by P5-related inventory impairment and loss of procurement commitments, which had a reverse impact of 3.2 percentage points on the gross margin of automobile sales this quarter. On May 20, Xiaopeng Motor released the front preview of the first model in the MONA series. The new car is an AI smart driving car, positioned as a compact pure electric sedan. The price is around 150,000 yuan. It will be released in June and delivered in the third quarter. In the fourth quarter, the company will also launch a new B-class pure electric sedan. It is expected that as the market recovers, the company's car sales will transition more smoothly in the second quarter. With the launch and delivery of new cars in the third quarter, the company's product matrix will be further enriched, and a new round of product cycles will begin, and car deliveries will increase.
B-Class cars launched in the fourth quarter are expected to have high gross profit, which is expected to lead to an increase in the company's gross margin of car sales.
Cooperation between the company and Volkswagen Group continues to be deepened, and technical service revenue supplements operating profit. In the first quarter, the company achieved service and other business revenue of 1,004 billion yuan, up 93.1% year on year, up 22.1% month on month; gross profit of 541 million yuan, accounting for 64.1% of the company's total gross profit for the quarter; gross profit margin of 53.9%, up 15.7 pcts from the previous quarter, up 24.3 pcts from the same period last year. The inclusion of technical service fees in cooperation with the Volkswagen Group in financial reports greatly boosted service and other business revenue and gross profit for the quarter. Since the beginning of the year, cooperation between the company and Volkswagen Group has continued to deepen. Following announcements on July 26, 2023 and December 6, 2023, the company announced that Volkswagen will acquire 4.99% of Xiaopeng Motor's shares and that the two parties have reached a technical strategic cooperation framework agreement, the company announced on February 29 this year that it has signed a platform and software strategic technical cooperation joint development agreement with Volkswagen Group. The two sides will accelerate the development of two B-class pure electric models and joint procurement of common parts for both models and platforms. On April 17, the company and Volkswagen Group formally signed an EEA electronic and electrical architecture technology strategic cooperation framework agreement. The two sides will jointly develop the latest generation EEA, which is expected to be applied to Volkswagen brand electric models produced in China from 2026. The revenue from the electronic and electrical architecture cooperation will be reflected in the second half of this year. In a situation where the market is fiercely competitive and it is difficult to obtain high gross profit from delivery, the technical service revenue generated by the cooperation between the company and the Volkswagen Group provides the company with a stable cash flow to ensure the company's healthy financial situation and its leading technical position in the market. It is expected that the company's future revenue related to cooperation will maintain a relatively stable growth rate. At the same time, cooperation between the two sides has accelerated the product cycle. Joining the Volkswagen supply chain will also further reduce the company's automobile production costs, and the gross profit of the company's NEV business is also expected to further increase.
The internationalization V2.0 strategy is advancing at an accelerated pace, and multinational cooperation helps products go overseas smoothly. In 2024, Xiaopeng Motor's internationalization V2.0 was officially launched, and Xiaopeng Motor's cumulative export sales volume in 2024Q1 reached 61.8% of the total export volume in 2023. At the same time, the company's overseas 2.0 strategy has accelerated. Since the beginning of the year, the company has announced cooperation with companies in several Asian, African, and European countries to enter the local market. The relevant models will be launched and delivered as soon as the second quarter. On February 22, the company announced the establishment of a strategic partnership with the UAE dealer group Ali&Sons. Xiaopeng Motor will launch and deliver various models in the five Middle Eastern and African countries starting in the second quarter. On March 26, the company established a long-term strategic partnership with Thai dealer group Neo Mobility Asia, and plans to begin delivering the right-hand drive version of the Xiaopeng G6 in the Matai region in the third quarter. On March 28, the company announced its official entry into the German market and began selling the listed models of the Xiaopeng G9 and Xiaopeng P7 in Germany in May. On April 10, the company cooperated with the Morinami Motor Group to officially enter the Hong Kong market. Delivery of some models is expected to begin in the third quarter. On May 11, the company announced that it had reached an exclusive cooperation agreement with Australian company TrueEV to officially enter the Australian market. On May 16, Xiaopeng Motors held the Xiaopeng G9 launch event in Paris and officially entered the French market.
The company's overseas target this year involves more than 20 sales networks. Overseas deliveries are expected to account for more than 10% in the second quarter, and the overseas overseas sales situation is in line with expectations. Starting in the second quarter, as the company gradually starts listing and delivery in overseas countries, it is expected that sales of the corresponding models will increase significantly. The increase in overseas market share will also help reduce the impact of domestic market fluctuations on sales to a certain extent, and the company's sales stability is expected to increase.
The end-to-end large model was mass-produced in China, and the world's first AI chauffeur service satisfies “private customization”. On May 20, the company fully launched the new technology stack on Xiaopeng AI Day. The company achieved the first domestic mass production of an end-to-end large-scale model. The model consists of three parts: the sensory neural network xNet, the large regulatory model xPlanner, and the large language model xBrain, and three network joint training. xNet's perception range increased by 2 times, and the ability to recognize non-standard obstacles was increased to 50+. After xPlanner replaced the code, the back and forth were reduced by 50%, and the number of broken stops was reduced by 40%, and safe takeover was reduced 60%, xBrain can read any Chinese and English text, and can grasp all kinds of prohibited, quick, and slow behavioral instructions. The end-to-end version of Xiaopeng XNGP has achieved internal iteration every 2 days, and the goal of smart driving capability has been increased 30 times in 18 months.
The company also launched an AI chauffeur service, which is the industry's first mass-produced “point-to-point” ultra-long memory pilot smart car. Based on the ability to learn independently, AI drivers only need to learn once, and the system can generate customized driving routes. It can store up to 10 memory routes, and each route is up to 100 km long. The company's technology is gradually forming an intergenerational advantage. Leading smart driving levels and individualized capabilities can meet the driving needs of a wider customer base, add to the rich product matrix in the future, and jointly promote the company's NEV sales.
Investment advice: Compared with traditional cars, the outstanding performance of new energy vehicles in terms of energy saving and environmental protection, autonomous driving, and smart cockpits has brought consumers a better transportation experience. However, as the penetration rate of new energy vehicles in the overall passenger car market continues to increase, more and more car companies are tilting their development strategies towards this segment of the market. Therefore, in the face of increasingly intense competition, we predict that the company's net profit for 2024-2026 will be -8.3 billion yuan, -4.7 billion yuan, and 900 million yuan, respectively, maintaining the “increase in wealth” rating.
Risk warning: NEV models are being upgraded rapidly, geopolitical risks, competitive pressure on NEV prices is increasing, and the degree of intelligence needs to be improved.