The company's recent situation
The company's autonomous driving R&D and functional mass production pace has long been in the first tier of domestic car companies. With its outstanding software R&D capabilities, the company reached a strategic cooperation with Volkswagen and exported the EEA architecture and a full set of intelligent solutions. Early related revenue was reflected in the company's 1Q24 results. Furthermore, the company officially unveiled the first model in the MONA series on July 3, thus completing the product matrix at mass market prices.
reviews
Continuous iteration consolidates technical advantages and enhances smart driving experience and cost performance. In terms of intelligent driving, the company has mass production capabilities for unmapped solutions, pioneered the full promotion of urban NOA, opened cities and rapidly accumulated mileage, and is leading the industry. Furthermore, the company plans to reduce costs in multiple dimensions on the hardware side and promote the implementation of advanced smart driving functions more economically in the low price market. In terms of the underlying E/E architecture, the company has gone through three iterations and is currently the leading centralized central computing+domain architecture in the mass industry. Taken together, we believe that the company's pace of autonomous driving R&D and mass production of functions has long been in the first tier among domestic car companies.
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The cooperation between the company and Volkswagen has gone through three stages of technical cooperation, joint procurement, and EEA technology strategic cooperation based on the G9 platform. Starting in 1Q24, software service revenue was officially realized on the reporting side. We expect it to be able to support a steady and stable gross margin in double digits during the transition period of the company's product cycle. After the official mass production of partner models in 2026, the company is expected to link software revenue to sales through bicycle software licensing fees to further achieve steady software revenue and help reduce losses. Looking ahead, we believe: 1) Under the premise of considerable revenue, the company is expected to establish cooperative relationships with more car companies to diversify revenue structures and achieve early profit improvement; 2) Platform software services are expected to be normalized, business models are unique, amounts are smooth and predictable, and profit margins are high, gradually forming independent valuations to support overall valuation increases.
MONA's first model is scheduled to be launched in August, and To C has sales volume and strategic significance. MONA's first model, the M03, targets young customers in the A-class car market. It is priced at less than 0.2 million yuan, and is mainly characterized by being good-looking and fun. It has better energy consumption performance, reducing energy consumption by about 15% for 100 kilometers. At the same time, technical cost reduction and better battery life are achieved through a low wind resistance coefficient of 0.194 cd and AGS active air intake grilles. The company is expected to officially go public in August. To the C side, we estimate that 0.1-0.2 million yuan car and SUV market space is large and the pure electric penetration rate is low. We believe that on the basis of reasonable pricing, autonomous driving is expected to have a differentiated advantage at this price, so we are optimistic about the subsequent sales performance of MONA series models.
Profit forecasting and valuation
The current Hong Kong/US stock prices are all corresponding to 1.5x EV/revenue in 2024, maintaining an outperforming industry rating and maintaining the 2024/25 profit forecast. Maintaining a target price of HK$47/$12 for Hong Kong/US stocks, with 56%/57% upside compared to current stock prices, all corresponding to 2.5x EV/revenue in 2024.
risks
Demand for new cars and autonomous vehicles fell short of expectations, and cooperation with Volkswagen fell short of expectations.