Core views:
From a medium- to long-term perspective, the company's target market is potentially lucrative, and profit growth is more flexible. According to Jiaotong Insurance data, passenger car profits in the range of 0.2 million yuan or more account for about 84% of the industry's steady profit center, and the profit obtained by Chinese brands in the passenger car market of 0.2 million yuan or more in 2023 by restructuring the competitive landscape was about 16%, +6.4 pct compared to the previous year. Taking into account the new product cycle, brand potential, and drive technology selection reserves, the company's profit growth elasticity is worth looking forward to.
The medium- to long-term vitality reflected in three turns in the company's history: rapid correction mechanism and continuous iteration ability. According to the company's official website and announcements, the company experienced three transitions: (1) transition 1: the company stopped losses in a timely manner after the 2-seat Mini SEV strategy failed, rethinking and positioning the 6-seater Blue Ocean market, reflecting the company's excellent market selection and product definition ability; (2) Turning 2: Facing increased competition from Huawei partner car companies after entering the market, the company accelerated product and organizational structure iteration to support L series products to achieve rapid sales growth; (3) Turning 3: After the ideal MEGA sales volume fell short of expectations, the company quickly reflected and corrected, and quickly adjusted the direction of resource investment to stabilize L series sales amount and shares.
The short-term focus is on the company's high-end car market share performance, opening up potential breakthroughs in overseas exports, and verifying the volume of pure electric models on the market. (1) Ideal L6: Use the brand's potential to sink and drive the company's high-end car market share to a steady increase; (2) exports open up room for growth: open up overseas markets, targeting high potential demand in the Middle East market. (3) New pure electric models: Advanced intelligent driving and the pure electric model layout supported by overcharging are worth looking forward to, which is expected to verify the brand's tension.
Profit prediction and investment advice: The new power growth path we have summed up is “seeking survival through electric power and seeking large-scale breakthroughs through hybridization (range growth)”. As a typical representative of this path, Ideal Auto still has a high level of confidence in growth. We expect the company's 24-26 EPS to be 3.89/5.14/7.02 yuan/share, respectively. Referring to the valuation of comparable companies, and considering the potential profit elasticity of the company after moving up the sales center, the company was given a 24-year PE valuation of 25 times, with a reasonable value of HK$106.55 per share for Hong Kong stocks, giving a “buy” rating; the reasonable value of corresponding US stocks was 27.23 US dollars/ADS, giving a “buy” rating.
Risk warning: sales fall short of expectations; increased market competition; changes in consumer demand, etc.