Focus on the luxury positioning of the home, and gradually improve the product matrix. The company was founded in 2015 with the mission of “creating a mobile home and creating a happy home”. Since 2018, Ideal ONE, Ideal L9, Ideal L8, Ideal L7, Ideal MEGA, and Ideal L6 have been released successively to meet the needs of family vehicles in different market segments through range+high voltage pure electric dual power type layout. In 2023, the company's annual delivery volume reached 0.376 million vehicles, becoming the first new Chinese car company with an annual delivery volume exceeding 0.3 million vehicles. Ideal L9, L8, and L7 each maintain leading sales in their market segments, with sales exceeding 0.1 million units in 2023, and the delivery volume of the new L6 in June 2024 also surpassing 0.02 million units.

Thanks to outstanding sales volume and strong expense management capabilities, the company achieved a full year GAAP net profit correction in 2023.

Deeply cultivate user needs, product definition capabilities and organizational structure support long-term growth. 1) Focus on user value and exceed user needs. Ideal Car accurately targets middle and high-end home users. Through detailed research on the needs of home users, it has developed functions such as intelligent driving, intelligent space, efficient battery life, and body safety that better meet the expectations of home users, enhancing the brand's user stickiness. 2) Treat the organization as a product, and use the growth of the organization to support the growth of the product. Ideal Auto uses the IPD R&D process+matrix organizational structure to ensure efficient collaboration among departments, enhance the overall efficiency of the enterprise and employee motivation, and will be a strong support for overall sales and performance growth. We believe that grasping user needs is not simply adding/building configurations, but is based on an organizational structure & process with clear user positioning+unified goals & culture & product standards+rapid iteration and response. The company has proven its product definition ability through the L series models, and it is expected that this ability will continue under the optimization of the organizational & process structure.

L6's sales performance is impressive, and the development of pure electric products can still be expected with rhythm adjustments and improved energy supplementation networks. Ideal L6 was launched in April 2024, and the price dropped to the 0.2-0.3 million range. It is highly competitive in terms of space, intelligence and comfort. The cumulative order period from April 18 to May 5 exceeded 0.041 million, and delivery exceeded 20,000 in June, which is expected to consolidate the company's basic L series growth rate. On the pure electric side, although MEGA's short-term performance is weak, and the company is also delaying the launch of pure electric SUV products until 2025H1, we believe that with the pace adjustment of pure electric products, the company focuses on improving user value and operating efficiency, and the continuous improvement of the pure electric power supply network, the country is expected to build 2000+ overcharging stations and 10000+ charging piles by the end of the year. The ideal car relies on a strong product definition capability and strong execution organizational structure, and the subsequent development of pure electric products can still be expected.

Profit forecast and investment suggestions: The company accurately targets home users and has proven its product definition ability through L series models. The L6 volume of the new car can be expected; with the pace adjustment and energy supplementation network for pure electric products, sales of subsequent models can still be expected. We expect the company's revenue for 2024-2026 to be 139.61, 189.67, and 242.3 billion yuan, respectively, and the corresponding net profit to mother will be 7.35, 12.13, and 18.29 billion yuan, respectively. Based on the closing price on July 19, 2024, the corresponding PE was 20.36, 12.34, and 8.18 times, respectively, maintaining the “buy” rating.

Risk warning: Industry competition intensifies, model sales or launch pace falls short of expectations, charging network construction falls short of expectations, and profitability improvement falls short of expectations.