Incident: On the afternoon of August 6, the Xiangjie S9 flagship sedan jointly built by Hongmeng Zhixing and BAIC was officially released. The Max/Ultra versions sold for 0.3998/0.4498 million yuan respectively, lower than the previous pre-sale price of 0.45-0.55 million yuan.

Comment:

Enjoy S9 debuted ADS 3.0, and the cockpit experience was quiet+comfortable. Key highlights of the Enjoy S9 include:

① Intelligent driving debuted ADS3.0. The core algorithm applied an end-to-end architecture, added the lower limit of the instinctive secure network pocket end-to-end algorithm; smart driving that penetrates all scenarios from the first parking space to the parking space; the learning and training computing power was raised to 5E FLOPS, and 35 million kilometers can be learned every day. ② The exterior of the S9 continues the same family design language as the M9, using the “Universal Aesthetics” design concept, and is equipped with Galaxy headlights; the vehicle size is 5160/1987/1486mm, the wheelbase is 3050mm, and the effective space in the cabin is 3460mm. The internal OneBox design achieves high space utilization, the cockpit focuses on quietness, privacy and comfort, the seat has massage/ventilation/heating functions, and the rear seats support “zero gravity mode”.

③ All models are equipped with a 100kWh Huawei 800V Giant Whale battery as standard. The chassis is based on the exclusive Touring platform for D-class cars, and all series are equipped with CDC+ air springs as standard.

The Xiangjie S9 covers the luxury car market. The main competitors include models such as the BBA 56E (BMW 5 Series, Audi A6, Mercedes-Benz E Class) /Volvo S90. Domestic 56E sales in '23 were 14.3w/17.8w/16.2w, respectively, while the annual sales volume of domestic sedans of 0.35 million or more was about 0.67 million units. Apart from individual domestic models such as the NIO ET7, the market share was almost all occupied by joint ventures/foreign investors. Therefore, we believe that the luxury car market has the characteristics of large space and low autonomous penetration rate. With superior space, configuration, comfort and intelligence, and the support of the Huawei brand, the Xinjie S9 is expected to fill the gap between domestic brands in the high-end car market. With the launch of the Extended Range model, we are optimistic that its monthly sales will rise further by more than 0.01 million.

I am optimistic that the high-end and intelligent capabilities of the Huawei Hongmeng Zhixing series will continue to advance. Zunjie's first model in collaboration with JAC is expected to be launched next year, forming a high-end model matrix with the Wanjie M9 and Xinjie S9. In terms of intelligence, all Genjie M5/M7/M9 and Zhijie S7 models will be upgraded to the Huawei ADS 3.0 Smart Drive in September; the new Wenjie M7 Pro, equipped with the basic version of the Huawei ADS, will be officially unveiled at the Chengdu Auto Show on August 26, and the pre-sale price will drop further to 0.2498 million.

Profit forecast and investment rating: The Xiangjie brand carries BAIC's manufacturing heritage and Huawei smart selection bonuses. The first model, the Xiangjie S9, has both luxury and technological attributes, and the price exceeds expectations, and is expected to be a strong alternative to traditional luxury joint venture brands. Considering the high-end positioning and subsequent product planning, we are optimistic that the rise in production and sales will lead to a significant improvement in the company's revenue and profit. We expect the company's net profit to be -4 billion yuan, -0.5 billion yuan, and 1 billion yuan in 2024-2026, maintaining a “buy” rating.

Risk factors: Risk of vehicle sales falling short of expectations; risk of increased competition in the NEV industry; risk of fluctuating raw material prices and supply shortages.