Futu Securities learned from the Zhitong Finance and Economics APP that Guosen Securities issued a research report stating that it maintains a "buy" rating for Xpeng-W (09868), considering the fierce competition in the automotive industry, adjusts profit forecasts appropriately, and expects the company's sales volume to be approximately 0.16/0.35/0.4 million units from 2024 to 2026, with total revenue reaching 38.7/71.1/85.4 billion yuan, and non-GAAP net profit rates of -16%/-7%/-2%. Considering the deepening cooperation with Volkswagen, the business forecast is split, with the main business revenue expected to be 36.8 billion yuan in 2024, and the net profit brought by the cooperation with Volkswagen in 2024 is estimated to be 1.1 billion yuan. The target price is set at 37.3 Hong Kong dollars.

Zhongsheng Securities' main points are as follows:

Q2 performance slightly exceeded expectations, and technical cooperation income further increased.

The company's Q2 revenue was 8.11 billion yuan, a high-speed growth of 60% year-on-year. In terms of car sales, the average price per car in Q2 has declined due to competition, but the sales volume has increased to over 0.03 million units, resulting in vehicle sales revenue of 6.8 billion yuan, a 54% year-on-year increase. Service and other revenue reached 1.29 billion yuan, a further increase of 0.29 billion yuan compared to the previous period, mainly due to 1) the growth of the car fleet, and 2) the sales of technical research and development services related to the strategic cooperation with Volkswagen's largest platform and software. The Q2 gross margin reversed its loss year-on-year, increasing by 1.1 percentage points to 14%, in line with expectations. Due to the economies of scale resulting from the growth in sales volume, the expense ratio has narrowed slightly. The Q2 non-GAAP net loss attributable to the parent company was 1.22 billion yuan, with a loss rate of 15%. Looking ahead to Q3, the company expects to deliver 0.041-0.045 million vehicles, an increase of 2.5%-12.5% year-on-year; revenue of 9.1-9.8 billion yuan, an increase of 6.7-14.9% year-on-year. In addition, the company's cash reserves are still abundant, with a total of 37.3 billion yuan in cash and cash equivalents, restricted cash, short-term investments, and time deposits as of the end of Q2.

Acceleration in international expansion is expected to improve profitability.

1) In terms of sales volume, Xpeng's Q2 overseas sales exceeded 10% for the first time. According to Xpeng's public earnings conference, the G9 has become the top-ranked mid-to-large pure electric SUV in Norway, Denmark, and Israel, and has also entered the top three in Sweden, the Netherlands, and other locations. Looking ahead to Q3, Xpeng will launch the G6 left-hand drive and right-hand drive versions for delivery in August, which is expected to further drive overseas sales. The company expects that the proportion of Q3 overseas car sales will exceed 15%. 2) In terms of distribution channels, the company is gradually expanding to markets outside of Europe. As of the end of July, Xpeng has entered more than 30 countries and regions, with 70+ stores, and the number of overseas stores is expected to double in the second half of the year. 3) In terms of profitability, due to the company's positioning in the mid-to-high-end market in overseas markets, overall profitability is good. The gradual expansion of the overseas market in the future will help the company improve its overall profitability.

Q3 has entered a strong product cycle, and the profitability of the next generation of products is promising.

1) In terms of vehicle models, on August 8th, MONA M03 started pre-sales and will be officially released on August 27th. In Q4 of this year, the company will release P7+ based on the new generation of autonomous driving hardware platform. From 2025 to 2026, the company will continue to launch new models at a faster pace, and the bank predicts that the company is expected to launch more than 8 new vehicles in the next two years. 2) In terms of channels, the company further expanded its physical sales network in Q2, with the number of stores increasing from 574 at the end of Q1 to 611 at the end of Q2, completing the goal of 600 stores one quarter ahead of schedule. 3) In terms of profitability, the company expects the gross margin to maintain a mid-to-low double-digit level in the second half of the year, with the possibility of an increase in vehicle gross margin on a month-on-month basis. Looking at the future new models, the company has exceeded its target of reducing the Bill of Materials (BOM) for autonomous driving hardware on the P7+ model. The bank predicts that its gross margin is expected to achieve double digits, and the new models in the next two years are expected to benefit from cost reduction through technology, joint procurement with the Volkswagen Group, and internal cost control.

Xpeng's cooperation with Volkswagen is expanding, and revenue realization is promising.

On July 22nd, the company's announcement showed that Xpeng has signed a strategic cooperation agreement with Volkswagen Group for the joint development of electronic and electrical architecture technology. The scope of joint development between the two parties has expanded from the previous CMP platform to the CMP and MEB platforms produced in China. The bank believes that this cooperation, in addition to expanding the MEB platform in addition to the CMP platform, is of great significance. 1) It indicates that the cooperation between the two parties covers a wider range of vehicle models; 2) MEB is a strategic platform for the global market, and the joint development of this platform also lays the foundation for possible future overseas market cooperation between the two parties. Considering only the domestic market, the bank predicts that the company is expected to achieve hundreds of millions of RMB in revenue every quarter within the next 3 years through platform software cooperation and joint development cooperation with Volkswagen.

Risk factors: Risks of lower-than-expected sales of new models, risks of slower-than-expected pace of product launches, risks of slower-than-expected improvement and implementation of intelligent driving capabilities, intense competition risks, risks of slower-than-expected cost improvement and gross margin improvement.