Incident: On August 26, 2024, the company released the 2024 semi-annual report results announcement. 24H1 achieved operating income of 3.741 billion yuan, or -35.16% year over year, of which Q2 was 2.237 billion yuan, -31.65% year on year, and +48.64% month on month. Net profit of 24H1 was 2.571 billion yuan, compared to -1.98 billion yuan for the same period last year, of which Q2 was -1.555 billion yuan, 23Q1 was -1.088 billion yuan, and 24Q1 was -1.016 billion yuan. The overall results were close to the median performance forecast.

Revenue grew month-on-month, and the Jihu brand performed brilliantly: 24H1 achieved revenue of 3.741 billion yuan, or -35.16% year over year, of which Q2 was 2.237 billion yuan, -31.65% year over year, and +48.64% month over month.

In the first half of 2024, the company's own brands such as the Jihu Alpha S5 and Jihu Koala 2024 were launched one after another, driving the company's sales growth. 24H1's overall sales volume was 0.028 million vehicles, -20.40% YoY; 24Q2 was 0.0179 million vehicles, +18.36% YoY, +76.73% YoY. Among them, the 24Q2 Jihu brand sold 0.0148 million vehicles, +394.30% year-on-year and +391.68% month-on-month, accounting for 83% of overall sales, which contributed significantly to the company's month-on-month sales growth.

The Q2 performance was in line with expectations, and there was a marginal improvement in bicycle losses: 24H1's gross margin was -7.05%, -2.04pcts year over year, of which 24Q2 was -7.51%, -5.25pcts year on year, and -1.14pcts month-on-month. We expect the year-on-month decline in gross margin to be mainly affected by factors such as price competition and changes in product structure in the NEV market. 24Q2's total sales/management/R&D expense ratio was 52.26%, +19.05pct year over year, and -0.57pct month-on-month. The company's expenditure ratio increased significantly year-on-year or in order to develop Hongmeng Zhixing cooperation with Huawei. Huawei is deeply involved in product definition, vehicle design, and channel sales. It is expected that the first model of the Xiangjie brand, the Xiangjie S9, will be co-developed in advance. In terms of profit, 24H1's net profit was 2.571 billion yuan, of which 24Q2 was -1.555 billion yuan, and the corresponding bicycle net profit was -0.0869 million yuan, an increase of 0.0149 million yuan compared to the previous year, and a decrease of 0.0135 million yuan over the previous month. Driven by increased model sales, the margin of bicycle profitability increased significantly.

The new Xiangjie S9 was launched for the first time, and Huawei Smart Choice collaborated to create a new growth pole: In terms of models, the Xiangjie S9, the first model of the Xiangjie brand, was officially released on August 6, 2024. It is positioned as a luxury flagship sedan. The price is 0.3998-0.4498 million. The cumulative number of units in 20 days since launch has already exceeded 8,000 units, and subsequent expansion versions are expected to be launched. The Jihu brand plans to launch models such as the Alpha T and Alpha S mid-term facelift. In 2025, technology upgrades will be carried out based on the company's product portfolio to further improve the sedan, SUV, and MPV product matrices. In terms of sales channels, the company plans to increase from 244 to 300 by the end of 2023, and achieve a marketing service network covering 100+ cities and 380+ outlets by 2025, and the overall level of service capacity is expected to improve.

Profit forecast: The company is expected to achieve revenue of 31.008, 76.752, and 100.334 billion yuan in 2024-2026, and net profit to mother of -4.228, -1.963, and 1.885 billion yuan, giving it a “recommended” rating.

Risk warning: New energy penetration rate falls short of expectations; model sales fall short of expectations; industry competition intensifies.