Ideal Auto announced 2024Q2 results: 2024Q2 achieved net profit of 1.1 billion yuan, year-on-year, +86% month-on-month; 2024H1 achieved net profit of 1.7 billion yuan to mother, -47% year-on-year.
The L6 listing led to an increase in Q2 delivery volume and revenue growth: 24Q2 achieved revenue of 31.7 billion yuan, +11% year-on-year and +24% month-on-month; of these, the automobile business revenue was 30.3 billion yuan, +8% year-on-year and +25% month-on-month. The basic L7/8/9 sales volume was relatively stable during the reporting period (total delivery of 0.067 million vehicles in Q2), L6 sales volume (0.039 million vehicles delivered in Q2), and 24Q2 car deliveries were 0.109 million vehicles, +25% year over month, +35% month over month; bicycle ASP was about 0.279 million yuan, down 0.044 million yuan year on year and 0.022 million yuan month on month. We think the main reason was the lower sales price during the reporting period The L6 listing was delivered.
The gross margin declined due to changes in the sales structure. Expenses were optimized month-on-month under cost reduction and efficiency, and operating profit was corrected: 1) The gross margin of the 24Q2 automobile business was 18.7%, a year-on-year decline of 2.2 pct, and a month-on-month decline of 0.6 pct. We believe this is mainly due to the launch of L6, which has a lower selling price. Based on the company's supply chain management efficiency, organizational management efficiency, and combined scale effects, we expect subsequent gross margin to pick up; 2) 24Q2's R&D expenses are 3 billion yuan, -0.7% month-on-month; R&D expenses are 9.6%, -2.3 pcts month-on-month.
The reduction in the remuneration of R&D personnel during the reporting period was basically offset by the increase in investment in product development and technology, and the R&D cost ratio was diluted as revenue increased. 3) 24Q2 The company's sales, general and administrative expenses were 2.8 billion yuan, +6% month-on-month; the sales, general and administrative expenses ratio was 8.9%, -2.7 pct. The sales network continued to expand during the reporting period. As of the end of Q2, there were 497 retail centers plus 421 after-sales maintenance and sheet spray centers, an increase of 23 and 65 respectively compared to the end of Q1; in this context, cost reductions were mainly due to promotional activities and reduced sales staff salaries.
Cash reserves were sufficient, and net cash flow outflow decreased: 24Q2 held 97.3 billion yuan in cash, a decrease of 1.6 billion yuan; net cash flow from operating activities was -0.43 billion yuan, and net outflow decreased 2.9 billion month-on-month, mainly due to a month-on-month increase in delivery volume and an increase in cash received; free cash flow was -1.9 billion yuan, and net outflow decreased by 3.2 billion yuan month-on-month. We expect a correction in Q3.
Looking forward to the second half of the year:
1) According to the company's guidelines in the financial report: 24Q3 is expected to deliver 0.145-0.155 million vehicles (+38% month-on-month according to central calculation), achieving revenue of 39.4-42.2 billion yuan (+29% month-on-month according to central calculation); 2) The growth range series is expected to continue to be popular and the sales structure is expected to be optimized: the company's strategy of focusing on the L series has remarkable results, and L7/8/9 sales volume is expected to rise and continue to be released. The monthly sales volume of L7/8/9 is expected to reach 0.05 million vehicles or more; the ideal OTA 6.0 The post-smart driving experience has been greatly improved, leading to an increase in the share of orders for the MAX version (in July 2024, the ideal model of 0.3 million yuan or more and MAX models accounted for nearly 70% of orders), effectively optimizing the sales structure;
3) The solid layout of the pure electric series is expected to start a major product cycle: the company has a solid layout of high-pressure fast charging technology on the vehicle side, and the layout of overcharging stations has exceeded 700 by the end of July, laying a solid foundation for the subsequent launch of pure electric products; MEGA products are strong, and sales are expected to break through after the company reverses its thinking and operates at a pace from 0 to 1; four more pure electric SUV products are expected to be launched in 2025, which is expected to start a major cycle of pure electric products.
Investment advice:
In the long run, Ideal Auto has three core capabilities: ultimate product capability, strong marketing ability, and excellent organizational management ability. At the same time, it is expected to achieve intelligent acceleration and catch-up. Based on the company's Q3 guidelines, the company's net profit for 2024-2026 is estimated to be 8.1, 15.4, and 26.5 billion yuan, respectively, corresponding to the current market capitalization PE of 20, 11, and 6 times, respectively. Referring to comparable company estimates, a 25-year 15xPE is given, corresponding to a 6-month target price of 109.05 yuan.
Risk warning: industry competition increases risk, supply chain cost reduction falls short of expectations, model launch pace falls short of expectations, etc.