Matters:
The company released its performance report for the second quarter of 2024. In the second quarter of 2024, the company achieved revenue of 31.68 billion yuan, an increase of 10.6%/23.6%, respectively. Net profit to mother was 1.1 billion yuan, up -51.9%/86.1%, respectively. By the end of the second quarter of 2024, the company's cash reserves reached 97.3 billion yuan.
Ping An's point of view:
The company's gross margin remained stable in the second quarter. According to the delivery data released by the company, the company delivered 0.109 million units in the second quarter of 2024, an increase of 25.5%/35.1%, respectively. Vehicle sales revenue of 30.32 billion yuan was achieved in the second quarter. The corresponding bicycle revenue was 0.279 million yuan, down 0.044 million/0.022 million yuan, respectively. The decline in bicycle revenue was mainly due to the delivery of the company's L6 models and price strategy adjustments. Maintaining a healthy level of gross margin: The company's gross margin of automobile sales reached 18.7% in the second quarter, down 2.3/0.6 percentage points from the same period last month, mainly due to the start of delivery of L6, which had a relatively low sales price in 2Q24, and the price reduction in the second quarter. The 3Q24 delivery guide was 14.5 to 0.155 million units, and the revenue guide was 39.4 billion to 42.2 billion yuan. The average monthly delivery volume for the third quarter was around 0.05 million units.
2Q24 The optimization results of various expenses were remarkable, and operating profit was corrected. The company's expenses fell month-on-month in the second quarter, mainly due to the company's staff reduction, cost reduction and efficiency in the second quarter. According to financial reports, the company's 2Q24 R&D expenses were 3.03 billion yuan, the same from month to month, and sales management expenses were 2.82 billion yuan, down 5.5% from month to month.
Due to the company's optimization on the cost side and growth on the revenue side in the second quarter, operating profit for the second quarter reached 0.47 billion yuan, which was a correction compared to the first quarter. Based on the net profit of bicycles (operating profit/vehicle sales volume), the operating profit of bicycles for the second quarter was 0.0043 million yuan.
Intelligent driving is being iterated at an accelerated pace, and the National Uncharted City Pilot has been promoted. In July 2024, the company promoted the graphless NOA function that can be used nationwide to all ideal AD MAX users. In addition, the company also released a new autonomous driving technology architecture based on end-to-end (E2E) and visual language models (VLM), and trained and verified through self-developed reconstruction+generative world models. Currently, the technical architecture has begun early bird testing. According to the company's disclosure, due to the company's accelerated iteration in the field of intelligent driving, the proportion of orders for the AD MAX version of the models currently sold by the company has increased markedly.
We believe that as intelligent driving solutions move to “end to end”, the amount of data and computing power investment will become the main barriers, and the ideal car smart driving iterates faster.
High-end growth spearheads are competing for supremacy, and the entry threshold for latecomers has increased. Due to competition in the first half of '24, the company's share of the high-end new energy market of 0.3 million yuan or more declined by a certain margin, but L6 opened up a new market of 0.25-0.3 million yuan for the company. Currently, L6 has strong competitiveness within this price band, and it may be difficult to have strong competitors in the short term. The company's L series is in a “battle for supremacy” in the high-end growth field, and we believe that due to competition between ideals and questions and the fact that both have a high share, this has increased the entry threshold for latecomers to a certain extent. They have a major leading edge over latecomers in terms of brand awareness, marketing, channel efficiency, and after-sales service.
Profit forecast and investment advice: Based on the company's first-half results and third-quarter guidance, we adjusted the company's net profit forecast for 2024-2026 to 8.28 billion/14.07 billion/20.64 billion yuan (the previous forecast value was 12.38 billion/18.09 billion/24.81 billion yuan). The company experienced many adjustments in the first half of the year, but as sales climbed in the second half of the year and cost side optimization, we believe that the company's profitability is expected to improve significantly in the second half of the year. At the same time, we believe that MEGA's loss in the first half of the year was largely due to the fact that the high-end pure electric industry fell short of expectations in 2024. We are still optimistic about the company's future development potential in the high-end pure electric field. The company still maintains a healthy level of gross margin and sufficient cash on hand. We believe that ideal automobile products have strong definition ability, a stable and mature market supply, and high control of marketing channels. We are optimistic about its future growth space, and we still maintain the company's “recommended” rating.
Risk warning: 1) Competition in the market is becoming more intense, and the entry of competitors may cause the company to lose potential orders; 2) the macroeconomic environment is at risk, and the company's sales volume may not meet expectations; 3) The company will launch a variety of pure electric models in '25, and sales of pure electric models may not meet expectations.