Incident: On August 28, 2024, Beijing time, Ideal Auto released its 2024Q2 financial report: 2024Q2 achieved revenue of 31.68 billion yuan in a single quarter, +10.6%/+23.6%, respectively. The 2024Q2 sold approximately 0.109 million units, +25.5%/+35.0%, respectively; the gross margin of the 2024Q2 automotive business was 18.7%, and -2.3 pts/-0.6 pts, respectively. 2024Q2's non-GAAP net profit was 1.5 billion yuan, or -44.5% YoY.
Revenue grew steadily and gross profit remained healthy
Revenue side: 2024Q2's ideal total revenue is 31.68 billion yuan, +10.6%/+23.6% yo/ month-on-month, respectively.
Among them, the 2024Q2 automobile business revenue was approximately 30.32 billion yuan, or +8.4%/+25.0% year over year, respectively. The year-on-month increase was mainly due to an increase in vehicle deliveries. Affected by changes in product mix and pricing strategies between the two quarters, there was a decline in bicycle ASP, which partially offset the increase in revenue.
The overall ASP dropped from 0.301 million yuan to 0.279 million yuan in 2024Q1. We determined that the reason was the different product mix and pricing strategy changes between the two quarters. In terms of delivery volume, the 2024Q2 delivered a total of 0.109 million vehicles, or +25.5%/+35.0% year over year; among them, Ideal L9, L8, L7, L6, and Mega's single-quarter sales volume accounted for 18.4%, 14.8%, 28.5%, 36.1%, and 2.2% of 2024Q2 sales, respectively.
In other business areas, 2024Q2's revenue reached 1.36 billion yuan, +99.6%/-1.7% year over year, respectively; the year-on-year increase was mainly due to increased service delivery and parts sales.
Profit side: In terms of gross profit, the gross profit of the 2024Q2 automobile business was 5.68 billion yuan, -13.5%/+21.2% year over month, respectively; the gross margin of the 2024Q2 automobile business was 18.7%, and -2.3 pts/-0.6 pts year over month, respectively.
In terms of operating profit, 2024Q2's operating profit for a single quarter was +0.47 billion yuan, profit margin was +1.5%, and -4.2 pts/+3.8 pts year-over-year, respectively. 2024Q2's net profit for a single quarter was 1.1 billion yuan, and non-GAAP net profit was 1.5 billion yuan, or -44.5%/+17.6% year over month, respectively; non-GAAP net profit margin was 4.7%, or -4.7 pts/-0.2 pts year over month, respectively.
Sufficient cash reserves, continuous investment in charging stations
Cost side: The ideal R&D cost for 2024Q2 is 3.03 billion yuan, +24.8%/-0.7% YoY; the R&D cost rate for 2024Q2 is 9.6%, +1.1 pts/-2.3 pts YoY. The year-over-year increase was mainly due to increased costs associated with supporting the expansion of the product portfolio and technology, as well as an increase in employee compensation due to an increase in the number of employees; the month-on-month decline was mainly due to a decrease in employee compensation, but this decrease was partially offset by increased costs to support the expansion of the product portfolio and technology.
2024Q2 sales management expenses were 2.82 billion yuan, +21.9%/-5.5% YoY, respectively; the 2024Q2 sales management expenses ratio was 8.9%, +0.8 pts/-2.7 pts y/y. The year-on-year increase was mainly due to an increase in employee compensation due to an increase in the number of employees, as well as an increase in leasing and other expenses associated with the expansion of sales and service networks; the month-on-month decline was mainly due to reduced marketing activities and employee compensation.
Channel side: In July 2024, the company delivered a total of 51,000 vehicles, an increase of 49.4% over July 2023. As of July 31, 2024, the company had 487 retail stores in China, covering 146 cities; 411 service centers and authorized Ideal Auto body and paint shops, covering 220 cities.
Charging network: As of August 25, there are 730 ideal overcharging stations and 3,416 ideal charging piles across the country. Among them, the number of ideal high-speed overcharging stations exceeds 490. At the same time, the number of overcharging stations in the city has also surpassed 230, with more than 500 pre-selected overcharging stations already online. Cash flow: As of 2024Q2, the total amount of cash and cash equivalents, restricted cash, and short-term investments totaled 97.3 billion yuan. 2024Q2 free cash flow was -1.9 billion yuan.
Future outlook: The company expects vehicle deliveries in 2024Q3 to be between 0.145 million and 0.155 million vehicles, in the year-on-year range of +38.0% to +47.5%; the corresponding revenue is about 39.4 billion yuan to 42.2 billion yuan, and the year-on-year range is +13.7% to +21.6%.
R&D investment translates into user value Intelligent driving accelerates breakthroughs. In terms of intelligent driving, ideal cars are entering the first tier at an accelerated pace. In July, Ideal Auto launched two major updates, OTA 6.0 and OTA 6.1, for the Ideal MEGA and Ideal L series models, achieving the comprehensive evolution of intelligent driving, intelligent space, and intelligent electric product capabilities, fully promoting Muji NOA, and releasing the industry's first dual-system intelligent driving technology architecture based on end-to-end and visual language models. At the same time, Ideal Auto officially unveiled a new autonomous driving technology architecture based on the end-to-end model, VLM visual language model, and world model at the intelligent driving summer conference, and independently developed a reconstruction+generative world model for training and verification of smart driving solutions.
Investment advice:
We are optimistic that the ideal product definition ability brought about by sharp user insight and an efficient organizational structure will continue to explore demand, and successfully replicate range extensions in pure electric products through product form innovation. As sales increase, the scale effect will continue to dilute various cost ratios. Considering the company's recent operating pace and adjusting profit forecasts, the company's revenue for 2024-2026 is estimated to be 142.78/191.27/234.8 billion yuan, respectively, and net profit to mother of 8.41/14.89/19.27 billion yuan, corresponding to the closing price of HK$73.15 per share on August 29, 2024 (HKD/RMB exchange rate 1:0.92), PE is 17/10/7 times, respectively, maintaining the “recommended” rating.
Risk warning: New model sales fall short of expectations; car companies' new model launch progress falls short of expectations.