The growth platform strives for steady growth, tracking the progress of pure electric improvements to improve the certainty of the next explosive product. The company's 2024-2026 revenue forecast was lowered from 135/168.2/214.1 billion yuan to 133.1/156.7/181.6 billion yuan, up 7%/18%/16% year over year; based on good management of operating expenses, the company's 2024 non-GAAP net profit forecast was slightly raised from 7.1 billion yuan to 7.1 billion yuan. 7.8 billion yuan, the 2025-2026 non-GAAP net profit forecast was lowered from 9.2/13.5 billion yuan to 8.2/10.7 billion yuan, corresponding EPS of 3.6/3.8/4.9, respectively. The current stock price of HK$73.15 corresponds to 1.2/1.0/0.9 times PS and 20.3/19.4/15.1 times PE in 2024-2026. The company has strengthened channel capacity building to ensure a steady increase in sales of growth platforms. Growth in 2025-2026 depends on the volume of pure electric platforms. Through design optimization, overcharging networks, and channel construction, the certainty of the next explosive product is enhanced, and the “gain” rating is maintained.

The overall 2024Q2 performance was in line with expectations. Operating expenses effectively controlled the company's 2024Q2 revenue of 31.68 billion yuan (vs. Bloomberg's agreed forecast of 31.42 billion yuan), an increase of 11% year over year. Due to the 25% increase in delivery volume, the negative impact of the decline in ASP was partially offset. Overall gross margin fell 1.1 pct to 19.5% month-on-month (vs. Bloomberg's agreed forecast of 19.3%), with vehicle gross profit falling 0.6 pct to 18.7% month-on-month, mainly due to the low gross margin of the 2024 L789 and the low gross margin of the L6 model delivered in May. GAAP net profit of 1.1 billion yuan (vs. Bloomberg's agreed estimate of 1.06 billion yuan); while non-GAAP net profit of 1.5 billion yuan was lower than Bloomberg's agreed forecast of 1.82 billion yuan. The difference was mainly due to operating expenses excluding equity incentive expenses being slightly higher than market expectations, and equity incentive expenses of 0.402 billion yuan, which were slightly lower than market expectations.

2024Q4 sales may not be strong during the peak season. Growth in 2025-2026 depends on Pure Electric Platform Emission Company to deliver 0.145-0.155 million vehicles in 2024Q3, downgrading the 2024 annual delivery guide to 0.5 million vehicles, which is lower than market optimistic expectations. Based on July deliveries of 0.051 million or poor delivery trends during the peak season, the company ensures steady sales performance by converting inefficient shopping mall stores to auto city center stores and increasing the investment of online marketing resources. According to the company's guidelines, the gross margin of automobiles in 2024Q3 is expected to exceed 19% and the overall gross margin to exceed 20%, benefiting from stabilizing L6 production and increasing L789 delivery. Sales growth in 2025-2026 is due to the expansion of the pure electric platform. A new pure electric SUV will be released on 2025H1. Based on the 800V high-voltage platform, three-electric system, and excellent product capabilities of intelligent driving, the overall capacity of the model will be completed through improved styling design and the layout of more than 2000 supercharging stations by the end of 2024, while actively expanding the proportion of stores, single store booths and number of display stores in the Auto City.

Risk warning: Product launches are not as good as expected, production capacity and supply chain risks, and NEV growth is not as good as expected.