Key points of investment:
Ideal Auto released audited financial results for the quarter ended June 30, 2024 (hereinafter referred to as “2024 Second Quarter Results Announcement”) and interim results announcements for the six months ended June 30, 2024 (hereinafter referred to as the “2024 Semi-Annual Report”). The company's 24H1 revenue was $57.31 billion, +21% year over year. Of this, 24Q2 revenue was 31.7 billion yuan, +11% year over year and +24% month over month. 24H1 net profit was 1.69 billion yuan, -48% year over year, of which 24Q2 net profit was 1.1 billion yuan, -52% year over year, +86% month on month.
24Q2 delivery volume increased year-on-month, and the product structure led to a decline in ASP. According to the company's results announcement for the second quarter of 2024, 24Q2 delivered 0.109 million new vehicles, +25% year over month, +35% month on month; the company's vehicle sales revenue was 30.32 billion yuan, +8% year on month and +25% month on month. According to our estimates, the company's 24Q2 bicycle revenue was about 0.279 million yuan, -0.044 million yuan year-on-year, and -0.022 million yuan month-on-month. We believe that the year-on-month decline in the company's 24Q2 bike revenue was mainly due to changes in the product portfolio. Since its launch in April '24, the Ideal L6 has performed well. According to the Passenger Federation data, Ideal L6 delivered 0.039 million vehicles in 24Q2, accounting for 36% of total deliveries in Q2. Meanwhile, the L8 and L9 models with higher ASP accounted for 15% and 18% of the total delivery volume in 24Q2, down 13% and 6% year on year, respectively, and 11% month-on-month.
The 24Q2 fee rate declined month-on-month, and the net interest rate increased month-on-month. According to the company's results announcement for the second quarter of 2024, the company's 24Q2 net interest rate was 3.5%, -4.6pct year on year, +1.2pct month-on-month; gross profit margin 19.5%, -2.3 pct yoy, -1.1 pct month-on-month. 2024Q2 SG&A/R&D cost rates were 8.9%/9.6%, +0.8/+1.1 pct year over year, and -2.7/-2.3 pct month over month, respectively. The month-on-month decline in the cost rate was mainly due to a decrease in employee remuneration.
As L6 production climbs and continues to reduce costs and increase efficiency, 24H2's profit level is expected to increase. According to the company's results announcement for the second quarter of 2024, looking ahead to 24Q3, the company expects vehicle delivery volume of 0.145-0.155 million vehicles, +38.0%-47.5% year-on-year; total revenue is expected to reach 39.4-42.2 billion yuan, or +13.7% -21.6% year-on-year.
Intelligent driving upgrades drive high-end driving. With the full launch of Ideal Wutu NOA in July '24 and the further upgrade of active safety capabilities, the share of orders for the AD Max version continued to increase. In particular, for models over 0.3 million yuan, the AD Max version accounted for nearly 70%. We are optimistic that the strengthening of intelligent capabilities will further drive the company's high-end configuration sales increase.
Profit forecast and investment suggestions: Taking into account the company's 2024H1 performance and the revenue outlook announced by the company in the second quarter of 2024, we adjusted the company's profit forecast. The company expects to sell 0.49/0.69/0.83 million new vehicles in 2024/25/26, respectively, with revenue of 144/203.6/246.8 billion yuan, respectively, and net profit to mother of 6.8/12.5/17.8 billion yuan, respectively, and EPS of 3.20/5.88/ 8.39 yuan.
Considering that the NEV industry is still developing rapidly, we used the PS method to value the company. The closing market value on August 30, 2024 was 1.1/0.7/0.6 times the 2024/25/26 PS, respectively. Referring to comparable companies, we gave the company 1.2-1.3 times PS in 2024, with a corresponding reasonable value range of HK$89.26-96.70 (converted at the exchange rate of HK$1 = RMB 0.9124). Maintain an “better than the market” rating.
Risk warning: new car sales fall short of expectations; raw material prices have risen sharply; investment in pure electric models has exceeded expectations.