Incident: The company released its 2024 semi-annual report. The company achieved revenue of 3.74 billion yuan in the first half of the year, or -35.2% year on year; realized net profit to mother - 2.57 billion yuan, or -29.9% year on year. Among them, Q2 achieved revenue of 2.24 billion yuan, or -31.7% YoY; realized net profit to mother of 1.56 billion yuan, or -42.9% YoY.

Comment:

Revenue performance in the first half of the year was slightly pressured, and Q2 bicycle losses narrowed month-on-month. The company achieved revenue of 3.74 billion yuan in the first half of the year, or -35.2% year-on-year; net profit to mother was 2.57 billion yuan, or -29.9% year-on-year. Among them, Q2 achieved revenue of 2.24 billion yuan, or -31.7% YoY; realized net profit to mother of 1.56 billion yuan, or -42.9% YoY. Q2 The company's gross profit margin was -7.5%, year-on-year -5.2 pct, and -1.1 pct month-on-month. In the first half of the year, the company sold 0.028 million vehicles, -20.4% year-on-year; Q2 sold 0.018 million units; bicycles lost 0.0869 million yuan; loss of 0.0135 million yuan compared to Q1.

The ADS 3.0 debut of the ADS 3.0 of the Xinjie S9 will surpass 8,000 units in 20 days. On the afternoon of August 6, the Xiangjie S9 flagship sedan jointly built by Hongmeng Zhixing and BAIC was officially released. The Max/Ultra versions sold for 0.3998/0.4498 million yuan respectively, lower than the previous pre-sale price of 0.45-0.55 million yuan. The main highlights of the S9 include: ADS3.0, the first launch of intelligent driving, an end-to-end architecture with core algorithms; the exterior continues the same design language as the M9; the cockpit focuses on quiet+privacy+comfort, and the rear seats support “zero gravity mode”. According to news from the Huawei terminal on August 26, the cumulative volume of the Enjoy S9 has exceeded 8,000 vehicles in 20 days since its launch.

The S9 covers the luxury car market, and its main competitors include models such as the BBA 56E (BMW 5 Series, Audi A6, Mercedes-Benz E-Class) /Volvo S90. Domestic 56E sales in '23 were 14.3w/17.8w/16.2w, respectively. With the exception of individual domestic models such as the NIO ET7, the market share of luxury sedans was almost all joint ventures/foreign investors. We believe that with superior space, configuration, comfort and intelligence, and the support of the Huawei brand, the Enjoy Jie S9 is expected to fill the gap between domestic brands in the high-end car market. With the launch of the Extended Range model, we are optimistic that its monthly sales will rise further.

Delivery of the Jihu brand is gradually picking up, and future investment will be concentrated to help long-term development. Delivery of models such as the Extreme Fox Alpha S5, T5, and Koala gradually increased. According to Marklines, the total delivery of the Jihu brand exceeded 8,000 units in July. BAIC has begun development work on 22 projects, including the Alpha T5 Extraordinary Edition and the Koala 5-seater Edition, as well as preliminary research on 8 projects. At the same time, the BAIC Group announced that it will invest more than 100 billion yuan in R&D by 2030, focusing on the fields of new energy and intelligence to effectively support the long-term development of Jihu.

Profit forecast and investment rating: The XIANGJIE brand carries BAIC's manufacturing heritage and the Huawei Smart Selection Bonus. The first model, the S9, has both luxury and technological attributes, and the price exceeds expectations, which is expected to be a strong alternative to traditional luxury joint venture brands. We are optimistic that the company's revenue and profit will improve significantly as the company's revenue and profit are rising and increasing in sales. We expect the company's net profit to be -4.6 billion yuan, -1.6 billion yuan, and 0.7 billion yuan in 2024-2026, maintaining a “buy” rating.

Risk factors: Risk of vehicle sales falling short of expectations; risk of increased competition in the NEV industry; risk of fluctuating raw material prices and supply shortages.