Incidents:
On August 28, 2024, Ideal Auto released its report for the second quarter of 2024:2024Q2 achieved revenue of 31.7 billion yuan, up 10.6% year on year; GAAP net profit of 1.1 billion yuan, or -52.3%/+86.2% month-on-month; non-GAAP net profit of 1.503 billion yuan, -44.9%/+17.8% YoY.
Investment highlights:
2024Q2 revenue increased month-on-month, and performance improved significantly month-on-month. 1) 2024Q2 achieved revenue of 31.7 billion yuan, +10.6%/+23.6% YoY; realized net profit of 1.1 billion yuan, or -52.3%/+86.2% YoY. The company's gross profit margin in 2024Q2 was 19.5%, -2.3 pct/-1.1 pct month-on-month. The year-on-month decline was mainly due to the decline in vehicle gross margin. Vehicle gross profit margin was 18.7%, -2.3 pct/month-on-month. The year-on-year decline was mainly due to changes in different product portfolios and pricing strategies in the two quarters, partly offset by lower costs. The month-on-month decline was mainly due to different product portfolios. 2) On the cost side, 2024Q2 R&D/SG&A cost rates were 9.6%/8.9%, respectively; +1.1 pct/+0.8 pct year over year, and -2.3 pct/-2.7 pct month over month. The company is making rapid progress in the field of intelligent driving. The year-on-year increase in R&D expenses was mainly due to an increase in employee compensation due to an increase in the cost of supporting the expansion of product portfolios and technology and an increase in the number of employees. The month-on-month decline was mainly due to a decrease in employee remuneration, which was offset by an increase in the cost of supporting the expansion of product portfolios and technology. The year-on-year increase in SG&A expenses was mainly due to an increase in employee remuneration due to an increase in the number of employees and an increase in rent and other expenses due to the expansion of sales and service networks. The month-on-month decrease was mainly due to a decrease in marketing and promotion activities and employee remuneration.
Due to the release of the new model L6, 2024Q2 deliveries increased year-on-year. The total delivery volume of 2024Q2 vehicles was 0.1086 million vehicles, +25.5%/+35.1% YoY. Vehicle sales revenue was 30.32 billion yuan, +8.4%/+25% month-on-month. The year-on-year increase was mainly due to increased delivery volume, but was partially offset by lower average sales prices due to changes in different product portfolios and pricing strategies; the month-on-month increase was mainly due to an increase in vehicle deliveries, but partly offset by a decrease in average sales prices mainly due to different product combinations.
Intelligence capabilities continue to improve, breaking through the end-to-end + visual language model (VLM). On July 5, Ideal Auto held the 2024 smart driving summer press conference. Ideal Wutu NOA will soon be fully launched, AD Max will be upgraded, and end-to-end + VLM will break through. The industry-leading One Model true-end-to-end model and the first VLM visual language model successfully deployed on a car-side chip. The “dual car-side system” of ideal car autonomous driving will work with the reconstruction-generative world model in the cloud to draw up a safer and more intelligent autonomous driving blueprint for ideal car users.
Accelerating the charging layout, the company actively responds to internal and external operating pressure, and the business outlook is conservative.
The accelerated layout of ideal overcharging stations. According to Ideal Auto's official account, the company expects that by the end of 2024, more than 2,000 ideal overcharging stations will be put into use, and more than 10,000 charging stations will be put into use, which will support the recovery in sales. The company's Q3 outlook: estimated vehicle delivery volume is 14.5w~15.5w, +38% ~ +47.5% ~ +33.5% ~ +42.8%; revenue is expected to be 394 to 42.2 billion yuan, +13.7% ~ +21.6%/+24.3% ~ +33.1% month-on-month.
Profit forecasts and investment ratings are affected by multiple factors such as industry competition. We lowered the company's profit forecast. We expect the company to achieve operating income of 152.1, 217.1, and 262.8 billion yuan in 2024-2026, with year-on-year growth rates of 23%, 43%, and 21%; realized net profit to mother of 8.4, 14.6, and 20 billion yuan, respectively; EPS was 4.0, 6.9, and 9.4 yuan. The PE valuation corresponding to the current stock price is 18, 10, and 8 times, respectively. With the company's L6 sales and the launch of new models, we expect the company's future sales to gradually increase, and corresponding performance is also expected to continue to improve, so we maintain the company's “increase” rating.
Risks suggest that the company's product sales fall short of expectations; market demand recovery falls short of expectations; fierce industry competition has triggered a price war; the growth rate of the pure electric vehicle market falls short of expectations; construction of charging and charging facilities falls short of expectations; and the progress of new product launches falls short of expectations.