Q3 Performance is under pressure, and the intensive launch of new cars can be expected to improve

The company released its three-quarter report for 2024, achieving revenue of 110.96 billion yuan, +2.54% year-on-year; net profit to mother of 2.711 billion yuan, -68.99% year-on-year. Q3 achieved revenue of 34.237 billion yuan, or -19.85% year over year; net profit to mother of 0.748 billion yuan, -66.44% year over year, mainly due to declining sales combined with higher promotion costs brought about by the launch of new products.

Considering the intense competition in the industry, the company's fuel vehicles are facing certain sales pressure, and new energy vehicles need to be expanded, we lowered the company's 2024-2026 performance forecast. The net profit for 2024-2026 is expected to be 53.1 (-28.3) /86.1 (-33.6) /109.4 (-34.1) billion yuan. The current stock price corresponds to a PE of 24.8/15.3/12.0 times. In view of the strong start of the company's new vehicle cycle and continuous overseas development, we are optimistic about long-term development and maintain a “buy” rating.

The decline in sales dragged down the company's Q3 performance, and the average bicycle price remained flat month-on-month

The company's total sales volume in Q3 was 0.5739 million vehicles, -12.2%/-10.6% YoY, with own-brand sales of 0.4632 million vehicles, -12.4%/-13.0% YoY, Gravity Series -29.4%/-11.3% YoY, and own-brand NEV/overseas sales volume -12.7%/-10.3% month-on-month. Despite sales pressure, the average price of bikes remained flat month-on-month in Q3. In terms of profitability, Q3 gross margin was +2.5pct month-on-month, mainly due to Deep Blue Q3 sales +57.8% month-on-month. Superimposed Q2 included assurance quality assurance costs in operating costs to bring a low base. At the same time, the Q3 sales/management/R&D cost ratio was +2.2pct/+1.4pct/+1.1pct month-on-month, mainly due to the increase in promotion costs/decline in scale effects and increased investment in electric intelligence due to the launch of various new vehicles in Q3. Q3 investment income declined markedly from month to month. Among them, Avita's Q3 sales volume was -43.8% month-on-month, and it is expected that it will still face large losses. Profits are expected to improve after the launch of new Q3 models.

With “self-development+cooperation” in the field of intelligence combined, the intensive launch of new cars can be expected to increase sales

The company released 7 intelligent technologies, including the SDA Tianshu architecture, the Tianshu Grand Model, Smart Driving, Tianyu OS, and Tianyu Smart Cockpit, which were installed on the E07, laying out the digital smart car era. However, after Avita takes a stake, it will cooperate with Huawei in joint brand marketing, joint product definition and design, priority installation of core technology, most-favoured-nation treatment at a price, and priority supply of parts, etc., and is currently profitable, and it is expected that in the long term, it is expected that it will enjoy the investment benefits brought by the expansion of sales of Avita cooperative models. Guided by intelligent technology, the company began a golden development period with intensive new product launches: (1) Deep Blue delivered 0.0279 million vehicles in October, orders for all 0.0363 million vehicles, and S05 orders exceeded 0.01 million vehicles in 10 days, which is expected to gradually approach the break-even point; (2) Avita's sales volume broke 0.01 million vehicles for the first time in October; Avita 07 broke 0.01 million vehicles for the first time in October, and sales volume is expected. Significant growth.

Risk warning: NEV sales and cooperation with Huawei fall short of expectations, sharp rise in raw material prices, etc.