Incident: The company released its 2024 three-quarter report. In the third quarter, the company achieved revenue of 41.58 billion yuan, +636.3% year-on-year; realized net profit of 2.41 billion yuan; and realized net profit deducted from non-mother of 2.33 billion yuan. In the first three quarters, the company achieved revenue of 106.63 billion yuan, +539.2% year-on-year; realized net profit of 4.04 billion yuan; and realized net profit of 3.76 billion yuan without deduction to mother.

Comment:

The 24Q3 performance improvement was clear. In the third quarter, the company achieved revenue of 41.58 billion yuan, +636.3%; realized net profit of 2.41 billion yuan, higher than the forecast net profit center of 2.18 billion yuan; realized net profit deducted from non-mother of 2.33 billion yuan, higher than the forecast net profit center of 2.06 billion yuan. In the first three quarters, the company achieved revenue of 106.63 billion yuan, +539.2% year-on-year; realized net profit of 4.04 billion yuan; and realized net profit of 3.76 billion yuan without deduction to mother. The company achieved a gross profit margin of 25.5% in the third quarter, +18.0pct year over year, and -1.9pct month-on-month. The month-on-month decline was mainly due to changes in accounting policies. Enterprise assurance quality assurance expenses were included in costs, corresponding to reducing sales expenses, which had no impact on net profit; sales/management/R&D/finance expense ratios were 11.1%/2.5%/3.7%/-0.4%, respectively, -4.3pct/+0.6pct/-1.2pct/-0.4pct month-on-month; net interest rate reached +1.6pct month-on-month, respectively 4.9%

Quarterly sales continued to increase month-on-month, and M9 definitely maintained high growth. In terms of sales, the company achieved sales of 0.116 million new energy vehicles in the third quarter, +394.2% year over month, and +9.1% month over month; the Q & A brand delivered 0.11 million vehicles, +595.7% year over year, and +11.8% month over month. Among them, the M5/M7/M9 delivered 0.016 million/0.045 million/0.049 million vehicles respectively, +18.8%/+21.3%/+2.4% month-on-month respectively.

In terms of orders, as of October 26, the M9 has accumulated a cumulative total of 0.16 million units in the 10 months since its launch. With the launch of the new five-seater version, Dazheng has surpassed 0.01 million units in the past half month. According to our statistics, M9's market share of 0.45 million yuan or more has exceeded 20%.

The active operation of capital shows firm confidence in future development. The company actively carried out capital operations in the second half of the year. In July, the company announced that it would acquire a series of text and graphic trademarks held by Huawei and its related parties, with a total purchase price of 2.5 billion yuan; in August, the company announced that it intended to use about 1.329 billion yuan to acquire minority shareholders' rights in the holding subsidiary Cyrus Auto, which would help the company increase net profit attributable to shareholders of the parent company and further enhance the company's profit level; in August, the company's board of directors deliberated and agreed that the company would purchase 10% of the shares in cash. The transaction amount was RMB 11.5 billion billion yuan. As of the date of publication of the third quarterly report, the first transfer price of RMB 2.3 billion had been paid; in October, the company held a shareholders' meeting to consider and pass the bill on the company's plan to issue shares to purchase assets. The company plans to use 8.16 billion yuan to acquire 100% of Longsheng New Energy's shares and obtain ownership of the gigafactory, which will help optimize the asset quality of listed companies and enhance sustainable profitability.

Profit forecast and investment advice: The launch of the new M7/M9 model accelerates order accumulation. I am optimistic that the company's sales will continue to increase. Looking ahead to 25, the launch of new models such as the M8 is expected to further increase the sales center, and the company's net interest rate is expected to grow steadily as the scale effect increases. We expect the company to achieve revenue of 152.2/190.6/226.3 billion yuan and net profit to mother of 6.1/9/11.9 billion yuan in 2024-2026.

Risk factors: The risk of launching new models falling short of expectations, the risk of price wars, and increased competition for new energy high-end medium and large vehicles.