The volume and price of 2024Q4 are stable, reserving potential for 2025, and the pure electric platform may create explosive surprises

Based on the stable competitiveness of growth models, we raised the company's 2024-2026 revenue forecast from 133.1/156.7/181.6 billion yuan to 145.8/169.2/216.2 billion yuan, up 18%/16%/28% year-on-year; based on steady increase in automobile gross profit and good management of operating expenses, the company's 2024-2026 non-GAAP net profit forecast was raised from 7.8/8.2/10.7 billion yuan to 10.7/13.2/ 17.8 billion yuan, corresponding EPS of 5.1/6.2/8.2 yuan, respectively, and the current stock price of HK$97.10 corresponds to 1.1/0.9/0.7 times PS and 14.7/12.1/9.0 times PE in 2024-2026. The company's stable 2024Q4 volume and price reserve potential for 2025 sales. The pure electric platform is still undergoing low-key improvements or creating explosive surprises. The AD Max smart driving function is rapidly iterating, and the digital factory consolidates long-term competitiveness, and has been upgraded to a “buy” rating.

2024Q3 non-GAAP net profit exceeded expectations, stemming from automobile gross profit exceeding expectations

The company's 2024Q3 revenue was 42.87 billion yuan, slightly higher than the company's guidance range of 39.4-42.2 billion yuan, up 24% year over year. ASP 0.27 million yuan was slightly better than our expectations, mainly due to the increase in L Series Max share; while 2024Q3 delivery volume increased 45% year over year to 0.153 million vehicles in the guidance range of 0.145-0.155 million vehicles. Overall gross margin increased 2.0pct to 21.5% month-on-month (vs. Bloomberg's agreed forecast of 20.2%), with vehicle gross profit increasing by 2.2 pct to 20.9% month-on-month. The analysis was driven by an increase in the share of max models and a decrease in bicycle costs. Non-GAAP net profit of 3.85 billion yuan (vs. Bloomberg's agreed estimate of 2.91 billion yuan) was mainly due to gross margin exceeding expectations, reduced R&D costs and employees, hedging the impact of increased sales staff, and early accounting of one-time expenses for CEO equity incentives.

2024Q4 is expected to be stable in volume and price or without increased promotion, reserving sales potential for 2025

The company delivered 0.0514 million vehicles in October 2024 and 0.16-0.17 million vehicles, mainly by increasing sales autonomy in various regions to ensure a steady increase in 2024Q4 sales, corresponding to an average delivery of 0.055-0.06 million vehicles in 11-12 months and 0.501-0.511 million vehicles throughout the year; the guideline 2024Q4 revenue of 43.2-45.9 billion yuan implied ASP hypothesis 0.27 The million yuan remained flat month-on-month, indicating that the company's promotional activities were stable in 2024Q4. The AD max smart driving function was rapidly iterated, and the NOA takeover rate and safety performance were significantly improved with the support of the end-to-end + VLM model. The one-click smart driving from parking space to parking space and the national ETC non-exit function is expected to be fully promoted to all AD Max users by the end of December 2024, which is expected to drive an increase in the proportion of high-margin max models. The company relies on technological innovation, platform-based reuse of parts, and digital smart factories to continuously reduce bicycle costs, which is expected to boost the gross profit margin of automobiles.

Risk warning: Product launches are not as good as expected, production capacity and supply chain risks, and NEV growth is not as good as expected.