Incident: 2024Q3 achieved revenue of 42.87 billion yuan, 23.6% year-on-year, 35.3%; of these, automobile sales revenue was 41.32 billion yuan, 22.9% year-on-year and 36.3% month-on-month. The increase was mainly due to an increase in vehicle deliveries; and realized net profit of 2.81 billion yuan, -0.3% year-on-year and 155.2% month-on-month.

Q3 Sales grew strongly, and gross margin increased significantly from month to month. The 2024Q3 company delivered 152,831 vehicles, 45.4% year-on-year and 40.8% month-on-month. Sales of L series models increased significantly after the launch of the L6 model. Q3 gross margin was 21.5%, of which vehicle gross margin was 20.9% (21.2% for 2023Q3 and 18.7% for 2024Q2), which remained relatively stable year over year. The large month-on-month increase was mainly due to lower costs.

Q3 The company's sales management/ R&D expenses were 3.36/2.587 billion yuan, respectively, 32.1%/-8.2% year-on-year, 19.3%/-14.6%, respectively, and sales management/R&D expenses rates were 7.8%/6.0%, respectively. The increase in sales management expenses mainly confirmed CEO equity incentive expenses in the third quarter.

Smart driving has been rapidly iterated, and OTA6.4 has been fully promoted to AD Max users. In October 2024, the company launched the OTA 6.4 update, which provides a range of new and upgraded features in smart driving, smart space, and smart electricity. With this upgrade, the company is fully promoting a new smart driving solution combining end-to-end (E2E) and visual language models (VLM) to over 0.32 million ideal AD Max owners. Furthermore, Ideal Student continues to evolve to achieve more natural and personable user interaction by upgrading voice models, etc.

The construction of the charging pile network continues to advance. As of November 3, 2024, the company has put 1004 overcharging stations into use across the country, equipped with 4,910 charging piles, and the coverage of the energy supply system continues to expand.

Looking ahead to the fourth quarter: The company expects car deliveries of 0.16-0.17 million vehicles, up 21.4% to 29.0% year on year; revenue is expected to be 43.2 billion to 45.9 billion, up 3.5% to 10.0% year on year.

Profit forecast: The company's revenue for 2024-2026 is expected to be 149.8/225.8/263.4 billion yuan, up 21%/51%/17% year on year, and net profit of 8.1/12.8/21 billion yuan, respectively, -31%/58%/64% year on year. The current stock price corresponds to 2024-2026 PE 24/15/9 times, respectively. Maintain a “buy” rating.

Risk warning: Competition in the industry intensifies, the company's sales volume falls short of expectations, progress in new pure electric vehicles falls short of expectations, risk of rising costs, etc.