Description of the event

Ideal Auto achieved revenue of 42.87 billion yuan in the third quarter, +23.6% year over year; realized net profit of 2.81 billion yuan to mother, -0.3% year over year.

Incident comments

The ideal sales volume for the third quarter of 2024 is 0.153 million vehicles, and the average price of a bicycle is about 0.27 million yuan. Ideal 2024Q3 achieved sales of 0.153 million vehicles, +45.4% year over year and +40.8% month-on-month, benefiting from the rapid growth of L6 sales, with an average monthly sales volume of 0.051 million units.

By model, Ideal L6/L7/L8/L9/MEGA achieved sales of 7.5, 3.4, 0.019, 0.022, and 0.002 million vehicles respectively, with L6 accounting for 49% of sales. Ideal Q3 achieved revenue of 42.87 billion yuan, of which vehicle sales revenue was 41.32 billion yuan, +22.9% year-on-year and +36.3% month-on-month. As the share of L6 sales increased, the corresponding bicycle sales price dropped to 0.27 million yuan, -0.049 million yuan year on year, and -0.009 million yuan month on month.

The scale effect clearly drives the increase in gross margin, and the scale effect brought about by subsequent sales growth is expected to continue to drive profit growth. In terms of gross margin, Q3 benefited from the scale effect and gross margin rebounded to 21.5%, of which vehicle gross margin was 20.9%, -0.3 pct year over year, and +2.2 pct month-on-month. Q3 Sales, administration and general expenses were $3.36 billion, with a cost rate of about 7.8%, +0.5pct year over year, and -1.1 pct month-on-month. The company's Q3 R&D expenses reached 2.59 billion yuan, -8.2% year-on-month, and -14.6% month-on-month. The corresponding R&D expenditure rate reached 6.0%, -2.1 pct year over year, and -3.5 pct month-on-month. Q3 The company achieved net profit to mother (GAAP) of 2.81 billion yuan. After adding 1.03 billion shares to pay compensation and other accounts, the company achieved net profit (non-GAAP) of 3.84 billion yuan, +10.6% YoY, +155.5% month-on-month, corresponding net interest rate to mother 9.0%, -1.1 pct YoY, +4.2pct month-on-month, bicycle profit 0.025 million yuan, YoY -0.008 million yuan, and month-on-month +0.011 million yuan. As ideal sales continue to grow and advances in smart driving technology drive sales and the share of sales of high-spec models, the ideal revenue and profit levels are expected to increase relatively well in the future. Looking ahead to 2024Q4, the ideal estimated delivery volume is 0.16-0.17 million vehicles, up 21.4% to 29.0% year on year, and expected revenue of 43.2-45.9 billion yuan, up 3.5%-10.0% year on year. Based on this guideline, the ideal annual sales volume is 0.502-0.512 million vehicles, up 33.4% to 36.1% year on year, and the estimated revenue is 143.4-146.1 billion yuan, up 15.8% to 18.0% year on year.

Ideal Auto has clear plans for subsequent models, continuous layout of direct sales channels, and broad scope for future sales. At present, a product layout of “4 extended-range electric models+1 high-voltage pure electric model” has been formed. The product matrix covers a market of more than 0.2 million, and it is expected that there will still be a strong new vehicle cycle next year. On the smart driving side, the company launched the OTA6.4 update for Ideal MEGA and Ideal L series models in October. At the same time, the ideal channel structure continues to be optimized and the number continues to increase. By the end of September 2024, Ideal Auto had 479 retail centers across the country, covering 145 cities; 436 after-sales maintenance centers and authorized sheet spray centers, covering 221 cities. Looking ahead to this year, the ideal sales and service network will continue to be upgraded. It is planned to increase the number of retail centers to 800 by the end of this year, and the number of after-sales service centers and authorized sheet spray centers is expected to exceed 500.

Ideal Auto's product advantages and brand design are deeply rooted in the hearts of the people, and the “Dual Energy Strategy” is expected to further expand the advantages of Ideal Auto.

Subsequent new models will be launched one after another to further improve the ideal product matrix and increase the ideal overall sales space. The combined scale effect of high bike sales prices is expected to maintain a good profit level. Net profit (GAAP) is expected to be 8.1, 14.68, and 20.08 billion yuan respectively for 2024-2026, corresponding PE is 23.1X, 12.8X, and 9.3X, respectively, and net profit (non-GAAP) is 11.1, 17.88, and 23.28 billion yuan respectively, corresponding PE is 16.9X, 10.5X, 8.0X, maintaining a “buy” rating.

Risk warning

1. Global economic recovery is weaker than expected; 2. Increased industry competition weakens corporate profits.