The company's Q3 performance was in line with expectations: the company achieved vehicle sales revenue of 41.32 billion yuan in Q3 of 2024, up 22.9% year on year and 36.3% month on month. Total vehicle deliveries in Q3 2024 were 0.153 million vehicles, up 45.4% year over year. Vehicle gross margin increased to 20.9% in Q3.

Net profit was 2.81 billion yuan, down 0.3% year over year. The new product L6 boosted overall sales volume, with an average monthly sales volume of 25,000 units, further expanding the domestic NEV market share of 0.2 million yuan or more. The ideal market share will increase from 14.4% in Q2 2024 to 17.3% in Q3. The company plans to further increase L6 production capacity from the fourth quarter to next year. The company's estimated delivery volume for the fourth quarter was 0.16-0.17 million vehicles, and revenue guidance was 43.2 billion - -45.9 billion yuan.

The cost ratio improved significantly: the company's R&D expenses rate in Q3 2024 was 6%, a year-on-year decrease of 2.1 pct and a month-on-month decrease of 3.5 pct; SG&A expenses were 7.8%, up 0.5 pct year on year, and 1.1 pct. The launch of new products has slowed down, some R&D costs have been reduced, and changes in the smart driving path have led to a reduction in R&D costs and a reduction in employee remuneration. Additionally, in the third quarter of 2024, compensation expenses were paid because the company's CEO confirmed shares based on performance rewards.

Full launch of the new smart driving solution: At the end of July, the company released a new autonomous driving technology architecture based on end-to-end and visual language models, and tested on a scale of 10,000 people in September. In October, the company launched the OTA 6.4 update for Ideal MEGA and Ideal L series models. Currently, the company has delivered more than 0.3 million models, 70% of users choose the AD max version, and the user rate of the L6 premium version has reached 30%.

Actively preparing for pure electric models: The company has 479 retail centers in 145 cities, operates 436 after-sales maintenance centers and authorized sheet spray centers for ideal cars in 221 cities, putting into use 894 ideal supercharging stations, equipped with 4,286 charging piles, laying a good foundation for the launch of pure electric models. Pure electric models will be the main increase next year, and the company's market share of more than 0.2 million is expected to increase further.

Target price of $33.75/HK$132.16, purchase rating: We forecast that the company's sales volume will reach 0.515 million units, 0.718 million units, and 0.944 million vehicles respectively in 2024-2026, with revenue of 147.5 billion yuan, 191.6 billion yuan and 221.3 billion yuan respectively, and net profit to mother of 7.84 billion yuan, 12.99 billion yuan and 16.75 billion yuan respectively, with an average of over the next three years Maintain profit levels. We used free cash flow discounting to value the company. WACC was 11%, with a sustainable growth rate of 3%. A reasonable share price should be $33.75/HK$132.16. There is room for 31.80%/37.60% increase compared to the current price, and maintain the buying rating.