Incident: The company released its third quarter report on October 29, 2024. 3Q24 achieved operating income of 10.908 billion yuan, a year-on-year decrease of 5.57%; net profit to mother of 0.324 billion yuan, an increase of 1028.38% over the previous year.

Gross margin increased year-on-year, and the expense ratio increased during the period: 3Q24's net profit to mother increased 1028.38% year over year to 0.324 billion yuan. The main reason was that, on the one hand, the company continued to optimize the product structure and debt structure, actively explore domestic and foreign markets, and achieved an increase in exchange income and financial expenses during the reporting period; on the other hand, the company continued to work to optimize the asset structure and improve resource allocation efficiency, and asset disposal income increased dramatically during the reporting period. 3Q24's gross margin was 11.36%, +0.41pct year on year; the company achieved a sales expense ratio of 3.88%, +0.2pct year on year; achieved a management expense ratio of 4.05%, +0.52 pct year on year; achieved a R & D cost ratio of 4.11%, +1.06 pct year on year.

Actively explore the market and optimize resource allocation: The company continues to optimize the product structure and debt structure, actively explore domestic and foreign markets, and achieve an increase in exchange income and a reduction in financial expenses; on the other hand, the company continues to strive to optimize the asset structure, improve resource allocation efficiency, and increase asset disposal benefits significantly. At the same time, the company has joined forces with technology giants such as Huawei, Horizon, iFLYTEK, Black Sesame, and Ningde Times to form comprehensive, long-term, and stable strategic partnerships in the field of intelligent new energy vehicle research and development, and continue to provide users with mobility solutions.

Investment advice: We expect the company to achieve net profit of 0.765/0.839/1.237 billion yuan in 2024-2026, corresponding PE of 126.52/115.38/78.24 times, respectively, to maintain a “gain” rating.

Risk warning: New product launch progress falls short of expectations; overseas competition intensifies; terminal consumer demand is insufficient.