Incidents:

On November 19, 2024, Xiaopeng Motor released its financial report for the third quarter of 2024:2024Q3's total revenue was 10.1 billion yuan, up 18.4% year on year and 24.5% month on month. Of this, vehicle revenue was 8.8 billion yuan, or +12.1%/+29.0% YoY. The net loss due to mother was 1.81 billion yuan, and the net loss for the same period in 2023 was 3.89 billion yuan; NON GAAP net loss was 1.53 billion yuan, compared to 2.79 billion yuan for the same period in 2023, and the loss narrowed. The gross profit margin was 15.3%, up 18pct from the same period in 2023.

The company delivered 46,533 vehicles in 2024Q3, up 16.3% year on year and 54% month on month.

Investment highlights:

2024Q3's revenue surpassed 10 billion and gross margin reached a new high. 2024Q3 achieved revenue of 10.1 billion yuan, or +18.4%/+24.5%, of which vehicle revenue was 8.8 billion yuan, or +12.1%/+29.0% month-on-month. The year-on-month increase was mainly due to increased deliveries in the third quarter of 2024; service and other revenue was 1.31 billion yuan, and +90.7%/+1.1% month-on-month. The increase was mainly due to platform and software strategy and electronic and electrical architecture technology strategic cooperation with Volkswagen Group The increase in revenue from related technology research and development services was partially offset by a decline in parts and accessories sales. 2024Q3's operating profit loss was 1.85 billion yuan, with a loss margin of 41.5%/14.9%, and net profit loss to mother of 1.81 billion yuan, a year-on-year narrowing of 53.5% and an increase of 41.4% month-on-month; gross margin was 15.3%, +18.0pct/+1.3pct, automobile gross margin 8.6%, and the month-on-month ratio was +14.7pct/+2.2pct. Expenses: Sales and general administrative expenses were $1.63 billion, or -3.5%/+3.8% YoY. The year-on-year decline was mainly due to lower employee pay. The month-on-month increase was mainly due to increased commissions paid to franchisees; R&D expenses were 1.63 billion yuan, or +25.1%/+11.3% month-on-month. The main reason for the increase was the company's expansion of the product portfolio to support future growth, in line with the increase in expenses associated with the development of new models.

Intelligent driving capabilities continue to improve, and large end-to-end models are being promoted at an accelerated pace. The company's smart driving technology continues to innovate, and product competitiveness continues to improve. 1) On November 6, 2024, Xiaopeng Motor held the 2024 AI Science and Technology Day event in Guangzhou, showcasing the company's cutting-edge technology and innovations, including the Xiaopeng Kunpeng super electric system, Turing AI intelligent driving system, and AI robots. 2) On November 7, 2024, Xiaopeng Motor officially released the P7+, an AI smart driving pure electric hatchback coupe, and large-scale delivery began in the same month. All P7+ models are equipped with end-to-end AI advanced intelligent driving assistance system technology as standard, providing industry-leading advanced urban intelligent driving assistance functions that do not rely on high-precision maps or lidars.

The sales service system has been upgraded, and business expectations are optimistic. As of September 30, 2024, the company has 639 sales stores, covering 206 cities across the country; Xiaopeng has 1,557 self-operated charging stations, including 654 S4 ultra-fast charging stations, and launched 6 new liquid-cooled S5 ultra-fast charging stations. The 2024q4 company expects delivery volume of 8.7W~9.1W, up 44.6% ~ 51.3% year on year. Total revenue is expected to be 15.3 billion yuan to 16.2 billion yuan, up 17.2% ~ 24.1% year on year.

The process of going out to sea continues to accelerate, and technical cooperation continues to advance. 1) Overseas export sales reached a record high in the third quarter of 2024. Export volume ranked first among new power companies. Overseas sales increased 70% month-on-month in Q3, accounting for 15% of the company's sales volume. 2) The company's overseas expansion process has been accelerated, and since this year, it has successively entered countries such as Germany, France, Spain, Portugal, etc. As the G6 continues to be launched and sold in more countries, Xiaopeng Motor's sales volume in Europe this year has grown exponentially rapidly. According to the Go Overseas 2.0 strategic plan, by the end of 2025, Xiaopeng Motor plans to enter the markets of more than 60 countries and regions around the world, and become the number one high-end Chinese new energy brand overseas. Xiaopeng Motor is also the first Chinese smart electric vehicle brand to launch a pure electric model in the Egyptian and African markets. 3) In July, Xiaopeng Motor and Volkswagen Group signed a strategic cooperation and joint development agreement on electronic and electrical architecture technology. The two sides will fully invest in developing industry-leading electronic and electrical architectures for Volkswagen's CMP and MEB platforms in China. The first model based on the jointly developed electronic and electrical architecture is expected to be mass-produced within 24 months. The two sides will actively explore opportunities for further cooperation to expand the scope of application of electronic and electrical architectures jointly developed by the two sides.

Profit forecasting and investment rating company's gross margin improved to 15.3% in 2024Q3; large models of end-to-end autonomous driving were released, and smart driving capabilities were further improved; Mona M03 and P7+ sold well. We raised the company's 2024-2026 revenue forecast to 41.8, 81.3, and 112.8 billion yuan, with year-on-year growth rates of 36%, 94%, and 39%; achieving net profit to mother of -6.1, -1.5, and 2.1 billion yuan. The corresponding EPS is -3.2, -0.8, and 1.1 yuan. The PS valuation corresponding to the current stock price is 1.9, 1.0, and 0.7 times, respectively, maintaining a “buy” rating.

Risks suggest that NEV sales are growing less than expected; competition in the automotive industry intensifies risks; the new vehicle development process falls short of expectations; competition in market segments increases risks; and the progress of intelligent development falls short of expectations.