Key points of investment:

Xiaopeng Motor announced unaudited financial results for the third quarter of 2024 (hereinafter referred to as the “2024 Third Quarter Results Announcement”): the company achieved revenue of 10.1 billion yuan in 2024 Q3, +18% year over year and +25% month over month.

Net loss was 1.81 billion yuan, 2023Q3 lost 3.89 billion yuan, and 2024Q2 lost 1.28 billion yuan.

24Q3 revenue was impressive: delivery volume increased month-on-month, and strategic cooperation with the public continued to advance. (1) 24Q3's automobile sales revenue was 8.8 billion yuan, +12% year over year and +29% month over month, thanks to increased delivery volume.

24Q3 delivered 0.047 million new vehicles, +16% year over year and +54% month over month. According to our estimates, 24Q3 bike revenue was 0.189 million yuan, -0.007 million yuan year on year, and -0.037 million yuan month on month. (2) The 24Q3 company's service and other revenue was 1.31 billion yuan, +91% year-on-year, and +1% month-on-month, mainly due to increased revenue from technology research and development services related to the public's platform and software strategies and electronic and electrical architecture technology strategies.

Gross margin reached a record high in 24Q3. The 24Q3 company's gross margin was 15.3%, +18.0pct year on year and +1.3pct month on month; among them, automobile gross margin was 8.6%, +14.7pct year on year, and +2.2pct month on month; service and other profit margins were 60.1%. According to the company's results announcement for the third quarter of 2024, the year-on-year increase in automobile gross margin was mainly due to lower costs and improved model product portfolios; the month-on-month increase was mainly due to lower costs.

Adhering to the global route, the export volume ranks first among the new forces. Adhering to the global route, the export volume ranks first among the new forces. According to Xiaopeng Motor's official account, in 24Q3, Xiaopeng's overseas sales volume was +70% month-on-month, accounting for 15% of the company's total sales. As of 2024Q3, Xiaopeng Motor has entered 30 countries and regions, aiming to enter more than 60 countries and regions by the end of 2025, with half of sales coming from overseas in the next 10 years. Overseas sales are expected to continue to grow rapidly.

The beginning of a major product cycle is expected to drive sales growth. According to the official account of Xiaopeng Motors, the Xiaopeng P7+ will go on sale for about 0.032 million units in 24 hours, and the performance was outstanding. We believe that the successful launch of the M03 and P7+ marks the beginning of the positive growth cycle of Xiaopeng Motor's major product cycle. The large product cycle will not only drive sales growth, but also bring healthier gross profit and cash flow, and support the company's technology research and development for AI vehicles. Looking ahead to 24Q4, the company expects new vehicle deliveries of 0.087-0.091 million vehicles, +45%-51% year over year, and +87%-96% month on month; total revenue is expected to reach 15.3-16.2 billion yuan, +17%-24% year over year, and +51%-60% month on month.

Profit forecast and investment advice: We expect the company's 2024/25/26 revenue to be 40.9/79/104.8 billion yuan, and net profit to mother of -5.5/-2/3.2 billion yuan. We use the PS method to value the company. The closing market value of the company on November 26, 2024 corresponds to 1.9/1.0/0.7 times the 2024/25/26 PS. Referring to comparable companies, we gave the company 1.2-1.4 times PS in 2025, and the corresponding reasonable value range was HK$54.27-63.32 (converted at the exchange rate of 1 HKD = 0.92 RMB). Maintain an “better than the market” rating.

Risk warning: NEV sales fall short of expectations; raw material prices have risen sharply.