Incident: 0.049 million vehicles were delivered in November, +18.8% compared to the previous month; in January-November '24, the company delivered a total of 0.442 million new vehicles. To complete the annual 0.502-0.512 million delivery guidelines disclosed in the three-quarterly report, it is necessary to deliver 0.06 million or more in December

We believe the main reasons for the month-on-month decline in the company's delivery volume in November: 1) increased competition and intensified market competition; 2) According to the three-quarter public results meeting, L6's current production capacity cannot meet order demand, and the factory will accelerate production expansion during the 2025 Spring Festival to meet order demand. Looking at retail data, in the first three weeks of November, the average weekly sales volume for L6 was about 6,000 units, and the total weekly sales volume for L7/8/9 was about 5,578 units. On November 29, a 3-year zero interest plan was launched, which is expected to drive up sales in December; pure electric products are basically stable, and MEGA has an average weekly sales volume of about 197 units. We believe that with the gradual accumulation of product reputation and the improvement of the layout of overcharging stations, subsequent sales are expected to break through.

Sales channels and service networks continue to be upgraded. By the end of November, Ideal Auto had 475 retail centers, 451 after-sales maintenance centers and authorized sheet spray centers across the country, an increase of 7 compared to the end of October. Forecast: the Extended Range series is expected to pick up, and the pure electric series has great potential for sales.

1) The Extended Range series is expected to rebound in sales volume and optimize the sales structure: the company focuses on the L series and the expansion of superimposed equity, and sales of the L series are expected to pick up; according to the sales announcement, AD MAX orders for models over 0.3 million/0.4 million in November accounted for more than 70%/80%, respectively. The parking space to parking space on November 28 was fully promoted along with OTA6.5, and the smart driving upgrade is expected to continue to optimize the sales structure.

2) The solid layout of the Pure Electric series is expected to start a major product cycle: on the infrastructure side, by the end of November, there were 1,135 overcharging stations and 5680 charging piles, an increase of 131 and 770 charging stations, respectively; on the car side, the company has a solid layout of high-voltage fast charging technology, and MEGA products are strong. After the company reverses its thinking and operates at a pace from 0 to 1, sales are expected to break through. There is great potential for sales after the launch of new pure electric products in 2025.

Investment advice: The company's net profit due to mother in 2024-2026 is estimated to be 8, 15.4, and 26.4 billion yuan, respectively, corresponding to the current market value PE, which is 20, 11, and 6 times, respectively. Referring to comparable company estimates, a 25-year 18xPE is given, corresponding to a 6-month target price of $130.57, equivalent to HK$142.58.

Risk warning: Industry competition increases risk, supply chain cost reduction falls short of expectations, model launch pace falls short of expectations, etc.