Investment Recommendation
Since initiating organizational restructuring in 2023, the company has successfully reversed its predicament and entered a robust product cycle driven by models such as MONA. Subsequently, it forged a strategic partnership with Volkswagen, adopting a technology licensing revenue model that has boosted profitability. Beyond automobiles, the company continues to invest in Robotaxis and humanoid robots, with technological and commercial advancements that lead the industry. Here, we explore the company's diversified business prospects and its SOTP valuation potential.
Reason
Penetrate niche markets with a product matrix, and let super range extension drive incremental growth. The company has fully rolled out its "One Vehicle, Dual Power" strategy, launching models such as the X9, P7+, G7, and GX equipped with the Kunpeng super range extension technology, focusing on the mainstream market priced between 100,000 and 400,000 yuan. By leveraging AI and intelligent driving experiences as core differentiating barriers, the company is enhancing its product definition capabilities, combining long-range pure electric performance with 5C ultra-fast charging, thereby meeting industry and policy challenges while achieving a brand upgrade and breakthrough.
As the company continues to expand its business scope, it is embarking on a new cycle of technology monetization. The collaboration between the company and Volkswagen has extended from the G9 platform to E/E architecture and Turing chips, achieving full-stack coverage across both software and hardware. Starting in 2024, both other business revenues and gross margins have risen, validating the company's ability to monetize its technologies. With the mass production of collaborative models such as the Zhongdu 07 and 08 beginning in 2026, the revenue model will be upgraded to a diversified structure comprising technology service fees plus sales-based royalties, thereby generating stable profit contributions.
VLA2.0 has been released, paving the way for a more comprehensive AI ecosystem. 2026 marks the inaugural year for the large-scale deployment of the company's Robotaxi and Physical AI solutions. With the rollout of VLA2.0 across vehicle platforms, the algorithm, computing power, data, and testing flywheels are fully engaged, enabling vehicle models to move toward L4 commercialization. Simultaneously, robots are entering mass production, with the IRON ET1 leveraging automotive supply chains and automotive-grade standards in depth. The company has transcended the boundaries of single passenger vehicles, establishing a closed-loop AI ecosystem that encompasses Turing chips, algorithms, and multi‑dimensional terminals—where efficient generalization and reuse of underlying technologies will continue to unlock substantial economies of scale.
Profit Forecast and Valuation
The current Hong Kong/U.S. stock prices correspond to 1.0/1.1x P/S for 2026, and we maintain our outperform industry rating. Given the company's increased 2025 expense investments and intensifying market competition, we have lowered our 2025 earnings forecast to -1.13 billion yuan (previously -0.78 billion yuan). Taking into account market competition and the company's ongoing efforts to reduce costs and improve efficiency, we are maintaining our 2026 earnings forecast while introducing a new 2027 forecast of 4.78 billion yuan. Considering that several of the company's innovative businesses have entered mass production, we are switching to SOTP valuation (detailed calculations are provided in the main text), lowering our target prices for Hong Kong/U.S. stocks by 17%/18% to 90 HKD/23 USD, representing upside potential of 45%/42% relative to current share prices, respectively.
Risk
New car and autonomous driving demand fell short of expectations, and the collaboration with Volkswagen did not meet expectations.
