The company is a pioneer in electric vehicles in China and has been in a period of product upgrading and transformation in recent years. The controlling shareholder of BAIC Blue Valley is BAIC Group, and the actual controller is the Beijing Municipal State-owned Assets Administration Commission. It has wholly-owned subsidiaries, Extreme Fox Auto and BAIC New Energy, and is mainly engaged in ARCFOX and BEIJING brands. The subsidiary BAIC New Energy was founded in 2009. It is the first independently operated enterprise in China and the first to obtain a new energy vehicle production license. BAIC Blue Valley became the first domestic NEV stock through major asset restructuring in 2018. In recent years, the company is in a period of product transformation, and high raw material enterprises and intensive R&D & marketing investment are putting pressure on performance. In 2023, the company accelerated the pace of new product launches and product adjustments. Revenue for the first three quarters of 2023 was 9.308 billion yuan, +63.1% year-on-year, and net profit loss was 3,251 million yuan, a year-on-year decrease of 248 million yuan.
Polar Fox Brand: Positioning high-end intelligent technology and starting again with “scenario based car building”. The ARCFOX brand is positioned as a high-end smart pure electric vehicle. Currently, the models on the market include the αT/Forest Edition/Advance Edition, αS/Forest Edition, and the compact MPV Koala. 1) In 2023, the company accelerated the pace of new car launch: With the αS Hi version being upgraded and renamed the αS Advance Edition, and the αS/T Forest Edition and Koala, which are based on the “scenario building car” concept, sales of the Polar Fox series recovered markedly. In October, sales of the Polar Fox series recovered markedly. In October, all Polar Fox sold 3107 units. 2) The launch of two new models in the Polar Fox series is imminent: On November 17, 2023, the pure electric mid-size SUV αT5 officially debuted at the 2023 Guangzhou Auto Show (pre-sale will begin on November 30), redefining a new generation of family cars with advantages such as high safety, high space utilization, and long battery life; the pure electric sedan αS5 may be released in the first half of 2024.
The Huawei Smart Choice Model (Hongmeng Zhixing) will be implemented to boost high-end electric smart cars. The company and Huawei first began cooperating in the field of intelligent connected electric vehicles in 2017. The Polar Fox αS HI version released in 2021 was the world's first mass-produced car equipped with the Huawei HI smart car solution and the first high-end pure electric mass-produced sedan equipped with Hongmeng. On August 14, 2023, the company issued an announcement stating that on the basis of existing strategic cooperation, BAIC New Energy and Huawei will carry out smart cooperation with Huawei. The first model selected by Smart is positioned as a high-end intelligent pure electric sedan. The new model will be built based on the existing BE22 platform after upgrading, and will be produced by the Beijing High-end Intelligent Ecological Factory. Under the Huawei Smart Choice model, Huawei is deeply involved in product definition, design, marketing, and user experience, etc., and it is expected that the intelligent level, brand operation, and market popularity of the smart brand will be fully enhanced.
Investment suggestion: With the launch of two new vehicles under Polar Fox and the launch of Huawei's smart models, the company will form a “Polar Fox+Huawei Smart Choice” differentiation matrix in the field of smart electric vehicles. In the expansion of market space covering the expansion of market space, the company's new car market size is expected to open up. The company's 2023/2024/2025 operating income is estimated to be 159.87/293.18/35.624 billion yuan, and net profit of -48.08/39.12/101 billion yuan. The PS corresponding to the current stock price is 2.18 times, 1.19 times, and 0.98 times, respectively. It was covered for the first time, and a “increase in holdings” rating was given.
Risk warning: increased competition in the NEV market; risk of raw material price fluctuations; risk of delays in R&D and production progress; risk of continued loss of performance