New energy transformation is leading state-owned enterprises. Starting a new journey of electrification, intelligence, and global transformation for the third time, the company experienced an important development period of “military to civilian, commercial transfer, electric intelligent transformation+global market development”.

In the era of fuel vehicles, the company launched popular models such as the CS/UNI series, and joint ventures and independent brands contributed to major performance.

In the era of electrification, the company launched the Deep Blue/Qiyuan/Avita brand and traditional brands to accelerate hybrid transformation, and promote intelligence through “self-developed SDA architecture+cooperation with Huawei”. The volume of new models is expected to significantly boost profits in the future. We maintain the company's performance forecast. We expect net profit to be 8.94/12.06/15.62 billion yuan in 2024-2026, and the PE corresponding to the current stock price is 13.6/10.0/7.8 times. We are optimistic about long-term development and maintain a “buy” rating.

Continued release of new energy brands is just around the corner. Accelerating the layout of overseas sales and profitability, the company's three new energy brands will usher in an intensive new product launch period. Among them, Deep Blue will rely on “super range+ Huawei ADS SE” to form a differentiated competitive advantage in the mainstream price segment with low penetration of new energy/intelligence; Avita will introduce extended range models and 07/E16 models with lower positioning. In the context of relief of battery life anxiety, the decline in price range+the power of Huawei ADS 3.0, sales growth can be expected, and will lead the company brand upward; Goal 2025 Ten models were launched a few years ago. Among them, the new digital smart car E07 will be equipped with a self-developed intelligent SDA architecture. Continued release of new products is expected to significantly increase sales, thereby bringing greater scale effects, driving new energy brands to reverse losses and contribute to long-term profits. At the same time, the company is accelerating the “Haina Baichuan” program and focusing on the “1+5+2” global layout. Among them, strategic nurture/target markets focus on new energy vehicles/fuel vehicles respectively. Overseas sales of its own brands were +68% year-on-year in the first 7 months of 2024, and actively promoted overseas localized supply such as factory construction in Thailand, which is expected to support the fuel vehicle sales base and increase profitability of new energy vehicles.

The Deep Blue/Avita brand is deeply empowered by Huawei's HI model, and the proposed investment “Hope” is expected to gain a first-mover advantage. Huawei provides industry-leading full-stack smart car solutions with end-to-end algorithms, 35 million km of daily data accumulation, and cloud-based 5EFLOPS computing power. The company's Deep Blue/Avita brand is equipped with Huawei Qiankun Smart Driving and Hongmeng cockpits, which have outstanding intelligent advantages over competing products. At the same time, the company plans to take a stake in the new Huawei BU company. The shareholding ratio is not expected to exceed 40%, and the company has basically completed due diligence on the investment project, and it is expected that the final cooperation document will be signed no later than August 31. As the first car company to take a stake in a new company, the company will gain an advantage in terms of Huawei's technological empowerment, and is expected to enjoy greater dividends from the expansion of Huawei's intelligent circle of friends in the long term.

Risk warning: automobile industry demand, NEV sales growth rate, intelligent penetration rate, overseas automobile demand falling short of expectations; increased industry competition; sharp fluctuations in raw material prices, etc.