Event: On August 28, 2024, Ideal Auto released financial results for the second quarter of 2024. 2024Q2's revenue was 31.7 billion yuan, up 10.6% year on year; vehicle sales revenue was 30.3 billion yuan, up 8.4% year on year, up 25.0% month on month; adjusted net profit attributable to shareholders in the second quarter was 1.5 billion yuan, down 44.9% year on year.
Increased sales led to improved revenue, and gross margin declined year-on-month due to price effects. Delivery volume in the second quarter of 2024 was 0.109 million vehicles, up 25.5% year over year and 35% month over month. By model, sales of L series products increased significantly, benefiting from sales momentum driven by the launch of the L6. L6 delivered 0.039 million vehicles in the second quarter, accounting for 36% of total sales, followed by L7, L9, L8, and MEGA, with sales of 0.031 million, 0.02 million, 0.016 million, and 2,348 units, respectively. Ideal Auto delivered 0.051 million vehicles in July 2024, a record monthly delivery record, an increase of 49.4% over the previous year. The second quarter of 2024 achieved revenue of 31.7 billion yuan, up 10.6% year on year and 23.6% month on month. The gross profit margin of 19.5% was achieved in the second quarter of 2024, a decrease of 2.2 pct and a decrease of 1.1 pct, respectively; the gross margin of the automobile sales business was 18.7%, with a decrease of 2.4 pct and 0.6 pct, respectively. The gross margin of automobile sales declined year-on-month, mainly affected by price strategy adjustments in the second quarter of 2024 and the reduction in the average price of bicycles.
Costs were reduced on the cost side and efficiency increased, operating profit rebounded in the second quarter, and bicycle revenue declined month-on-month. The company's operating profit for the second quarter of 2024 was 0.468 billion, profit margin 1.5%, and total expenses for the second quarter of 2024 were 5.709 billion, with an expense ratio of 18%; R&D expenses were 3.028 billion, an expense ratio of 9.6%, a decrease of 1.24 pcts; sales, marketing, and administrative expenses were 2.815 billion, with an expense ratio of 8.9%, a decrease of 2.7 pcts month-on-month; the recovery in Q2 operating profit was mainly due to cost side effects, R&D expenses and sales administration expenses The ratio is lower.
Cycle revenue declined month-on-month. Bike revenue for the second quarter of 2024 was 0.279 million yuan, a decrease of 0.0226 million yuan month-on-month, mainly due to an increase in sales share after the launch of the L6 model, and the average sales price declined due to adjustments in pricing strategies.
Intelligent strategies are being accelerated, and the smart max ratio is increasing. Since the big model OTA, AD MAX has accounted for nearly 70% of model orders over 0.3 million yuan. The dual-model model of the end-to-end and VLM models is in closed beta. Early bird testing with 1,000 people began in July. The model has been iterated for 9 versions, and the amount of data has increased significantly from 1 millionclips to 2.3 millionclips. It is expected that a larger scale of 10,000 users will be tested in September. Since the release of the Mutu NOA, users' attention and recognition of smart driving technology has increased significantly. In July, the share of NOA test drives in stores doubled, and orders for AD Max models equipped with the Mutu NOA function increased dramatically.
Future outlook: Results are expected to gradually pick up in the third quarter. We believe that the company is in a pressure channel in the second quarter of '24 due to factors such as price strategy adjustments and increased competitive pressure in the industry. It is expected to bottom out after being pressured in the second quarter of 2024. We look forward to the company's performance after improving its operating efficiency and accelerating its intelligent strategy. Pure electric models are progressing steadily, and it is expected that various pure electric SUVs will be launched next year. According to company guidelines, 2024Q3 deliveries are 14.5 to 0.155 million vehicles, which is expected to increase 38% to 47.5% year over year; revenue is expected to be 39.4 billion to 42.2 billion, up 13.7% to 21.6% year on year.
Profit forecast: The company is expected to achieve revenue of 140.5, 217.69, and 269.95 billion yuan in 2024-2026, and achieve net profit of 8.358, 14.03, and 20.884 billion yuan in 2024-2026, corresponding PE of 19, 11, and 8 times, respectively, giving it a “recommended” rating.
Risk warning: Competition in the passenger car industry intensifies, sales fall short of expectations; promotion of new products falls short of expectations; risk of rising raw material costs and prices, etc.