Guosheng Securities released a research report stating that it maintains the Ideal Automobile-W (02015) “buy” rating and selects suppliers to bear 50% and gross profit margin of 20%. The estimated net profit from non-GAAP is $148/196/29.1 billion yuan, the non-GAAP net profit margin is 8.3%/7.9%/8.1%, and the target price is HK$151. The bank expects the company to sell about 60/90/1.31 million vehicles in 2024-2026, with total revenue reaching 1791/2482/359.9 billion yuan. Future profit changes depend on the extent to which suppliers bear the price reduction. According to the different assumptions that the supplier bears 0%/50%/100%, the bank estimates that the company's gross margin may be 18%/20%/22% in 2024.
Guosheng Securities's main views are as follows:
Q1 sales reached 80,000 units.
Ideal Auto unveiled its new MEGA car on March 1. Due to factors such as high pricing, public opinion, and lack of supplementary energy, the sales volume of the new car fell short of previous expectations. In late March, the founder of Ideal Auto issued an internal letter reflecting on current problems, stating that “Ideal MEGA will patiently operate at a pace from 0 to 1”, “reduce sales expectations and desires, and return to healthy growth.” In March, Ideal Auto sold 28,984 vehicles, up 39% yearly/month-on-month. A total of 80,400 vehicles were delivered in Q1, an increase of 53% year over year, and sales increased steadily.
New cars will be launched soon, which is expected to further drive growth.
Model side: The Ideal L6 was officially released on April 18. It is positioned as a five-seater luxury SUV for the family. The price of the L6 Pro/Max version is 249,800 and 279,800, respectively. On April 21, Ideal announced that the cumulative number of orders exceeded 10,000 units in 72 hours. In addition, Ideal Auto is expected to launch 3 pure electric models in the second half of the year. By the end of 2024, the company will have 8 models in 3 series, forming a complete product matrix. Sales side: Considering the pace of pure electric models such as the Mega, the bank lowered its sales forecast appropriately. It expects sales growth of 50%-70% year-on-year in 2024, and is expected to sell 56-640,000 vehicles throughout the year.
The foundation has been laid for the intensive launch of pure electric models, and the overcharging network is aggressive.
As of March 11, 351 ideal overcharging stations (1,518 charging stations) have been put into use, mainly in high-speed service areas. According to the plan published on Ideal Auto's official WeChat account, by the end of 2024, the company aims to build 2,700 overcharging stations (20,000 charging piles) across the country, of which the city will build 2,000 supercharging stations (17,000 charging piles) to achieve more than 60% urban coverage in Tier 1, 2, and 3 cities; and to build 700 supercharging stations (3,000 charging piles) at high speed to achieve more than 70% coverage of national highways.
The price strategy is steady, and profits are expected to remain high in 2024.
On the gross margin side: Facing more intense market competition, the company cut L7/L8/L9/MEGA car prices on April 22, by 18,000 to 30,000. Looking forward to the future, the company is still expected to achieve a high level of gross profit through supply chain cost reduction, R&D cost reduction, scale cost reduction, and production efficiency improvement. The bank expects the company's gross margin to be between 15% and 20% in 2024. Expense ratio side: As the revenue scale continues to increase, the overall cost rate is expected to improve. The bank expects the company's R&D expenses to be about 140-16 billion yuan in 2024, and the SG&A fee rate is expected to drop below 7%.
Risk warning: risk of model development and sales falling short of expectations, risk of fluctuations in upstream parts supply, risk of iteration of intelligent driving technology falling short of expectations.