Bank of America Securities released a research report stating that it reaffirmed the Ideal Automobile-W (02015) “buy” rating because the company has a strong model pipeline, good gross margin management, and strong free cash flow. However, the 2024-2026 sales forecast for Ideal Auto was lowered by 7%/11%/6%, and the earnings forecast per share was lowered by 33%/21%/2%, respectively; taking into account the new sales and free cash flow forecasts, the target price was lowered from HK$160 to HK$140.
The bank said that the company's first-quarter results fell short of expectations, with total revenue of RMB 25.6 billion, up 36% year on year and down 39% from quarter to quarter. Gross margin was 20.6%, up 0.2 percentage points year on year, down 2.9 percentage points from quarter to quarter, better than the bank's forecast of 19.8%. The operating loss was 585 million yuan, in line with the bank's forecast, but lower than market expectations. Net profit was 593 million yuan, down 36% year on year and 90% quarterly, better than the bank's forecast of 111 million yuan.
According to the report, Ideal Auto management expects deliveries of 105,000 to 110,000 vehicles in the second quarter, an increase of 21% to 27% year-on-year, and a quarterly increase of 31% to 37%. At the same time, it is expected that the second quarter will be the most challenging quarter for gross margin. Driven by more sales contributions from L6, which has a low profit margin, automobile gross margin may be 18%. Additionally, management expects monthly sales from July to August to return to the level of 50,000 units.