Ideal Auto (LI/02015) experienced a significant drop of over 13% after the release of its third quarter financial report yesterday. Analysis suggests that this is mainly due to Ideal Auto's revenue guidance for the fourth quarter falling short of expectations. However, as the expected Q4 car delivery volume will meet the assessment target, this does not affect Li Xiang, the founder of Ideal Automobile, from receiving the first phase of over 600 million yuan in equity incentives.
Ideal Auto's US stock closed at $25.01 yesterday, a sharp drop of 13.58%. Ideal Auto Hong Kong stock opened today and followed suit, closing at HKD 99.8 by noon, down 7.08%.
On the afternoon of October 31st Beijing time, Ideal Auto released its financial report for the third quarter of 2024 as of September 30th: total revenue was 42.9 billion yuan, a year-on-year increase of 23.6% and a month on month increase of 35.3%. The net profit was 2.8 billion yuan, a year-on-year increase of 0.3% and a month on month increase of 56.2%. According to the US Generally Accepted Accounting Principles, the net profit was 3.9 billion yuan, a year-on-year increase of 11.1% and a month on month increase of 156.2%.
The total delivery volume of Ideal Automobile in the third quarter of 2024 was 152831 vehicles, a year-on-year increase of 45.4%. Ideal Auto delivered over 1 million vehicles on October 18, 2024.
Ideal Automotive Outlook: The delivery volume of automobiles in the fourth quarter of 2024 is expected to be approximately 160000 to 170000 units, representing a year-on-year growth of approximately 21.4% to 29.0%.
The total revenue will reach 43.2 billion yuan (about 6.2 billion US dollars) to 45.9 billion yuan (about 6.5 billion US dollars), a year-on-year increase of about 3.5% to 10.0%.
Li Xiang stated on the earnings conference call that it is expected that the delivery volume of Ideal Automobile will reach 160000 to 170000 vehicles in the next quarter, driving the delivery volume for the whole year of 2024 to about 502000 to 512000 vehicles.
According to Li Tie, CFO of Ideal Auto, in a conference call, as of September 30, 2024, the company expects to meet the performance conditions for the first phase of equity incentives by accumulating the delivery volume of the first three quarters in the fourth quarter, which is expected to reach a total delivery volume of 500000 units within 12 consecutive months. Therefore, the company confirmed equity incentive expenses of RMB 593 million in the third quarter and expects an additional RMB 42 million in the fourth quarter. This resulted in sales, general and administrative expenses of RMB 3.4 billion (USD 478.7 million) in the third quarter, an increase of 32.1% compared to the same period last year and an increase of 19.3% compared to the previous quarter.
This means that Li Xiang can receive over 600 million yuan in equity incentives in the first phase.
Ideal Auto announced this rule in March 2021, when the board of directors and compensation committee approved granting Li Xiang the option to purchase 108557400 shares of Class B common stock at an exercise price of $14.63 per share or $29.26 per ADS. These options are divided into six equal parts, each part consisting of 18092900 shares.
When the total number of vehicles delivered by Ideal Auto exceeds 500000 in any consecutive 12-month period, the first batch of options can be exercised. When the total number of vehicles delivered by Ideal Auto in any consecutive 12-month period exceeds 1 million, 1.5 million, 2 million, 2.5 million, and 3 million respectively, the second to sixth batches of options can be exercised.
According to the plan, Ideal Auto may issue up to 108557400 shares of Class B common stock.