After releasing annual results that exceeded market expectations, the stock price of Ideal Automobile (02015. HK) surged by 25.45% to close at HKD 175.5 on February 27, surpassing the reduction prices of non-executive director Wang Xing and CFO Li Tie in the second half of 2023.
The delivery data forecast for the first quarter of 2024, released simultaneously last night, only slightly exceeded 100000 vehicles, a decrease from 131800 vehicles in the fourth quarter of 2023. With the increasingly fierce market competition, to what extent will the future growth rate of Ideal Automobile slow down?
On the other hand, as competitors in the same industry continue to exert their efforts, Ideal Automobile's& Quota; Moat; Quota; How deep is it? Will market share be eroded? These are all issues facing the management and investors of Ideal Automobile.
Delivery volume slowed down month on month growth rate
In 2023, Ideal Automobile achieved a revenue of 123.85 billion yuan, a year-on-year increase of 173.5%; Realized a net profit of 11.81 billion yuan, turning losses into profits for the first time throughout the year, with a gross profit margin of 22.2%, and became the first new force automotive company in China to achieve annual profitability. In 2023, the total delivery volume of automobiles reached 376000 units, an increase of 182.2% from 133200 units in 2022.
In the fourth quarter of 2023, the total delivery volume of automobiles was 131800 units, a year-on-year increase of 184.6%. The gross profit margin is 23.5%, compared to 20.2% in the fourth quarter of 2022 and 22.0% in the third quarter of 2023.
In addition, Ideal Automobile is expected to have a revenue of 31.25 billion to 32.19 billion yuan and a delivery volume of 100000 to 103000 vehicles in the first quarter of this year.
According to a research report by Bank of Communications International Securities, the first quarter guidance met expectations: due to overdraft demand in December last year and the impact of the Spring Festival, the delivery volume in the first quarter was 100000 to 103000 vehicles, a decrease of 21.8% to 24.1% month on month and a year-on-year increase of 90.2% to 95.9%; The revenue ranged from 31.25 billion yuan to 32.19 billion yuan, a month on month decrease of 20.3% to 22.6%, and a year-on-year increase of 66.3% to 71.3%.
Ideal Automotive executives stated in a conference call that the expected delivery volume in March will exceed 50000 vehicles. This number is equivalent to the delivery volume of 50353 vehicles in December 2023.
Li Tie, Chief Financial Officer of Ideal Automobile, stated that as of the end of 2023, Ideal Automobile's cash reserves have increased to 103.67 billion yuan. In 2024, healthy profitability and financial strength will support Ideal Automobile to deepen research and development, expand business scale, and continue to lead the rapid transformation of China's new energy vehicle market.
However, according to equity disclosure information from the Hong Kong Stock Exchange, Li Tie reduced his holdings of 400000 shares of Ideal Automobile at a price of $17.76 per share (approximately HKD 138.52) on December 15, 2023. Previously, Wang Xing, CEO and non-executive director of Meituan-W (03690. HK), reduced his holdings of 1.9479 million shares of Ideal Automobile from September 12 to 15, 2023, with an average price of HKD 157.84 to HKD 160.51, resulting in a total cash out of over HKD 300 million.
Cheese Fund researcher Fu Wenhao told First Financial reporters that in response to the slowdown in sales compared to the previous month, it may be more objective to observe the year-on-year growth changes in sales due to the peak season of electric vehicle sales. At present, the penetration rate of electric vehicles is still gradually increasing. In the context of relatively fierce competition, with the price reduction of top brand products, the sales of electric vehicles are expected to continue to increase.
According to analysts from Hong Kong securities firms, the most satisfactory aspect of Ideal Automobile's performance last year was the increase in gross profit margin, with the expectation of maintaining a gross profit margin of over 20% in the future. Ideal indicates that it does not consider markets below 200000 yuan in the short term, which may also be related to an increase in gross profit margin. It is estimated that Ideal Automobile wants to focus on the high-end market in order to avoid the low-priced market; Quota; Internal competition; Quota; The impact.
Ping An Securities analyst Wang De'an stated that he is optimistic about the growth of high-end new energy vehicles represented by Ideal and Huawei's ecosystem in 2024. Although Ideal has not yet proven itself in the pure electric field, the company has fully demonstrated its leading product definition, channel control, and supply chain management capabilities in the range extender field. Moreover, the company's range extender models are expected to maintain growth and contribute stable profits in 2024.
Will opponents in the world erode their market share?
Compared to the collective losses of new forces in pure electric vehicles, the batteries of extended range hybrid vehicles are not large and greatly reduce costs, which is one of the reasons why Ideal Automobile successfully turned losses into profits in 2023.
Industry insiders believe that with the intensification of competition in the tram industry, competitors such as Wenjie may further exert their efforts in the field of extended range technology, which may erode their ideal market share.
In January 2024, Wenjie delivered 32973 new cars across the entire lineup, a month on month increase of 34.76% and a year-on-year increase of over 636.82%. In terms of vehicle models, the monthly delivery volume of Wenjie M7 reached 31253 vehicles, becoming the main sales force of the Wenjie brand.
A product manager who switched from a traditional car company to a technology company told reporters:; Quota; The best-selling of the Wenjie New M7 has fully demonstrated that Huawei will be a strong competitor to automotive companies& Amp; Quota;
Fu Wenhao stated that Huawei continues to make efforts in the field of new energy vehicles, empowering traditional car companies through cooperation with multiple brands; On the other hand, the industry itself has a trend of intensified competition. Therefore, from a medium to long term perspective, it is still necessary to continue to pay attention to the changes in the competitive landscape in the medium to long term, and there is a possibility of brand share alternation.
&Amp; Quota; There are no plans to launch models worth less than 200000 yuan within five years. By 2030, if we occupy one-third of the market share worth more than 200000 yuan, we can achieve a scale of over one trillion yuan. In this niche market, we can go deeper and there is no need to focus on markets below 200000 yuan& Amp; Quota; On the evening of February 26th, Li Xiang, CEO of Ideal Automobile, stated in a financial report conference call:; Quota; In the fourth quarter of this year, the new energy vehicle market, which costs over 200000 yuan, will show that the top three brands will occupy 70% of the market share, which is more concentrated than gasoline vehicles and no different from smartphones& Amp; Quota;
The above Hong Kong securities analysts believe that there are certain risks in not engaging in a low-priced market. If the high-end market is sluggish and the market above 200000 yuan shrinks, the road will be difficult. If the product layout of the car factory has both high, medium, and low configurations, the overall flexibility will be higher. If we focus on a single channel, we need to consider the market demand side.
(Intern Huang Wenluo also contributed to this article)