Leapmotor (or "the Company") released a profit alert on 13 Jan. 2025, announcing that the Company's net profit turned positive in 4Q2024, one year ahead of the Company's plan, mainly due to significant sales growth and product structure optimization, coupled with the cost control and operational efficiency capabilities. This also marked that Leapmotor has become the second profitable "new EV forces" after Li Auto (02015 HK) in China. The announcement shows that the Company expects its revenue in 2024 to be no less than RMB30.5 bn, a year-on-year increase of no less than 80%; the gross profit margin is no less than 8%.
　　Against the backdrop of fierce competition in China's auto industry, Leapmotor's top management has a clear goal in the near term, seizing market share, which has empowered the Company's auto sales to repeatedly hit new highs. The Company’s sales in 4Q2024 hit a new record high, with deliveries increasing by 119.2% year-on-year to 120,863 units, continuing to be China’s second largest “new EV forces” with monthly sales exceeding 40,000 units.
　　This is the eighth consecutive month that the Company’s vehicle sales have hit a record high, firmly securing its position in the first tier of China’s “new EV forces”. The Company's higher-priced C series models account for 77% of total vehicle sales. The Company’s domestic market position has been continuously consolidated, and overseas markets have begun to be deployed. With the launch of C10 and T03 in more than 200 dealers in 13 European countries, coupled with the goal of having 500 sales outlets in Europe by the end of 2025, we believe that the Company's monthly sales in 1H2025 are expected to reach 50,000-60,000 units.
　　We expect that Leapmotor's monthly sales will continue to hit new highs in 1H2025, and maintain a good profit trend in the coming quarters. The Company's sales target for 2025 is set at 500,000 units. The Company's new B-series compact model is aimed at young global consumers with a budget of RMB100,000-150,000 per unit. This model will be officially launched globally in Mar. and is expected to become the next hit model of the Company. We expect this new model, together with the C-series and T model in 2025, to take the Company's vehicle sales into next level. Strong sales are expected to help Leapmotor maintain its first-tier position among China's "new EV forces", while further expanding into the international market in 2025.
　　In view of Leapmotor's strong vehicle sales fundamentals and increasing cost control capabilities, we are considering raising our revenue and earnings forecasts in the next Company Report. The Company currently has a "Buy" investment rating, with a target price of HK$39.00 per share, corresponding to 0.9x 2025 PS.
　　Risks: 1) Industry competition may exceed expectations; 2) sales of new vehicle models and overseas sales may fall short of expectations.