Maintain "Buy" and raise TP to HK$54.00. Leapmotor’s (the "Company") 2024 results beat our expectations. Taking into account the Company's operational capabilities to continuously achieve enhancement in the very competitive domestic market, GPM in 2024 increased by 7.9 ppts yoy to 8.4%, and the continuous development and breakthrough of the Company's overseas market in 2025, we raise our SVPS forecasts for 2025-2027F to RMB38.530 (+14.205) / RMB54.159 (+15.705) / RMB71.841 (+20.025). We raise the Company’s TP to HK$54.00, corresponding to 1.3x 2025 PS.
　　Very robust sales growth in 2024 and GPM continued to grow rapidly. Leapmotor's overall GPM in 2024 was 8.4%, thanks to the significant increase in the Company’s vehicle deliveries and the optimization of product sales structure, as well as its ability to reduce operating costs and increase production efficiency. In 2024, Leapmotor's top line reached RMB32.2 bn, soared by 92.1% yoy. Net loss attributable to shareholders of the Company was RMB2.8 bn, down 33.1% yoy, due to: 1) the combined effect of the Company’s continuous strong sales growth; 2) the continuous improvement of its gross profit, and; 3) the effective control and management of its expenses. We forecast the Company’s 2025 annual GPM of around 10.0%, and expect the Company to be profitable in 2026.
　　Leapmotor witnessed significantly strong vehicle sales, both in the domestic market and in overseas markets. Leapmotor's Vehicle sales volume reached 291,424 units in 2024, a yoy increase of 102.4%, thanks to strong sales of C11, C10 and C16, which formed a great combination that can meet the needs of different consumer segments. Meaniwhile, with the Company's strong C series sales (sold 224,540 units in 2024, a yoy increase of 112.4%), the stimulation of T03 sales (sold 66,884 units in 2024, a yoy increase of 73.9%) under the current “trade-in for new” policy, strong growth in overseas markets, and the expected high sales growth in C10, C11 and brand-new B10, we expect Leapmotor to achieve total sales volume of nearly 450,000 units in 2025. The Company's latest model B10, which was launched on 10 Mar. 2025, priced at RMB129,800 and above, is equipped with LiDAR + city NOA intelligent driving. This compact SUV will be delivering in Apr. 2025. The pricing strategy of B10 is very competitive. With the boost of this model, we expect the Company's monthly sales to hit 50,000 units in 2Q2025.
　　The overseas layout continues to progress, and localized production in Europe is expected to kickoff in the end of 2025. Leapmotor quickly entered the EU market with the advantages of Stellantis' leading position in the European market. More than 350 dealer stores have been opened in Europe, and all of them have sales and after-sales service functions. The Company's T03 and C10 models are highly competitive in the European market and are beginning to increase in sales volume. The Company is making effort to achieve localized production in Europe by the end of 2025. Meanwhile, other overseas markets are also being deployed. Leapmotor will conduct business in the APAC market soon. We are confident in the Company's overall sales and profitability in 2025.
Risks: 1) Industry competition may exceed expectations; 2) sales of new vehicle models and overseas sales may fall short of expectations.