Source of this article: CITIC Securities
CITIC Securities pointed out that due to the systematic adjustment of Chinese stocks, the fundamentals and stock prices of the three new forces have deviated seriously in 2021. CITIC Securities believes that the current three new forces are in an accelerated period of profitability improvement, and large R&D investment has led to short-term strategic losses, but its rising gross profit of bicycles has shown its ability to approach the breakeven point in the future.
In the context of tightening liquidity, the PS valuation system is being questioned, CITIC Securities innovatively proposed to use the "market capitalization/gross profit" valuation method to make comparable valuations of car companies, and the three new forces currently have extremely high valuation and cost performance. Reaffirm the "buy" rating for the three new powers.
Maintain Xiaopeng Automobile's 2022 sales forecast of 200,000 units; raise the 2022 sales forecast of Weilai Automobile and Ideal Automobile to 180,000 units/180,000 units (original forecast: 160,000 units/147,000 units). The current stock price corresponds to 3.7/3.5/4.8 times PS of NIO/Ideal/Xiaopeng in 2022.
Last year, they all lost significantly to the NASDAQ
The fundamentals and stock prices of the three new forces have deviated seriously in 2021, and the current value of the new forces is undervalued.
In 2021, the sales of NIO, Ideal and Xiaopeng reached 91,400 units, 90,500 units and 98,100 units respectively, an increase of 109%, 177% and 263% respectively.
Due to the increase in the scale effect of the manufacturing end, the comprehensive gross profit margin of the three new forces reached 20.3%, 23.3% and 14.6% respectively in Q3 2021, compared with 2020Q3, which increased by 7.4pcts, 3.5pcts and 10pcts.
Due to the systematic adjustment of Chinese stocks, the rise and fall of NIO, Ideal and Xiaopeng in the US market in the past year was -60.7%, -9.0% and -23.8% respectively, compared with the NASDAQ index (+1.3%).
Profitability accelerates and improves
The three new powers are in an accelerated period of improved profitability, with large R&D investment leading to "strategic" losses, but the actual break-even point is not far away.
Looking back at Tesla's sales expansion process in the past 10 years, we find that its profitability and sales scale show a "hook" relationship: in the process of quarterly sales growth, new car manufacturers often first expand losses, and then enter the stage of accelerated improvement of profitability, and finally break through the break-even point when quarterly sales reach 70,000 vehicles.
During the period of quarterly sales of 30,000-50,000 fluctuating vehicles, the new forces often fall into the situation of "less sales, more money, and more losses", mainly because the company is in the early stage of the launch of running volume products, and it also needs to increase investment in various aspects such as plants, equipment, and personnel, and in order to improve the company's product strength and long-term competitiveness, it is also necessary to invest a lot of research and development (especially the full-stack self-research of automatic driving and smart cockpits) and channel construction costs.
CITIC Securities believes that the three new forces are currently in the middle of development, and it is business logic to generate strategic losses due to the necessary cost investment. However, if you only examine the three new forces from the vehicle manufacturing end, in fact, the gross profit of Weilai, Ideal and Xiaopeng in 21Q3 has reached 6.4/6.2/29,000 yuan respectively, which is better than many traditional Chinese car companies.
In contrast, the bicycle SG&A and bicycle research and development of Weilai, Ideal and Xiaopeng are 7.5, 4.1 and 60,000 yuan, respectively, and 4.9, 3.5 and 49,000 yuan, all of which have room for a sharp decline. Combined with Tesla's breakeven data in history and the financial data of the three new forces, CITIC Securities believes that the new forces are expected to rapidly approach the breakeven point in the next year.
Seriously undervalued?
CITIC Securities pointed out that the impact of tight liquidity on the PS valuation system of the new forces has been over-traded, and the current investment price performance of the new forces is actually in an excellent position.
Since the three new forces have not yet made a profit, the capital market has widely used the PS valuation system for the three new forces. In 2021, the PS valuation fluctuation ranges of Weilai, Ideal and Xiaopeng are 4.8-15.1 times, 4.3-8.0 times, and 4.3-11.5 times, respectively, which is basically the same as the Tesla valuation system in 2016-2018.
The mainstream view is that in the context of tightening global liquidity, the valuation foundation of PS is no longer solid, but there is no unified consensus on which valuation method should be used.
CITIC Securities believes that the valuation multiple using market capitalization/gross profit is a valuation indicator with strong comparability, whether it is for new car manufacturers or traditional car manufacturers.
At present, the valuation multiples of the market value/21Q3 annualized gross profit of WEILAI, Ideal and Xiaopeng are 31/26/62 times, and 18/18/27 times of 2022E, respectively.
Compared with other A/H listed independent car companies, the current valuation of the new car-making forces has an excellent cost performance.
Intelligence will bring a premium
The intelligent wrestling has just begun, and the intelligent premium of the three new forces is worth promising.
At the sales level, new forces are expected to surpass industry growth: the overall sales volume of new energy vehicles in 2022 will decline (from +180% in 2021 to +40% in 2022), but the three new forces are expected to achieve +100% or higher growth with strong products and channels.
Under the background of intelligence, car companies have the opportunity to participate in the operation and service of the whole life cycle of vehicles, so in addition to one-time hardware revenue, they will also receive other innovative income.
For example, car companies can learn the data transmitted back by the vehicle, iterate on the auxiliary driving function, and finally launch a software system that makes driving easier, so as to obtain the potential for charging; in addition, when the user base is large enough, the traffic entrance value of the smart cockpit will be highlighted, and the car company can realize the user stickiness monetization.
Looking forward to 2022, the three new forces with steady sales growth and outstanding "intelligent full-stack self-research capabilities" are expected to rely on intelligence to regain the valuation premium.