LEAPMOTOR(HK:09863) 3 6 Ke·2025-08-21 07:51Core Viewpoint - Leap Motor has achieved a significant milestone by turning a profit in its latest half-year report, and is now potentially entering a strategic partnership with China FAW Group, which may involve a 10% stake acquisition [1][4]. Financial Performance - Leap Motor reported a net profit of 30 million yuan for the first half of 2025, marking its first positive half-year result since its listing, with revenue reaching 24.25 billion yuan, a year-on-year increase of 174% [4]. - The gross margin improved by 13 percentage points to 14.1%, but the net profit represents only 0.12% of total revenue, indicating limited profit scale [4]. - The company’s operational loss was 90 million yuan, with the net profit primarily driven by financial income of 110 million yuan and contributions from joint ventures [4]. Market Reaction - Following the news of the potential partnership, shares of both Leap Motor and FAW Jiefang surged, with Leap Motor's stock reaching a high of 76.3 HKD, pushing its market capitalization above 100 billion HKD [2]. Strategic Developments - The collaboration between Leap Motor and FAW has been in discussion since March 2023, focusing on joint development of new energy vehicles and potential capital cooperation [1]. - The partnership is seen as a response to FAW's slow progress in the new energy vehicle sector and increasing pressure from the State-owned Assets Supervision and Administration Commission [1]. Growth Potential - Leap Motor's sales reached 220,000 units in the first half of 2025, leading among new energy vehicle manufacturers, with expectations to sell between 580,000 to 650,000 units for the full year [6]. - The company plans to launch a flagship D series model targeting the 200,000 to 300,000 yuan market segment in 2026, aiming to penetrate the high-end market [6]. Challenges Ahead - Despite the positive financial results, Leap Motor faces challenges related to profit sustainability and brand positioning, particularly in the competitive 100,000 to 200,000 yuan market [7][8]. - The average revenue per vehicle has decreased from 114,000 yuan to 98,000 yuan, and the gross margin has also declined, raising concerns about maintaining profitability amid ongoing price competition [7]. Future Outlook - Leap Motor's management remains optimistic about maintaining a good gross margin trend in the second half of the year, supported by a carbon credit transfer agreement with Stellantis that could generate additional revenue [7].