XPENG INC.(9868.HK)：EARNINGS ON TRACK WITH POSITIVE SURPRISE IN ROBOT

Core Viewpoint - Xpeng's 3Q25 earnings are largely in line with expectations, with a slight miss in vehicle gross profit margin (GPM) and selling, general and administrative (SG&A) expenses, but the company is on track to achieve profitability in 4Q25 [1] Financial Performance - Xpeng's 3Q25 revenue was 2% lower than prior forecasts, with an all-time high GPM of 20.1%, which is 2.4 percentage points higher than estimates, driven by unexpected R&D service income from Volkswagen [2] - Vehicle GPM fell by 1.2 percentage points quarter-over-quarter to 13.1%, which was 0.7 percentage points lower than forecasted [2] - SG&A and R&D expenses in 3Q25 were approximately RMB400 million higher than projections, offsetting the gross profit increase [2] - The net loss for 3Q25 was RMB381 million, which was about RMB110 million wider than previous forecasts [2] Future Outlook - Management anticipates a similar level of R&D service income in 4Q25 compared to 3Q25, supporting the expectation of breakeven in 4Q25 [3] - Vehicle average selling price (ASP) and GPM are expected to improve sequentially in 4Q25, aided by the redesigned P7 model [3] - Projected net profit for 4Q25 is RMB124 million, with FY26 sales volume expected to reach 0.61 million units due to new models and EREV variants [3] - FY26 GPM is projected to widen by 0.1 percentage points year-over-year to 18.7%, supported by a better product mix and ongoing income from Volkswagen [3] - Projected net profit for FY26 is RMB4.1 billion, considering potential tax credits [3] Strategic Initiatives - Xpeng's humanoid robot, showcased on November 5, 2025, could potentially double the company's revenue by FY30, with plans for mass production by the end of 2026 and an annual sales target of 1 million units by 2030 [4] - The company is positioned to leverage its advantages in autonomous driving technologies to become a significant player in the humanoid robot market, indicating a first-mover advantage [4] Valuation - The company maintains a BUY rating and has slightly raised target prices for ADR/H shares from US$28.00/HK$110.00 to US$29.00/HK$113.00, based on a 1.8x FY26E price-to-sales ratio [5]