SERES(SH:601127) Ping An Securities·2024-11-06 05:10Investment Rating - The report initiates coverage on Seres (601127 SH) with a "Recommend" rating [1] Core Views - AITO (Wenjie) has the potential to reach a scale of 1 million units and is a key driver for the valuation growth of Yinwang [4] - Seres' investment in Yinwang is expected to yield significant value appreciation, with Yinwang's revenue potentially reaching 1275-1650 billion yuan at maturity [6] - The high-end hybrid vehicle market, where AITO operates, is rapidly expanding with favorable competition dynamics and strong profitability [4] - Huawei's deep integration with AITO has established it as a successful vehicle brand with high consumer recognition, making it Huawei's most cost-effective investment in the automotive sector [4] - Seres' partnership with Huawei in Yinwang positions it to benefit from the future growth of Huawei's intelligent vehicle business [6] Company Overview - Seres, originally a micro-vehicle manufacturer, transformed into a high-end new energy vehicle (NEV) player through its collaboration with Huawei [14] - The company's core business now revolves around AITO, a high-end NEV brand co-developed with Huawei, which has become a benchmark in the premium NEV segment [18] - Seres' total market capitalization is 208 1 billion yuan, with a total share capital of 1 51 billion shares [1] - The company's debt-to-asset ratio stands at 89 2%, with a net asset per share of 8 84 yuan [1] Financial Performance - Seres' revenue is projected to grow significantly, from 34 105 billion yuan in 2022 to 218 855 billion yuan in 2026, with a CAGR of 21 2% [5] - The company is expected to turn profitable by 2024, with net income reaching 6 458 billion yuan, and further increasing to 12 840 billion yuan by 2026 [5] - Gross margin is forecasted to improve from 11 3% in 2022 to 26 2% in 2026, driven by the strong performance of AITO models [5] - ROE is expected to rebound from -33 6% in 2022 to 31 3% in 2026, reflecting improved profitability and operational efficiency [5] AITO (Wenjie) Brand Potential - AITO is positioned in the high-end SUV market, with a potential domestic market size of 1 million units, assuming a 20-30% market share in the 400 000-unit premium SUV segment [38] - The AITO M9, launched in late 2023, has become a best-seller in the 500 000+ yuan price range, with monthly deliveries exceeding 15 000 units [18][28] - AITO's success is attributed to its strong brand value, consumer recognition, and Huawei's technological and marketing support [4][35] Yinwang Investment and Huawei Collaboration - Seres acquired a 10% stake in Yinwang (Huawei's automotive business unit) for 11 5 billion yuan, positioning itself as a key shareholder alongside Changan Automobile [47] - Yinwang's revenue is projected to reach 1275-1650 billion yuan at maturity, with an annual net profit of 191-248 billion yuan, offering significant valuation upside for Seres [6][54] - Huawei's intelligent driving solutions, particularly the high-end ADS system, are expected to maintain a leading position in the market, with over 1 million vehicles equipped with Huawei's intelligent driving technology by 2025 [58] Future Growth Drivers - Seres plans to launch new AITO models, including the M8, which is expected to replicate the success of the M9 and further boost profitability [63] - The company's gross margin is expected to stabilize at around 26-27% from 2024 to 2026, driven by the strong performance of AITO models and cost optimization [70] - Seres' investment in Yinwang and its partnership with Huawei are expected to drive long-term growth, with the company benefiting from the expansion of Huawei's intelligent vehicle ecosystem [47][54]