Core Viewpoint - Leapmotor aims to achieve a sales target of 500,000 units for 2025, having delivered 221,664 vehicles in the first half of the year, which is 44.33% of its annual goal [1][2]. Sales Performance - Leapmotor has shown strong sales momentum, leading the new energy vehicle (NEV) market in China with 221,664 units sold in H1 2025, maintaining the top position for four consecutive months [6][8]. - The company is well-positioned to meet its full-year sales target due to the upcoming traditional sales peak season and the launch of new models [2]. Financial Performance - Leapmotor's revenue for full-year 2024 increased by 92.0%, while Q1 2025 revenue surged by 187.1% year-over-year [3]. - The gross profit margin improved from 8.4% in 2024 to 14.9% in Q1 2025, driven by rapid volume growth and product structure optimization [3]. Net Profit and R&D Investment - In Q1 2025, Leapmotor reported a net loss of RMB 130 million, a significant reduction from the RMB 1.13 billion net loss in the same period of 2024 [5]. - R&D expenditure reached RMB 800 million in Q1 2025, up 53.8% from RMB 520 million in 2024, focusing primarily on intelligent driving technologies [5]. Product Portfolio - Leapmotor offers a diverse product range priced between RMB 60,000 and RMB 300,000, catering to various consumer segments [10]. - The A Series targets price-sensitive consumers, while the B Series serves as the core product line with advanced features at competitive prices [11][12]. - The C Series includes models like the C11, which competes with traditional automakers' products priced around RMB 300,000 [14]. - The D Series is set to introduce ultra-luxury features at affordable prices, targeting the premium segment [15]. Market Dynamics - The NEV market in China is experiencing increasing consolidation, with leading manufacturers capturing a larger market share [19][20]. - Leapmotor's full-stack independent R&D strategy covers six key technology domains, allowing for rapid technological iteration and reduced reliance on third-party suppliers [21][22]. Future Projections - Q2 2025 revenue is projected to reach RMB 13.8 billion, representing a 156.61% year-over-year increase [24].

Core Viewpoint - Li Auto is experiencing demand contraction and sales underperformance, leading to revised sales volume and earnings forecasts for 2025-26 due to increased competition and margin compression from new BEV models [1][2][4]. Sales Performance - In 1H25, Li Auto's sales lagged behind the broader market, with a market share decline of 2 percentage points in China's NEV market [2]. - Weekly sales have dropped from 8-9k units to below 6k units, indicating deteriorating demand dynamics [2][3]. - The company anticipates a potential year-over-year sales decline exceeding 30% in 3Q25 due to inadequate delivery of new models [4]. Margin and Earnings Outlook - Despite a vehicle margin of around 19% in 2Q25, margin compression is expected from the increased sales mix of i-series BEVs, which have higher BOM costs [1][3]. - Non-GAAP net income forecasts have been reduced by 37%-47% to RMB6.2 billion and RMB10.1 billion for 2025 and 2026, respectively [4]. Competitive Landscape - Li Auto faces intensified competition as rivals introduce lower-priced models with similar features, challenging its market position [5]. - The company has been criticized for its slow response to competitors and for not sufficiently innovating its product offerings [5][6]. Strategic Focus - The company needs to pivot its strategic focus to expand its BEV reach while maintaining relevance in the EREV market through effective product iteration [6]. - A shift back to P/S multiples for valuation is preferred due to near-term profitability volatility and the industry trend among NEV counterparts [7].

Index Performance - The Hang Seng Index (HSI) closed at 24,911, with a year-to-date increase of 24.2% [1] - The Hang Seng China Enterprises Index (HSCEI) decreased by 0.2% to 8,933, with a year-to-date increase of 22.5% [1] - The MSCI China index rose by 0.3% to 80, reflecting a year-to-date increase of 23.5% [1] Commodity Price Performance - Brent Crude oil price decreased by 1.0% to US$67 per barrel, with a year-to-date decline of 7.5% [2] - Gold prices fell by 0.3% to US$3,369 per ounce, but showed a year-to-date increase of 28.4% [2] - The Baltic Dry Index (BDI) remained stable at 1,970, with a significant year-to-date increase of 97.6% [2] Key Macro and Earnings Releases - US unit labor costs increased by 6.6% as of August 7, 2025, significantly above the consensus of 1.5% [3] - Initial jobless claims in the US were reported at 222,000, slightly lower than the previous week's 218,000 [3] - The US Consumer Price Index (CPI) for urban consumers showed a month-on-month increase of 0.3% and a year-on-year increase of 2.7% as of August 12, 2025 [3] Company-Specific Insights ADNOC Gas - ADNOC Gas reported a 16% year-on-year increase in Q2 2025 earnings to US$1,385 million, exceeding forecasts by 16% [5][7] - The company has upgraded its full-year guidance for sales volume and margin, leading to a 5-6% increase in earnings forecasts for 2025-2027 [5][7] - The target price for ADNOC Gas has been raised to AED3.86, maintaining a BUY rating [6][7] Uni-President China - Uni-President China (UPC) reported a 10.6% increase in revenue and a 33.2% increase in net profit for the first half of 2025, both slightly above expectations [8][11] - Management anticipates a long-term revenue growth rate of 6%-8%, although demand for instant noodles and beverages may fluctuate in the second half due to competition in food delivery [9][11] - The target price for UPC remains at HK$10.40, implying a P/E ratio of 18.2x for 2025 and 16.2x for 2026, with a BUY rating maintained [10][11] Automotive Sector Update - The automotive sector is focusing on Q2 2025 results and sales outlook for the second half of the year, alongside potential policy changes in 2026 [14][17] - There is a consensus regarding the reduction of NEV purchase tax benefits from 10% to 5%, and the continuation of local government subsidies [15][17] - Short-term trading opportunities are expected in the automotive sector, particularly for stocks like Geely and BYD, influenced by seasonal demand and new model launches [16][17]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Autos - **Key Focus**: The impact of the Chinese government's "anti-involution" initiatives aimed at curbing irrational competition and addressing overcapacity in the automotive sector, particularly in New Energy Vehicles (NEVs) [2][8][12] Core Insights - **Challenging Pricing Environment**: - The average industry capacity utilization rate was around 70% in 2024, with significant variance among OEMs [6][15] - The top 10 brands accounted for only 55% of the market share in 1H25, indicating a lack of market concentration [6][18] - The pricing environment worsened in 2Q25 due to price cuts initiated by key OEMs like BYD and Nissan [14] - **Government Initiatives**: - The government is implementing measures to stabilize pricing and improve margins by phasing out outdated capacity [12][14] - Initial signs of a stabilizing pricing environment are emerging, supported by government actions and company-level restructuring [6][12][37] - **Consolidation Trends**: - A two-phase consolidation is expected, with the first phase involving the exit of smaller OEMs and the second phase seeing Chinese brands gaining market share from foreign brands [6][23][32] Company-Specific Insights - **Guangzhou Auto (GAC)**: - Upgraded from Underweight (UW) to Overweight (OW) with a price target of Rmb11.00, implying a potential upside of 42% [40][58] - GAC is undergoing a comprehensive restructuring aimed at improving profitability, with expected benefits starting in 2026 [41][61] - The company plans to launch new NEV models and enhance its product offerings, focusing on technology and connectivity [44][46] - **Zhongsheng Auto**: - Upgraded to Overweight (OW) due to expected benefits from Mercedes-Benz's restructuring and a strong model cycle [2][40] Financial Projections - **Guangzhou Auto Financials**: - Revenue is projected to grow from Rmb107.78 billion in FY24 to Rmb139.34 billion in FY27 [57] - Adjusted net income is expected to improve significantly, with a forecast of Rmb1.33 billion in FY26 [57] - The company is currently trading at a low price-to-book (P/B) ratio of 0.2x for FY25E and FY26E, indicating favorable risk-reward dynamics [40][41] Risks and Considerations - **Downside Risks**: - Potential risks include worse-than-expected sales volume and profitability at major joint ventures, as well as slower-than-anticipated growth for GAC's own-brand operations [63] Conclusion - The Chinese automotive sector is poised for a turnaround driven by government initiatives and company-level restructuring, with specific companies like Guangzhou Auto and Zhongsheng Auto positioned to benefit significantly from these changes [2][8][40][58]

Summary of the Conference Call on Autonomous Driving and AI Integration Industry Overview - The report focuses on the **automotive industry** and its transition towards **autonomous driving** powered by **AI**. - A forecast of a **US$200 billion market** for self-driving vehicles by **2030** is presented, with significant implications for various stakeholders in the industry [1][5][43]. Key Forecasts and Market Dynamics - **Market Penetration**: Vehicles with **Level 2+** smart driving features are expected to reach **28%** of unit sales by **2030**, up from **8%** in **2024**. This translates to **26 million** unit sales annually by **2030** [5][43]. - The global **ADAS/AD hardware/software market** is projected to be **US$200 billion** by **2030** and could grow to **US$300-400 billion** by **2035** [5][43]. - **China** is anticipated to lead the market, with **60%** of passenger vehicles sold equipped with L2+ features by **2030**, accounting for half of the global market volume [51]. Adoption Drivers - **Technological Advancements**: Breakthroughs in **GenAI-powered simulation** and **cost deflation** through collaboration are expected to accelerate adoption [42][57]. - **Regulatory Support**: Progressive regulations in regions like Europe and the US are facilitating the deployment of smart driving technologies [59][60]. Competitive Landscape - The report discusses the concept of **'coopetition'**, where global OEMs may either compete or collaborate to lower costs and expedite the development of smart driving technologies [6][45]. - Key players identified include **Nvidia**, **Tesla**, **XPeng**, and **Li Auto**, among others, which are well-positioned to benefit from the smart driving trend [8][46]. Risks and Challenges - Key risks include rising hardware costs due to supply chain issues, inadequate regulatory frameworks, and ethical concerns surrounding autonomous driving [9][60]. - The report highlights the potential for slower adoption rates during the early stages of technology upgrades and stresses the importance of building consumer trust in autonomous systems [94]. Revenue Opportunities - The report estimates that the market value of L2+ smart driving will surpass **US$200 billion** by **2030**, with hardware and software providing distinct revenue streams [60][62]. - **Hardware** sales will initially drive revenue, while **software** sales are expected to generate recurring revenue through licensing and updates [63][64]. Conclusion - The automotive industry is at a pivotal moment, with AI integration poised to reshape mobility. The report emphasizes the importance of collaboration among global players to navigate the evolving landscape and capitalize on emerging opportunities [42][85].

Summary of the Conference Call on China's Auto Parts Sector Industry Overview - The conference call focused on the **China Auto Parts Sector**, particularly the earnings performance of suppliers in Q225 and the evolving client mix within the industry [2][3]. Key Points and Arguments Revenue Growth Expectations - Suppliers are expected to post **encouraging revenue growth** for Q225, driven by new model launches and an increasing content value per vehicle (CPV) [2][3]. - **Fuyao** is projected to achieve **10-15% YoY revenue growth** due to overseas market share expansion and rising domestic average selling prices (ASP) [3]. - **Tuopu** and **Sanhua** are forecasted to deliver **mid-to-high single-digit YoY revenue growth**, with Tuopu expected to achieve **20%-plus QoQ revenue growth** from new orders [3]. Margin Concerns - There are significant **margin concerns** due to ongoing price competition in the auto parts sector, with most companies experiencing a decline in gross margins over the past two years [4]. - Although raw material prices have decreased, which could support margins, headwinds remain from price competition and potential cost increases from new plant ramp-ups [4][15]. Client Mix Evolution - The client mix is evolving, with **Xiaomi**, **Li Auto**, and **AITO** expected to become increasingly important for suppliers from FY24 to FY26E [2][7]. - Revenue contributions from these companies are projected to significantly increase, with some suppliers expected to derive **35-40%** of their 2026 revenue from them [7]. Upcoming Catalysts - Key catalysts for the auto parts sector in H225 include: - Delivery of orders for **Xiaomi YU7** - Launch of **Li Auto's i8** and **Tesla's Model Y L** - Strong sales from **Leapmotor** [5]. - Concerns exist that the Xiaomi YU7 could compete with the Tesla Model Y, but it is believed that the YU7 orders will largely offset any potential decline in Model Y sales [5][24]. Humanoid Robotics Supply Chain - The auto parts suppliers are making strides in the **humanoid robotics** space, leveraging their existing technology and relationships with companies like **Tesla** and **JD.com** [8][58]. - Despite a reduction in Tesla's humanoid robot sales volume guidance, there are still catalysts for growth in this area [8]. Stock Implications - The launch of new models and developments in humanoid robotics are expected to act as **share price catalysts** for supply chain companies in the short term [9]. Additional Important Insights - The analysis indicates that **Desay SV** is expected to benefit the most from the Xiaomi YU7 launch, with a projected **16.6%** revenue increase in 2026E [29]. - The report highlights the potential for **Xiaomi YU7** orders to offset revenue declines from existing customers, particularly for suppliers with higher CPV from the YU7 [24][28]. - Risks to the auto parts sector include demand dampening due to lower auto production, price pressure from automakers, and potential product recalls due to quality issues [61]. This summary encapsulates the key insights and projections discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the China Auto Parts Sector.

Investment Rating - The report assigns a "Buy" rating to BYD (1211 HK), Desay SV (002920 CH), and Contemporary Amperex Technology (300750 CH) [54][60][65]. Core Insights - The China auto market has shown another double-digit year-on-year growth, with wholesale unit deliveries reaching 2.5 million units in June, marking a 14.5% increase year-on-year and a 7.8% increase month-on-month [1][7]. - The electric vehicle (EV) market is experiencing suboptimal growth, with EV penetration at 52.7% in June, which is below expectations and historical highs [1][7]. - Concerns are raised regarding the slowing growth of EV penetration, potentially due to aggressive pricing strategies from internal combustion engine (ICE) car manufacturers and the upcoming 50% cut to EV purchase tax exemptions starting next year [2][7]. Summary by Sections China Auto Market Performance - In 1H25, the China auto market reported a total of 13.5 million wholesale shipments, reflecting a 12.9% year-on-year growth, while retail sales (excluding minivans) reached 10.9 million units, up 10.8% year-on-year [8]. - The overall growth momentum in 1H25 was slightly above expectations, supported by government subsidies for scrapping and trade-in programs [8]. Electric Vehicle Market - Monthly retail sales of PV EVs reached 1.1 million units in June, representing a 30.2% year-on-year increase [1][9]. - The report highlights that BEVs outperformed PHEVs/EREVs in terms of growth, with BEVs showing 45% year-on-year growth in wholesale shipments during 1H25 [9]. OEM Strategies and Market Dynamics - OEMs are currently preparing their strategies for 2H25, with expectations of model launches and adjustments in response to government policies against over-competition [3]. - BYD remains a top pick due to its strategies aimed at regaining market share, including reducing SKUs and improving model features without price increases [4]. Battery Market Insights - EV battery installations grew by 35.9% year-on-year to 58.2 GWh in June, with total installations for 1H25 reaching 300 GWh, a 47.3% increase year-on-year [5]. - CATL and BYD maintained their market leadership in the battery sector, holding 43.7% and 21.5% market shares, respectively [5]. Lithium Market Trends - The price of lithium carbonate in China rebounded from a low of CNY 60,000 per tonne in late June to CNY 63,000 per tonne in early July [5][48]. - The report anticipates potential downside risks to lithium production in July due to weakened demand and government interventions [5][48].

Core Insights - Xpeng is maintaining strong sales momentum with 34,611 car deliveries in June, marking its eighth consecutive month of over 30,000 deliveries, despite intense competition from BYD and others in the Chinese electric vehicle market [1][2] Industry Overview - The electric vehicle price war in China has intensified, leading to government criticism of excessive competition, with President Xi Jinping calling for better governance of low-price competition [3] - BYD remains the dominant player in the market, with June sales reaching 377,628 vehicles, contributing to a total of 2.1 million vehicles sold in the first half of the year [13] Competitor Performance - Xpeng's competitors have shown mixed results: - Zeekr reported 16,702 deliveries in June, down 11.7% month-over-month and 16.9% year-over-year [4] - Nio delivered 24,925 cars in June, showing slight growth due to its premium and lower-priced brands [4] - Li Auto delivered 36,279 vehicles in June, a decline of 11.2% from May, but exceeded its second-quarter guidance with 111,074 total deliveries [5] - Xiaomi reported over 25,000 electric car deliveries in June, with significant demand for its new YU7 SUV, which is priced lower than Tesla's Model Y [8][9] Market Dynamics - Tesla's sales in China are estimated at approximately 128,000 units for Q2, down 12% year-over-year, facing pressure from new model launches by Chinese brands [10] - Tesla's market share in China's new energy vehicle segment has slightly declined, with retail sales just over 200,000 vehicles in the first five months of the year [11] - Leapmotor and Aito reported strong growth with record deliveries of 48,006 and 44,685 cars respectively in June [12] Future Outlook - Analysts predict that BYD, Xiaomi, and Geely are likely to survive potential industry consolidation, while Nio may face risks due to financial challenges despite having a strong product lineup [14]

Investment Rating - The industry investment rating is "In-Line" [4]. Core Insights - The report indicates solid growth in the industrial robot sector, with China's industrial robot production growing by 36% year-on-year in May, up from 34% in the previous four months [7]. - Global players such as ABB, Fanuc, Kuka, and Yamaha saw a combined shipment increase of 3% year-on-year in May, compared to a 2% increase in the first four months of 2025 [7]. - The growth is primarily driven by demand from the automotive sector, consumer electronics (3C), and exports, with expectations of intense competition and sustained market share gains for domestic brands like Estun and Inovance [7]. Summary by Sections Industry Overview - The industrial robot operations in China are experiencing robust growth, with significant contributions from various sectors [7]. Production and Shipment Data - China's industrial robot production increased by 36% year-on-year in May, supported by strong demand from the automotive and consumer electronics sectors [7]. - The report highlights that Fanuc's inventory levels have normalized, allowing for continuous shipments to key customers such as Li Auto and Xiaomi [7]. Market Dynamics - The competition in the industrial robot market remains intense, with domestic brands expected to maintain their market share gains [7].

Core Viewpoint - Li Auto's revenue showed a slight increase of 1.1% YoY in 1Q25, while non-GAAP net income decreased to RMB1.0 billion, indicating a mixed performance amidst a challenging market environment [1][3] Financial Performance - In 1Q25, vehicle sales increased by 2% YoY to RMB24.7 billion, but the average selling price (ASP) fell to RMB266,000 due to a higher mix of lower-priced L6 models and cash promotions [1] - Non-GAAP earnings per unit decreased to RMB11,000, reflecting a decline from RMB1.3 billion in 1Q24, attributed to a high base from last year's investment income [3] - Vehicle margin improved to 19.8% in 1Q25, slightly above the previous quarter, but is expected to stabilize around 19% in 2Q25 due to various factors affecting sales mix and pricing [2] Sales Guidance and Market Outlook - The company guided for 2Q25 deliveries of 125,000 to 128,000 units, with expectations of monthly sales returning to 50,000 units by June [1][4] - MEGA HOME Family Edition has gained significant traction, accounting for approximately 90% of MEGA's order backlog, leading to an anticipated monthly sales increase to 2,500-3,000 units by July [4] - The management indicated that the full range of new models could support annual revenue scaling up to RMB300 billion, implying a potential sales volume of 1.2 million units [4] Strategic Initiatives - Li Auto plans to expand into international markets, focusing on pan-Asia and Europe, with a long-term goal of achieving 30% of annual sales from overseas [5][6] - The company is set to launch new pure electric SUVs, Li i8 and Li i6, in July and September, respectively, as part of its strategy to diversify its product offerings beyond SUVs [4] Valuation and Market Position - Current valuations for Li Auto's ADRs are at 18.6x 2025E P/S and 13.6x 2026E P/E, which are below the industry average, indicating potential upside as market expectations for the i-series models are low [8] - The ongoing new product cycle is expected to drive sales growth and stock re-rating, with a revised target price of US$41.00/HK$160.00 based on a 20x 2026E P/E [9]