Core Viewpoint - Dongfeng Group's stock surged over 90% following the announcement of its privatization and delisting plans, alongside the introduction of its subsidiary, Lantu Motors, to the Hong Kong stock market [1] Group 1: Privatization and Delisting - Dongfeng Group announced plans for privatization and delisting, with a total acquisition price set at HKD 10.85 per share, comprising HKD 6.68 in cash and HKD 4.17 in equity from Lantu Motors [1] - The decision to privatize is attributed to the low valuation of Dongfeng Group's stock, which has hindered its financing capabilities [1] Group 2: Strategic Transition - Dongfeng Group is transitioning towards the new energy sector and has initiated internal reforms, which are currently limited by regulations governing public companies [1] - The dual purpose of the privatization is to facilitate Lantu's entry into the capital market and to enable further internal integration and restructuring within Dongfeng Group [1]

Investment Logic - The company has shown a continuous upward trend in operations after a bottom reversal, with April 2025 sales of passenger cars reaching 234,100 units, a year-on-year increase of 49.1% [1][13] - Electric vehicle sales reached 126,000 units in April 2025, with a year-on-year increase of 137.7% [1][13] - The company has maintained strong sales performance despite price wars affecting electric vehicles, with fuel vehicles also showing resilience [1][13] Reasons for Recovery - The core reasons for the company's recovery include the implementation of a low-cost strategy, a strong product cycle with multiple new models, and internal integration that has improved profitability [2][3] - The launch of the GEA platform and EM-i hybrid technology has significantly enhanced the company's product appeal [2] - The company is entering a new car cycle with ten new models expected to launch in 2025, including several market hits [2][3] Sales Performance - The company has achieved strong sales performance, with April 2025 sales of 234,100 units, a 52.7% increase year-on-year [13][14] - Electric vehicle sales in the first four months of 2025 reached 465,000 units, a 137.7% increase year-on-year [13][14] - The company has faced challenges in the export market, particularly in Russia, but has seen strong growth in other regions, including Latin America and Asia-Pacific [15][19] Brand Performance - The company's four main brands have shown varied performance, with the Galaxy brand achieving significant growth, while the Zeekr brand has faced challenges [25][19] - The Galaxy brand sold 97,000 units in April 2025, a 285.2% increase year-on-year, indicating strong market acceptance [19][25] - Fuel vehicles have also performed well, with sales increasing by 3% year-on-year in April 2025 [25][26] Profitability Trends - The company has experienced a significant recovery in profitability, with net profit in Q1 2025 reaching 5.67 billion yuan, a 262.9% increase year-on-year [39][40] - The gross profit margin for the company has improved, reaching 15.8% in Q1 2025, up 2.1 percentage points from the previous quarter [39][40] - The company has successfully turned around its profitability after a challenging period, with the Galaxy brand contributing significantly to this recovery [48][49] Cost Reduction Strategies - The implementation of the GEA platform has led to a significant reduction in vehicle costs, enhancing the company's competitive position [51][52] - The GEA platform allows for modular design and increased parts reuse, which lowers production costs [52][53] - The company's self-research and supply capabilities have improved, reducing reliance on external suppliers and further lowering costs [53]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 29.65 [7][12]. Core Views - The company reported Q1 revenue of RMB 72.5 billion, a year-on-year increase of 25%, and a net profit attributable to shareholders of RMB 5.7 billion, up 264% year-on-year, aligning with expectations [1][5]. - The company is expected to benefit from the new car cycle driven by the GEA platform, with strong sales of new models like the Xingyao 8, which is projected to sell over 8,000 units monthly [4][12]. - The proposed privatization of Zeekr by Geely aims to enhance internal integration and reduce inefficiencies, potentially increasing group efficiency by over 5% and improving R&D and management efficiency by 15-20% [3][12]. Financial Performance - In Q1 2025, the company sold 700,000 new vehicles, a 48% increase year-on-year, with a gross margin of 15.8%, reflecting improvements in cost management [2][5]. - The company forecasts revenues of RMB 344.4 billion, RMB 370.8 billion, and RMB 422.5 billion for 2025, 2026, and 2027 respectively, with net profits of RMB 13.8 billion, RMB 15.5 billion, and RMB 19.4 billion for the same years [6][12]. - The report indicates an expected EPS of RMB 1.37, RMB 1.53, and RMB 1.92 for 2025, 2026, and 2027 respectively, with a projected PE ratio of 20x for 2025 [5][12]. Market Outlook - The company is set to launch several new models, including the Lynk & Co Z10 and Zeekr 9X, which are anticipated to enhance revenue and profitability [4][12]. - The report highlights the importance of the GEA platform in driving profitability and operational efficiency, suggesting a positive outlook for the company's future performance [3][12].