Investment Rating - The report maintains a "Positive" investment rating for the automotive industry [13]. Core Insights - The valuation framework for automotive companies has evolved significantly due to the explosion of electric vehicles and advancements in intelligent driving. Different valuation methods such as PS and PE are used to price various automakers, reflecting the industry's transformation and growth potential [8][9]. - The theoretical PE valuation is derived from the DCF principle, where the parameters include the compound annual growth rate of net profit (g), the forecast period (n), and the discount rate (r). Higher growth rates and longer forecast periods lead to higher valuations [9][24]. - The PS valuation method is a concession for growth-stage companies that are not yet profitable, and it implicitly includes PE valuation. The expected revenue growth and net profit margin significantly influence the PS multiple [10][52]. Summary by Sections Valuation Framework - The report quantifies the valuation of automotive companies using a framework that incorporates both PE and PS methods. The transition from PS to PE occurs when companies move from losses to profitability [5][11]. - For growth stocks, a projected net profit compound growth rate of 14.49% over five years results in a theoretical dynamic PE of 19.84 at an 8% discount rate. For mature stocks with 0% growth, the theoretical dynamic PE is 12.50 [9][26]. Theoretical PE and PS Analysis - The theoretical dynamic PE is sensitive to changes in growth rates, forecast periods, and discount rates. As growth expectations decrease, the theoretical PE converges from growth stocks to mature stocks [27][37]. - The report provides a detailed analysis of Tesla and Toyota's valuations, highlighting the market's different pricing strategies for their respective business models. Tesla's theoretical dynamic PE is significantly higher due to its multiple business segments and growth potential [42][47]. Investment Recommendations - For profitable automotive companies, the report suggests using PE valuation, focusing on future net profit growth. For unprofitable companies, PS valuation is recommended, emphasizing revenue growth and expected net profit margins. Companies transitioning from losses to profits should switch from PS to PE valuation once profitability is expected [11][52].