Summary of Chery Automobile Conference Call Company Overview - Chery Automobile has entered a growth phase since 2022, significantly increasing its market share due to technological advancements such as Kunpeng Power and Mars Architecture, as well as export growth [2][4] Core Industry Insights - Chery maintains a dual development strategy for traditional fuel vehicles and new energy vehicles, with steady market share growth in the domestic market [2][4] - Strong sales performance from models like the Tiggo 8 series and Arrizo 7 contribute significantly to revenue [2][4] - The company has expanded its overseas market presence, achieving over 1 million units sold abroad, with Europe, Southeast Asia, and Latin America as key focus areas, particularly strong performance in the Brazilian market [2][4][6] Technological Advancements - Chery has a notable advantage in engine technology, with the Kunpeng engine achieving a thermal efficiency of 48%, placing it at a global leading level, enhancing competitiveness in fuel and hybrid vehicle segments [2][5] - The company is progressing in the smart technology sector through a 2.0 strategic partnership with Huawei, gradually applying Huawei's Intelligent Driving 4.0 solutions to its Zhijie platform, resulting in increased sales of updated Zhijie models [2][5] Future Development Strategy - Chery plans to integrate domestic operations and strengthen brand collaboration, focusing on the Fengyun and Tiggo brands for new energy transformation, with the Fengyun series targeting the Geely Galaxy [6] - The company aims to launch multiple new models based on CCDM 6.0, including the Fengyun T11 and upgraded T9L, while continuing to focus on the Arrizo and Tiggo product lines in the fuel vehicle sector [6] - The overseas market remains a crucial growth point, with plans to achieve a production capacity of 50,000 units in Europe by 2027 and 150,000 units by 2029 [6] Financial Projections and Investment Recommendations - Chery is projected to achieve a net profit of approximately 18 billion RMB in 2025, potentially reaching around 20 billion RMB in 2026, with a current valuation of about 10 times earnings [3][7] - Despite a weak beta in the overall automotive industry, the expected stable growth in overseas business and continuous iteration of the Fengyun brand, along with the potential success of the Zhijie MPV, could drive further valuation increases [7]

Core Viewpoint - The rapid development of domestic new energy vehicles (NEVs) is notable, but there remains a significant demand for domestic fuel vehicles, indicating a complex market landscape [1]. Sales Performance - The best-selling fuel vehicle is the Xingrui, accounting for one-third of monthly sales, followed by Boyue L and Emgrand [3]. - The overall sales of fuel vehicles have remained stable compared to last year, but there is increased pressure from the growing interest in NEVs [4]. - The most popular fuel vehicles in the store include the M8, GS8, M6 series, and the Ying Su series, with Ying Su selling around 18-20 units monthly [6]. - The top-selling fuel cars are the fourth-generation CS75PLUS, CS55PLUS, and Yidong PLUS, collectively selling about 35 units monthly, representing over 65% of total sales [9]. Customer Demographics - Fuel vehicle buyers are predominantly middle-aged, with a mix of professions including factory workers, nurses, and teachers, often requiring vehicles for long-distance travel [3]. - The customer base for the Ying Su is diverse, including first-time buyers and retirees, with a general preference for the reliability of fuel vehicles over NEVs [6]. - Younger customers, often purchasing their first car, primarily consider fuel vehicles, with some interest in plug-in hybrids [10]. Market Trends - There is a noticeable decline in overall sales compared to last year, with profit margins also decreasing, leading to a push for additional services [7]. - The acceptance of NEVs is increasing, with customers recognizing the advantages in product configuration and overall purchase experience [7]. - The market for fuel vehicles is expected to improve slightly next year due to potential changes in tax policies and the reduction of subsidies for NEVs [13][15]. Competitive Landscape - Competing fuel vehicles include popular models like the Langyi and Suteng, with domestic brands such as Chery, GAC, and Changan being compared within similar price ranges [3]. - The lack of competitive pricing and product offerings in the NEV segment is noted, particularly in the 150,000 yuan price range, which is currently underserved [7]. - The best-selling fuel vehicles in the store include the Aiyue 5 and Aiyue 8, appealing to younger consumers due to their affordability and design [12].

Investment Rating - The report initiates coverage with a "Buy" rating for Chery Automobile [6][3]. Core Insights - Chery Automobile is positioned as a leading player among domestic car manufacturers, focusing on the transition to new energy vehicles, high-end market penetration, and international expansion to drive new growth [1][18]. - The company has established a clear brand matrix consisting of five brands: Chery, Jetour, Exeed, iCAR, and Zhijie, which cater to various market segments from mainstream to high-end and from fuel to new energy vehicles [1][18][21]. - Chery's sales are projected to grow significantly, with a compound annual growth rate (CAGR) of 36.7% for its main brand from 2022 to 2024, and a notable increase in export sales [2][3]. Financial Summary - Revenue forecasts for Chery Automobile are as follows: 2025 at 315 billion CNY, 2026 at 394.3 billion CNY, and 2027 at 485.6 billion CNY, with corresponding net profits of 16.22 billion CNY, 21.36 billion CNY, and 27.19 billion CNY [3][4]. - The company is expected to maintain a strong net profit margin, with a projected price-to-earnings (PE) ratio of 10.40 for 2025, decreasing to 6.20 by 2027 [3][4]. Sales and Market Position - In the 5-20W price segment, Chery ranks second in wholesale sales, with a significant increase in sales from 1.75 million units in 2023 to 2.375 million units in 2024, driven by its strong performance in the new energy vehicle sector [2][3]. - The overall penetration rate of new energy vehicles in the market is 44.9%, with Chery's brands showing robust growth across all segments [2][3]. Brand Performance - The main brand Chery is expected to achieve sales of 1.643 million units in 2024, while Jetour, Exeed, iCAR, and Zhijie are also projected to see substantial sales increases, reflecting the effectiveness of the company's diversified brand strategy [2][21]. - The Jetour brand is particularly noteworthy, with a projected CAGR of 77.7% from 2022 to 2024, indicating strong market demand for its offerings [2][3]. Technological Advancements - Chery has made significant investments in technology, focusing on five key areas: Mars architecture, Kunpeng power, Lion smart cockpit, Falcon intelligent driving, and Galaxy ecosystem, which are expected to enhance its competitive edge in the automotive industry [1][64].

Core Viewpoint - Chery Automobile successfully completed its IPO on the Hong Kong Stock Exchange, marking a significant milestone as it aims to enhance its market position and expand its operations globally [2]. Group 1: IPO Details - Chery's IPO was officially listed on September 25, with an opening price of HKD 34.2 per share [2]. - The funds raised will be allocated for new vehicle development, next-generation automotive technology, overseas market expansion, and upgrading production facilities in Wuhu [2]. - Chery plans to use up to 3.69 million shares (approximately 6.74% of total shares) for employee incentives, priced at HKD 3.4 per share, with a six-year lock-up period [2]. Group 2: Sales Performance - In 2024, Chery achieved a global sales volume of 2.295 million vehicles, ranking among the top twenty car manufacturers worldwide, with a year-on-year growth rate of 49.4%, the highest in this category [2]. - The company reported a 56% year-on-year increase in domestic passenger car sales for 2024, with a remarkable 277.3% growth in new energy vehicle sales, leading the top ten domestic passenger car manufacturers [3]. - Chery's market share in China increased from 11.8% in 2023 to 14.0% in 2024, ranking second among domestic brands [3]. Group 3: Product and Brand Performance - Chery has five major automotive brands, with projected sales in 2024: Chery brand at 1.52 million, Jetour at 530,000, Exeed at 130,000, iCAR at 60,000, and Zhijie at 38,500 [3]. - The Tiggo 8 series ranked first in global sales of self-owned brand fuel vehicles in 2024, while the Jetour X70 series ranked fourth in global B-class SUV sales [3]. Group 4: International Expansion - Chery has been the top exporter of self-owned brand passenger cars in China for 22 consecutive years, with products sold in over 100 countries and regions, totaling over 13 million vehicles sold globally [3]. - In 2024, overseas revenue accounted for 37.4% of total revenue, with Chery ranking first in Europe, South America, the Middle East, and North Africa for self-owned brand passenger car sales, and second in North America and other Asian regions outside China [3][4]. - The collaboration with EV MOTORS in Barcelona marks Chery as the first Chinese self-owned brand to achieve localized production in Europe, with a total of 1,075 overseas dealers by the end of 2024 [4]. Group 5: Financial Performance - Chery's revenue for 2022, 2023, and 2024 was reported at CNY 92.618 billion, CNY 177.056 billion, and CNY 269.897 billion respectively, with net profits of CNY 5.806 billion, CNY 9.949 billion, and CNY 14.334 billion [4]. - In the first quarter of 2025, Chery reported revenue of CNY 68.223 billion and a net profit of CNY 4.726 billion [4].

Core Viewpoint - Chery Automobile is progressing with its Hong Kong IPO, planning to issue up to 699 million shares and convert 2.016 billion shares from domestic to overseas listings, with a strong performance in both traditional and new energy vehicle sales [1][4]. Financial Performance - In 2024, Chery's revenue reached 269.9 billion RMB, a year-on-year increase of 65.4%, and net profit was 14.3 billion RMB, up 37.2% [1][3]. - For Q1 2025, revenue rose by 24.2% to 68.2 billion RMB, while net profit surged by 90.9% to 4.7 billion RMB [2][3]. Market Position and Sales - Chery's total vehicle sales exceeded 13 million units, ranking 11th globally and 2nd among Chinese brands in 2024 [1]. - The company achieved a remarkable 277.3% increase in new energy vehicle sales in 2024, with overseas revenue accounting for 37.4% of total sales [4]. Brand Strategy - Chery has established five differentiated brands targeting various market segments, with the Chery brand leading in overall sales [4]. - The company has a robust global dealer network with 6,621 outlets, including 3,663 in China and 2,958 overseas [4]. Use of IPO Proceeds - The funds raised from the IPO will be allocated to expanding the passenger vehicle product line, R&D for next-generation vehicles and advanced technologies, global strategy implementation, upgrading the Wuhu production base, and supplementing working capital [6].

Core Viewpoint - The automotive industry is facing significant challenges, including price wars and disordered competition, leading to a decline in sales and income for many companies and sales personnel [1] Group 1: Sales and Income Trends - Sales income in first-tier cities has decreased significantly, with some reporting declines of up to 40% compared to last year [3] - The average transaction price for vehicles has dropped by over 10,000 yuan compared to last year, indicating a tough market environment [3] - Many brands are reducing staff and facing severe layoffs, with stricter hiring processes in place [3] Group 2: Pricing Strategies and Discounts - Price reductions have been frequent, with some models seeing discounts of 20,000 to 30,000 yuan [5][8] - The competition among brands has intensified, leading to aggressive pricing strategies and frequent adjustments in promotional policies [5][8] - Some brands are experiencing a lack of effective promotional results, leading to customer dissatisfaction [8] Group 3: Product and Quality Adjustments - There have been no significant changes in product quality, but some brands have started to reduce configurations to cut costs [4][8] - New models are being introduced with slight price adjustments, but overall quality complaints remain low [4][11] - Brands are focusing on enhancing product features and technology to attract customers, with some emphasizing their unique selling propositions [15] Group 4: Inventory and Production - Inventory levels are reported to be unhealthy for some brands, leading to pressure on sales teams [5][13] - Companies are adopting order-based production strategies to manage inventory more effectively [15] - The inventory coefficient for some brands is reported to be healthy, indicating a more controlled approach to stock management [15]

Core Insights - Chinese automotive manufacturers have achieved significant success in global exports, becoming the largest exporter in 2023, and are focusing on localization strategies to ensure sustainable growth in overseas markets [1][3] - The localization strategy involves deep integration across various aspects such as R&D, supply chain, talent, and marketing to better adapt to local market demands and enhance product competitiveness [1] Group 1: Localization in Brazil - Brazil is emerging as a strategic hub for Chinese automotive companies, with President Lula's visit to China highlighting the growing cooperation in the automotive sector [3][4] - Great Wall Motors and GAC Group are planning significant investments in Brazil, with GAC committing to invest $1.3 billion to establish a local manufacturing base and R&D center [4][6] - Several Chinese automakers, including Chery, JAC, Geely, BYD, and Great Wall, have established a presence in Brazil, using it as a gateway to the Latin American market [4][9] Group 2: Market Potential and Policy Support - Brazil is the sixth-largest automotive market globally, with a population exceeding 200 million and a growing middle class, making it attractive for Chinese automakers [10] - The Brazilian government has implemented policies favoring electric and hybrid vehicles, including tax exemptions for electric vehicles and incentives for local production, which have encouraged Chinese companies to invest [10][11] - The Brazilian Electric Vehicle Association reported a significant increase in electric vehicle sales, with a forecast that by 2030, electric and hybrid vehicles will surpass traditional fuel vehicles in sales [11] Group 3: Challenges and Adaptation - The Brazilian market is characterized by a strong presence of flex-fuel vehicles, which dominate the market, necessitating that Chinese companies adapt their products to local preferences [12][13] - Chinese automakers face challenges such as legal compliance, cultural adaptation, and competition from established local and international players, requiring a multifaceted strategy to navigate these obstacles [13] - The Brazilian Automotive Manufacturers Association has raised concerns about potential "dumping" practices by Chinese companies, indicating the need for Chinese firms to develop robust public relations and legal strategies [13]