Investment Rating - The report maintains a "Buy" rating for Leap Motor (9863.HK) and raises the target price to HKD 83.0, indicating a potential upside of 22% from the current price of HKD 68.15 [2][4]. Core Insights - Leap Motor's sales and net profit guidance for the year exceed expectations, with a target of 580,000 to 650,000 vehicles for 2025. The company anticipates significant growth in both domestic and overseas markets, supported by new model launches and partnerships [8]. - The gross margin is expected to improve, with a forecasted annual gross margin of 14%-15% for the year, driven by increased sales volume and better product mix [8]. - The valuation methodology used is a sum-of-the-parts approach, applying a price-to-sales ratio of 1.6x for 2025 sales, leading to the target price of HKD 83.0 [8]. Financial Performance and Forecast - For Q2 2025, Leap Motor reported revenue of RMB 14.23 billion, a year-on-year increase of 166% and a quarter-on-quarter increase of 42%. The gross margin was 13.6%, up 10.8 percentage points year-on-year [12]. - The company achieved a net profit of RMB 163 million in Q2 2025, marking a return to profitability after a loss in the previous quarter [12]. - Revenue projections for 2023 to 2027 show significant growth, with expected revenues of RMB 16.75 billion in 2023, increasing to RMB 108.44 billion by 2027, reflecting a compound annual growth rate [3][9]. Valuation and Market Position - The current market capitalization of Leap Motor is approximately HKD 91.11 billion, with an average trading volume of HKD 472.2 million over the past three months [4]. - The report highlights that Leap Motor's current price-to-sales ratio is 1.1x, suggesting potential for revaluation as the company continues to grow [8]. - The financial forecasts indicate a steady improvement in profitability, with net losses expected to turn into profits by 2025, projecting a net profit of RMB 634 million [3][9].

Core Viewpoint - Leapmotor's entry into the Hong Kong market is a strategic move aimed at brand positioning and market penetration, leveraging its successful models and understanding of local consumer behavior [2][3]. Group 1: Market Entry and Strategy - Leapmotor opened its 1500th store in Hong Kong's Central business district, showcasing its C10 SUV and T03 compact car at the Hong Kong International Auto Show [2]. - The C10 is targeted at young families and has been labeled as a "half-price ideal" in mainland China, while the T03 is designed for Hong Kong's congested driving conditions [2]. - The company aims to capture market share from established brands like Toyota by offering quality vehicles at competitive prices, addressing the price-sensitive nature of Hong Kong consumers due to high registration taxes [3]. Group 2: Policy and Market Conditions - The Hong Kong government has facilitated the growth of electric vehicles (EVs) by exempting pure electric models from initial registration taxes and reducing annual license fees, contributing to a 68% penetration rate of EVs in the first four months of the year [3]. - Despite the favorable policies, the limited annual market size of 40,000 to 50,000 vehicles raises questions about the scale of Leapmotor's investment in the region [3]. Group 3: Future Plans and Global Expansion - Leapmotor's founder, Zhu Jiangming, views Hong Kong as a key window for brand exposure and attracting investment, with plans to introduce a flagship D series model priced between 200,000 to 300,000 yuan [4]. - The collaboration with Stellantis allows Leapmotor to share development costs for right-hand drive vehicles, facilitating entry into markets like the UK, Australia, and Southeast Asia [4][8]. - The company has set ambitious sales targets, aiming for 500,000 to 600,000 units this year, 1 million units in two years, and 4 million units in five years [6]. Group 4: Financial Performance and Market Position - Leapmotor achieved nearly 300,000 total sales last year and has maintained a leading position among new energy vehicle manufacturers, with increasing gross margins [4]. - The company is focused on achieving profitability by 2025, with strategies including scaling production, maintaining cost control through in-house development, and improving product offerings [17][18]. - Leapmotor's market capitalization is expected to grow significantly, with the potential to reach a valuation of 100 billion yuan [10][9].

Group 1 - The company achieved a revenue of 10 billion yuan in Q1 2025, with a gross margin of 14.9%, marking a significant improvement in profitability [1][2] - The average revenue per vehicle increased to 114,000 yuan, reflecting a year-on-year increase of 1,000 yuan and a quarter-on-quarter increase of 800 yuan [2] - The company sold 88,000 vehicles in Q1 2025, representing a year-on-year growth of 162.1% but a quarter-on-quarter decline of 30.6% [1][2] Group 2 - The company plans to launch 2-3 new products globally each year over the next three years, with the B10 already launched and two more B-series models planned for 2025 [3] - The domestic sales network has expanded to 756 stores, with a plan to increase coverage to 90% in cities above the county level by the end of 2025 [3] - The company has established over 500 overseas channels, with plans for local assembly in Malaysia and local manufacturing in Europe by 2026 [3][4] Group 3 - The partnership with Stellantis is expected to leverage global resources for rapid overseas expansion with low initial investment [4] - The company anticipates vehicle sales of 570,000, 890,000, and 1.21 million units for the years 2025, 2026, and 2027, respectively [4]