Core Viewpoint - The report from Huaxing Securities is optimistic about Leap Motor (09863), predicting a significant increase in sales due to high cost-performance models and expecting the company to reach a profitability inflection point by 2025. The company effectively controls costs through a fully self-developed technology platform and is rapidly expanding into overseas markets in collaboration with Stellantis, showcasing significant advantages in international expansion. A "Buy" rating is given with a target price of HKD 71.80 [1] Sales Growth and Profitability Inflection Point - Leap Motor has experienced rapid sales growth, with October sales reaching a historical high of 70,289 units (up 84% year-on-year) and cumulative sales for the first ten months at 465,805 units (up 125% year-on-year). The company is positioned as a mass-market brand in the 100,000-200,000 RMB price range, and the launch of models C10 and C16 in 2024 is expected to further boost sales. The introduction of models D19 and Lafa will enrich the product matrix and support continued sales growth. The company is anticipated to achieve profitability by 2025, becoming the second new force car manufacturer to do so [1][2] Overseas Market Development Advantages - Leap Motor is expanding its overseas market presence through a deep partnership with Stellantis, with plans to launch a new model annually from 2025 to 2027. Since entering the European market in September 2024, the company has seen rapid growth, with Q2 2025 sales in Europe increasing by 65.8% to 3,196 units, totaling 5,124 units in the first half of the year, ranking fifth among all domestic brands. The company is expected to surpass XPeng in total European sales this year. Leveraging Stellantis's global distribution network and brand strength, Leap Motor has a competitive edge in overseas distribution and manufacturing [2] Full-stack Self-research Technology Capability - Leap Motor possesses self-research and manufacturing capabilities across six core areas: vehicle architecture, electronic and electrical architecture, batteries, electric drives, intelligent cabins, and intelligent driving, which account for 65% of the vehicle manufacturing cost. The core technology architecture, LEAP series, has undergone multiple upgrades since its introduction in 2019. The company can maximize fixed asset cost allocation and enhance manufacturing scale efficiency through its fully self-research model, thereby reducing manufacturing costs and strengthening its core technological competitiveness [3] Investment Recommendations - The report initiates coverage with a "Buy" rating and a target price of HKD 71.80. Sales projections for Leap Motor from 2025 to 2027 are 578,528, 750,215, and 837,500 units, corresponding to revenues of CNY 62.9 billion, 78.02 billion, and 103.73 billion, respectively. The forecasted gross margins for the same period are 14.5%, 15.7%, and 16.8%. The company is expected to maintain an operating efficiency with a three-expense ratio of approximately 15%, with adjusted net profits projected at CNY 1.61 billion, 3.24 billion, and 6.58 billion. The valuation is based on a 1.2 times P/S ratio for 2026, higher than the average of comparable companies at 1.1 times [4]

Core Viewpoint - Huaxing Securities is optimistic about Leap Motor (09863) due to its rapid sales growth driven by high cost-performance models, expecting the company to reach a profitability inflection point by 2025. The company effectively controls costs through a fully self-developed technology platform and is rapidly expanding into overseas markets with the help of its partnership with Stellantis, showcasing significant advantages in international expansion. A "Buy" rating is initiated with a target price of HKD 71.80 [1] Group 1: Sales Growth and Profitability - Leap Motor has seen rapid sales growth, with October sales reaching a historical high of 70,289 units (up 84% year-on-year) and cumulative sales for the first ten months at 465,805 units (up 125% year-on-year). The company is positioned as a mass-market brand in the 100,000-200,000 RMB price range, with new models like C10 and C16 expected to further boost sales [1] - The release of models D19 and Lafa will enrich Leap Motor's product matrix and support continued sales growth. The company is anticipated to achieve profitability by 2025, becoming the second new force automaker to achieve full-year profitability [1] Group 2: Overseas Market Development - Leap Motor is expanding its overseas market presence through a deep partnership with Stellantis, with plans to launch a new model annually from 2025 to 2027. Since entering the European market in September 2024, the company has experienced rapid growth, with Q2 2025 European sales increasing by 65.8% to 3,196 units, totaling 5,124 units in the first half of the year, ranking fifth among all domestic brands [2] - The collaboration with Stellantis provides Leap Motor with significant advantages in overseas distribution and manufacturing, allowing for quicker penetration into international markets compared to other Chinese brands [2] Group 3: Self-Developed Technology Capabilities - Leap Motor possesses self-research and manufacturing capabilities across six core areas: vehicle architecture, electronic and electrical architecture, batteries, electric drives, intelligent cabins, and intelligent driving, which account for 65% of the vehicle manufacturing cost. The LEAP series technology architecture has undergone multiple upgrades since its introduction in 2019 [3] - The fully self-developed model allows Leap Motor to maximize the allocation of fixed asset costs and enhance manufacturing scale efficiency, thereby reducing overall manufacturing costs and strengthening its core technological competitiveness [3] Group 4: Investment Recommendations - A "Buy" rating is initiated with a target price of HKD 71.80. Sales projections for Leap Motor from 2025 to 2027 are 578,528, 750,215, and 837,500 units, corresponding to revenues of RMB 62.9 billion, RMB 78.02 billion, and RMB 103.73 billion, respectively. The expected gross margins for the same period are 14.5%, 15.7%, and 16.8% [4] - The company is expected to maintain an operating expense ratio of approximately 15% to achieve efficient operational performance, with adjusted net profits projected at RMB 1.61 billion, RMB 3.24 billion, and RMB 6.58 billion for the respective years [4] - The valuation is based on a 1.2 times price-to-sales ratio for 2026, which is above the average of comparable companies at 1.1 times [4]