Citibank: Investors should price based on sales expectations for 2025, prefer BYD COMPANY (01211) and BRILLIANCE CHI (01114)

Citi released a research report stating that due to strong demand for Chinese cars in the fourth quarter as expected, market concerns include sales volume falling below expectations by the first quarter of 2025, whether the policy of trading in old cars for new ones will be postponed, and the possibility of a price war restarting in the first half of 2025. Citi believes that investors should price based on sales expectations for 2025 rather than current order momentum. For stocks valued by the market-to-sales ratio, there is downward risk if investor sentiment worsens, with an average of less than 0.8 times having some downside risk. Citi stated that at the company level, they prefer BYD COMPANY (01211) and BRILLIANCE CHI (01114). For BYD Company Limited/GEELY AUTO (00175)/LEAPMOTOR (09868), based on the current trajectory of order volume, the bank expects a strong order backlog by the end of 2024, which can offset the slow season in car sales at the beginning of 2025, supporting valuation before the launch of strong models in March 2025 and the second quarter. Regarding Geely, the bank maintains its core profit forecast for the third quarter at 2.6 billion Chinese Yuan, but after accounting for other one-time items (such as foreign exchange and provisions), total profit is expected to reach 2.4 billion Chinese Yuan. As for XPENG-W (09868), the bank believes that the length of the model cycle for P7+ and MONA is uncertain, and the current strong model cycle may be diluted by the slow season in car sales at the beginning of 2025. In 2025, the penetration of intelligent driver assistance systems (ADAS) into the market below 200,000 Chinese Yuan will pose a threat to Xiaopeng's core intelligent driver assistance system.