Guotai Haitong maintains "buy" rating on LEAPMOTOR (09863) with a target price of HK$68.73.

Guotai Haitong released a research report stating that recently, FAW Group and LEAPMOTOR (09863) signed an investment and cooperation agreement. The bank believes that this cooperation signifies a further deepening of strategic synergy between the two parties, injecting sustained momentum for long-term development. The bank maintains a "buy" rating, with unchanged forecasts for net profit attributable to shareholders for 2025/26/27 at 13/48/76 billion yuan. The bank values the company using the PS method, referencing comparable companies, and assigns a 2026 valuation of 0.8 times PS, corresponding to a target price of 68.73 Hong Kong dollars (converted at an exchange rate of 1 Hong Kong dollar = 0.8991 Chinese yuan). Key viewpoints from Guotai Haitong: Event On December 28, 2025, FAW Group and LEAPMOTOR held a signing ceremony in Hangzhou. FAW Group's wholly-owned subsidiary, FAW Equity Investment Co., Ltd., and FAW Flag New Power Technology Co., Ltd., respectively signed investment and cooperation agreements with LEAPMOTOR. According to the agreements, FAW Equity will invest in LEAPMOTOR through a non-public offering of shares, becoming its strategic shareholder, and promote strategic synergy between the two major automotive groups through capital integration. Flag New Power will further share resources with LEAPMOTOR to jointly promote the joint development and production of plug-in hybrid, extended range, and other powertrains. Overall equity structure remains stable According to the company's announcement, the company has conditionally agreed to issue 74.8322 million domestic shares, and FAW Equity has conditionally agreed to subscribe to 74.8322 million domestic shares at a subscription price of 50.03 yuan per share (equivalent to 55.29 Hong Kong dollars). Compared to LEAPMOTOR's closing price of 49.94 Hong Kong dollars on December 24, as well as the average closing price of 49.23 Hong Kong dollars over the previous five trading days before the agreement date, this subscription price represents a premium. The 74.8322 million domestic shares represent approximately 25.74% of the total issued domestic shares of LEAPMOTOR, or approximately 20.47% after the expanded issuance; it also represents approximately 5.26% of the total issued shares, or about 5% after the expanded issuance. After this subscription is completed, Mr. Zhu and concerted action parties will hold 22.56% of the shares, Stellantis 18.99%, and the overall equity structure will remain stable. Enhanced strategic synergy, sharing resource advantages As early as 2019, FAW and Leapmotor began joint research in areas such as electric vehicle systems, and in 2020, FAW Besturn and Leapmotor signed a technology agreement. In March 2025, FAW signed a "Strategic Cooperation MoU" with LEAPMOTOR, planning to deepen cooperation on the joint development of new energy passenger vehicles and component collaboration. Just 20 days after signing, FAW's electronic tendering platform showed that Red Flag brand G117 product vehicle development and platform license fee technology procurement project was awarded to Leapmotor. According to the company's announcement, the total proceeds from the domestic share subscription will amount to 3.744 billion yuan, with approximately 50% allocated to research and development investment, around 25% for supplementary operating funds and general corporate purposes, and the remaining 25% for expanding sales and service networks and enhancing brand awareness. Risk Alerts: New energy vehicle sales may fall short of expectations; significant increase in raw material prices.