XPENG-W(09868) performance disclosure is imminent, can the decline be reversed?

XPENG-W (09868) will announce its 2023 fourth quarter and full-year performance after the market closes on March 19. Several brokerage firms have provided performance outlook reports. Morgan Stanley previously estimated that Xiaopeng Motors' revenue in the fourth quarter will slightly exceed 13 billion RMB, mainly benefiting from a slight increase in the average selling price (ASP) of the G9 model. The company's gross profit margin is expected to reach around 6%, compared to -2.7% in the third quarter. Due to a slight increase in research and development, sales, and management expenses, the net loss for the fourth quarter is expected to be between 2 billion and 2.2 billion RMB. In terms of car sales, Xiaopeng Motors delivered 60,158 cars in the fourth quarter of last year, achieving the company's set guidance target, with quarterly revenue expected to increase by over double compared to the same period last year, reaching 12.89 billion RMB. However, in the fierce competition in the Chinese electric vehicle market, Xiaopeng Motors is facing strong pressure from competitors such as Nio, Nio, and global giant Tesla. These competitors have shown strong profitability in terms of gross profit margin, while Xiaopeng Motors disclosed a gross profit margin of -2.7% in the third quarter report, significantly lower than the 13.5% in the same period last year. However, at the beginning of 2024, Xiaopeng's deliveries did not see improvement. In the delivery rankings for January, Xiaopeng Motors sold 8,250 cars, a 59% decrease from the previous month, making it one of the new car companies with a significant month-on-month drop. In February, Xiaopeng Motors' sales continued to decline, with only 4,545 new cars delivered in February. As for the reason for the sharp drop in sales in February, He Xiaopeng attributed it to the production capacity of the new X9 car. He said, "Due to excessive orders and insufficient capacity, Xiaopeng accumulated tens of thousands of orders for the X9 in January. The difficulties faced by the current X9 have been resolved, and we will work overtime during the Spring Festival to quickly increase production capacity to ensure deliveries." Investors are also cautious about Xiaopeng Motors' future sales outlook and profit plans. CMB International analyst Que Ke said that in addition to focusing on the sales prospects for the first quarter, investors are also curious about the detailed plans for the cheaper sub-brand that Xiaopeng Motors plans to launch next month. However, facing continued losses and negative gross profit margins, there is still significant uncertainty as to whether Xiaopeng Motors can turn the tide through its new product strategy. It is worth noting that at the China Electric Vehicle Hundred People Forum (2024) held on March 16, Xiaopeng Motors Chairman and CEO He Xiaopeng delivered a speech, revealing for the first time that Xiaopeng Motors is about to launch a brand new brand and officially enter the global automotive market in the 100,000-150,000 yuan price range. According to him, the new brand is committed to creating "the first AI smart driving car for young people" and will launch a series of new car models with different levels of intelligent driving capabilities by continuously understanding the needs of young customers. According to the plan, Xiaopeng Motors will upgrade its "AI technology core-driven by intelligent driving" this year, with a planned annual investment of 3.5 billion RMB in intelligent research and development, and the recruitment of 4,000 new personnel. At the same time, Xiaopeng's AI smart driving large model will officially "get on the car" in the second quarter of this year, becoming the industry's first mass-produced automotive artificial intelligence and automotive cognitive engine. Meanwhile, Daiwa expects Xiaopeng to achieve revenue of 12.4 billion RMB in the fourth quarter of last year, a year-on-year increase of 142% and a quarterly increase of 46%, compared to the company's guidance range of 12.7 billion to 13.6 billion RMB. The fourth quarter saw the sale of 61,700 cars, within the guidance range, but with competitive pricing trends, the average selling price is mild and the total gross profit margin is estimated to remain at -2.1%; the net loss for the end of the quarter decreased from 3.9 billion RMB in the third quarter of last year to 2.9 billion RMB. In mid-March, CMSC International released a research report maintaining a "buy" rating on XPENG-W, with pressure on the first two months' delivery volume and increased terminal promotions in March, while new affiliated dealers begin operations, accelerating channel expansion. It is expected that Xiaopeng's delivery volume in March will rebound from the bottom, with a trading opportunity, raising its target price by 78% to 69 Hong Kong dollars. The company's new car delivery volume in February was 4,545 units, a year-on-year/ month-on-month decline of 24.5%/44.9%, mainly due to the spring season downturn; individual parts of the supply chain; and factors such as the company not adjusting prices according to market conditions.