XPENG INC.(9868.HK)：1Q25 BOTTOM LINE BEAT ON NON-RECURRING ITEMS; INTENSIVE NEW LAUNCHES TO DRIVE ROBUST GROWTH AHEAD WITH PROFITABILITY ON TRACK

机构：中银国际
研究员：LOU Jia/Olivia NIU/Catherine SUN

　　Despite a slight sequential decline in 1Q25 revenue due to theweakening sales mix, 1Q25 non-GAAP net income narrowed toRMB426m as record low, thanks to improving gross margin, OPEXoptimisation and extra non-recurring income of c.RMB500m.
　　Additionally, the stronger free cash flow (over RMB3bn) during theperiod increased net cash to RMB33.3bn. Affected by the postponedall-new model launch and model switch, 2Q25 delivery guidance seemsa bit lower than estimates. Yet we expect strong rally in 2H25 driven byseveral all-new flagship models (G7, next-gen P7, Kunpeng EREVs),while 4Q25 gross margin set to reach high-teens with profitability atthe bottom line. We reckon its recent share prices underperformancemay partially reflect market skepticism over the outlook of G7/new P7,both vital to XPeng’s brand upscale and yet to prove. But we see highvisibility of sales upsides driven by Kunpeng pipelines from 4Q25onwards given its lack of EREV offerings at present, versus majorpeers in the affordable market, and its product affordability featuredrich techs. Maintain BUY with higher TP of US$31.00.
　　Key Factors for Rating
　　1Q25 revenue largely in line with sequential decline in vehicle ASP onweakening mix. 1Q25 vehicle sales dipped 2.1% QoQ to RMB14.4bn, againstsales volume growth of 2.7% QoQ, dragged by decline in vehicle ASP of 4.7%to RMB153k, amid the unfavourable mix as sales proportions of MONA increasedto 50% in 1Q25 from 42% in 4Q24. Service income of RMB1.4bn stayed on parwith that in 4Q24. Looking ahead, we expect vehicle ASP to regain growth from1Q25 trough driven by sales ramp up of higher-priced models (MONAmax/G7/new P7 etc) in the coming two quarters.
　　Gross margin improved QoQ yet temporarily disturbed by inventoryprovision and purchase commitment loss related to model switch. 1Q25vehicle margin improved from 10.0% in 4Q24 to 10.5%, slightly below ourforecasts due to the extra purchase commitment loss recognition related tomodel changes. Combined with stronger gross profit contribution of RMB957mfrom service income, blended GPM well expanded from 14.4% in 4Q24 to 15.6%in 1Q25. The mgmt. expressed confidence in sequential vehicle marginimprovements in coming quarters, by virtue of optimised product portfolio,continuing supply chain cost-cut benefits, as well as better scale effect, pledgingto get high-teens blended gross margin in 4Q25.
　　Net loss narrowed to record low helped by non-recurring items. 1Q25OPEX ratio moderately optimised to 24.8% from prior quarter. Coupled with thecontribution of non-recurring items by RMB500m (ie. government subsidy andFX gains), non-GAAP net loss narrowed to historical low of RMB426m. Goingforward, the company did not expect such non-recurring items to sustain butstill anticipated to continue the loss-reduction momentum on a path towardsprofitability in 4Q25 as scheduled, aided by stronger gross margin and enhancedOPEX efficiency, which we deem well attainable.
　　Solid cash position with healthy cash dynamics. Benefiting from enhancedprofitability and improved working capital management, the free cashflowsurpassed RMB3bn in 1Q25 and lays a solid foundation to realise a sizeable freecash inflow throughout whole year. The positive cash flow dynamics gave astrong lift to net cash position of RMB33.3bn as of end 1Q25.
　　Weaker 2Q25 delivery guidance before the strong rally from 3Q25driven by several all-new models. For 2Q25, the company guided salesvolume of 102k-108k units, which implies average monthly sales of 33k-36kunits over May-Jun. This came well below our prior anticipation and might beexplained by the weaker end-user demand for existing models during theproduct switchover stage, before the kickoff of all-new product launches fromlate-2Q. By details, the company is slated to finish the model-changes for 5legacy models in 2Q25, which contain revamped G6/G9 that commenceddelivery in Apr, upgraded X9, and MONA 03 series. From late 2Q25, the companyplans to launch G7 SUV (debut in Jun), followed by next-gen P7 sedan in early3Q25, and intensive Kunpeng EREV models release from 4Q25 onwards. Thiswill drive a strong rally in quarterly sales volume and likely rewrite the recordhigh in 2H25 in our view.
　　Growth story extends towards overseas market and non-vehiclebusiness. During the conf. call, CEO He Xiaopeng described the long-termcompany vision with the growth curves extending beyond current AI vehiclebusiness. Regarding the core growth engine AI vehicle business, the companysticks to the vision of bringing advanced smart driving features on wide-rangingaffordable models. The second growth curve lies in the robust overseas marketpotential, as the mgmt. anticipated the overseas sales to continue meteoricgrowth in coming 3 years propelled by broader market entries, rich productofferings as well as deepened localised involvement throughout productdesign/production/distribution. The third growth curve counts on non-vehiclebusiness (mainly humanoid robots), as the company set to mass produce thehumanoid robot for industrial and commercial applications in 2026, which willentirely benefit from the synergies with core AI vehicle business through worldmodelbased AI architecture, unified computing hardware (Turing AI SoC), andproduction scalability, giving XPeng an edge over other NEV counterparts.
　　Valuation
　　We maintained our sales volume forecast for 2025-26E at 470k/620k units.
　　However, to reflect positive gross margin guidance in 2H25 backed by ongoingcost reduction efforts and production scale-up, we lift our 2025-26E non-GAAPnet income forecasts from RMB-1.9bn/993m to RMB-1.7bn/1.7bn, respectively.
　　XPeng’s share stock has remained as the best performer among OEM space YTD,whereas lagged behind major NEV rivals over the past month due to the slightpostponement of fresh new models (G7, next-gen P7 codenamed E29) andweakened weekly sales data during product switchover stage. However, themgmt. conveyed confidence to restore sales momentum and expand profitabilitywith robust new model cycle and continuing cost reduction in 2H25.
　　Following recent pullback, we deem its current stock price has reflected themarket skepticism over the audience acceptance of coming G7 and next-gen P7,both vital to XPeng’s brand upscale strategy and yet to prove. Beyond that, wesee larger sales volume upsides driven by XPeng’s Kunpeng EREV pipelines from4Q25 onwards (“one car, dual energy” product philosophy) given XPeng’s lackof EREV offerings in affordable market at present, versus major peers(BYD/Geely/Leapmotor) all of which have powertrain of both EV and PHEV/EREVtype. Meanwhile, we deem XPeng’s edge in AD techs may aid to its differentiatedfeatures in the cost-conscious segment.
　　In addition, we believe sentiment-driven narratives (i.e. AI hype, humanoidrobots) may serve as stock catalysts for XPeng, given its AI advancements aheadof NEV players, aggressive spending in AI infrastructure and faster-than-peershumanoid robot production roadmap. We maintain BUY rating with higher TPof US$31.00 by adopting 2.5x 2025E P/S (vs. prior 2x).