CICC released a research report stating that XPENG-W's (09868) current Hong Kong and US stock prices both correspond to 2025 1.6x P/S. The firm maintains its outperform rating and earnings forecasts, keeping the Hong Kong/US stock target prices at HK$108/US$28, representing 40%/35% upside potential from current levels, both corresponding to 2025 2.2x P/S.
The company announced Q2 2025 results with revenue of RMB 18.274 billion and Non-GAAP loss of RMB 385 million. Scale effects driving significant improvement in gross margins both year-over-year and quarter-over-quarter led to performance exceeding market and the firm's expectations.
CICC's main views are as follows:
**Q2 Performance Exceeds Market Expectations with Continued Gross Margin Improvement**
The company delivered 103,181 vehicles in Q2, with sales continuing to reach quarterly highs, driving Q2 revenue to RMB 18.274 billion. Q2 comprehensive gross margin was 17.3%, up 3.3 percentage points year-over-year and 1.8 percentage points quarter-over-quarter. Automotive business gross margin was 14.3%, primarily due to increased parts standardization rates, delivery volumes, and higher proportion of high-margin vehicle models.
On the expense side, Q2 control was effective, with R&D expenses of RMB 2.21 billion and sales and administrative expenses of RMB 2.17 billion. Overall, scale effects driving continued gross margin improvement and efficient cost control led to performance exceeding market and the firm's expectations. Q2 Non-GAAP net loss was RMB 385 million compared to a net loss of RMB 1.22 billion in Q2 2024, continuing the narrowing trend.
**Guidance for September Sales to Exceed 40,000 Units, Entering Super Electric Cycle**
Recently, the company's new P7 Next model began pre-sales. The new vehicle features three self-developed Turing AI chips across all variants and is equipped with a full 800V platform plus 5C ultra-fast charging battery, receiving positive market reception. The company guides Q3 deliveries of 113,000-118,000 units, up 142.8%-153.6% year-over-year. During the earnings call, management indicated that starting in September, monthly sales will consistently exceed 40,000 units.
The firm believes the company will enter a new super electric product cycle. In Q4, the company plans to officially mass-produce the first model in the Kunpeng super range-extended electric series and gradually complete the transition to dual-energy versions of existing models. The firm believes that models launched in the second half, such as the P7 Next, are all priced above RMB 200,000, which should drive continuous quarter-over-quarter improvement in profitability. Current market expectations for the company still show gaps.
**Building Comprehensive AI Ecosystem, Focus on Overseas Market Progress**
During the earnings call, the company stated that L4-capable vehicle models are planned for mass production in 2026, with plans to begin pilot Robotaxi operations and services in certain regions. The company is positioned to become the first domestic automaker with L4 computing power, software, hardware, and cloud capabilities in mass production.
Additionally, the company's new generation humanoid robot has achieved breakthroughs. Based on Turing chips, VLA and VLM, it is rapidly advancing toward a mass-producible version with initial L4 capabilities, with the company planning mass production in the second half of 2026.
In overseas markets, the company delivered over 18,000 units in the first half, up more than 200% year-over-year. Furthermore, in July, the company's first locally produced XPENG X9 model in Indonesia was officially delivered, marking the formal launch of the company's global localized production strategy. The company plans to complete the full launch of Kunpeng super electric and European versions in global overseas markets by 2H 2026, significantly expanding global addressable market size.
**Risk Factors:** New vehicle and autonomous driving demand falling short of expectations, new vehicle deliveries and Volkswagen cooperation not meeting expectations.