China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Xpeng reported soft 4Q22 results, with top line of RMB 5.14bn, missing our estimate/cons. by (5.6%)/(9.7%); GPM of 8.7%, missing our estimate/cons. by (1.6ppt)/(3.4ppt), primarily due to increased sales promotions. </li>
<li>We maintain SELL, because 1) price war and intensified competition in 2023 are still key challenges facing its existing and new models; </li>
<li>2) margin pressure ahead amid the price war, while its cost reduction initiatives starting from 2H23 take time to verify effect.</li>
</ul>


Xpeng reported soft 4Q22 results, with top line of RMB 5.14bn, missing our estimate/cons. by (5.6%)/(9.7%); GPM of 8.7%, missing our estimate/cons. by (1.6ppt)/(3.4ppt), primarily due to increased sales promotions. 
We maintain SELL, because 1) price war and intensified competition in 2023 are still key challenges facing its existing and new models; 
2) margin pressure ahead amid the price war, while its cost reduction initiatives starting from 2H23 take time to verify effect.


[XPeng (XPEV US) Earnings Review]: Facing Price War and Fiercer Competition in 2023

Thematic (Sector/Industry)

<ul>
<li>Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. </li>
<li>Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;</li>
<li>Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso</li>
</ul>


Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. 
Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;
Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso


[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

China Specialist, Auto and Industrial Specialist

Victoria Li

<ul>
<li>25% reduction on hardware cost of car production in one year would be remarkable if achieved</li>
<li>Integrating two sales systems into one is a positive move, but not good enough in our view.</li>
<li>Mr. He taking direct resposibility of styling design division is a sign that the company acknowledges that it is a key improvement area for estabilishing brand image</li>
</ul>


25% reduction on hardware cost of car production in one year would be remarkable if achieved
Integrating two sales systems into one is a positive move, but not good enough in our view.
Mr. He taking direct resposibility of styling design division is a sign that the company acknowledges that it is a key improvement area for estabilishing brand image


Xpeng - Bold Intentions on Costs and Sales System Provide Some Silver Linings

<ul>
<li>9926HK：Akeso and China's 2nd largest pharmaceutical distributor signed collaborative R&amp;D agreement（+）</li>
<li>XPEV: Xpeng to officially unveils facelift of P7 on Friday (+)</li>
<li>981.HK/1347.HK/ACMR: Netherlands announces intention to ban only “state-of-the-art” ASML DUV tools (+/+/+)</li>
</ul>


9926HK：Akeso and China's 2nd largest pharmaceutical distributor signed collaborative R&amp;D agreement（+）
XPEV: Xpeng to officially unveils facelift of P7 on Friday (+)
981.HK/1347.HK/ACMR: Netherlands announces intention to ban only “state-of-the-art” ASML DUV tools (+/+/+)


China TMT Update(Mar.10): 9926hk/XPEV/981.HK/1347.HK/ACMR: Xpeng to Unveils Facelift of P7 (+)

<ul>
<li>XPEV: BYD cut prices for the older models of its Dynasty series (-)</li>
<li>700HK/SE/NTES: &lt;Undawn&gt; performance lower than expectation  (-/-/+)， hence we cut our estimation of annual gross billings of the game</li>
<li>9995HK: Daiichi Sangyo/Astra Zeneca's ADC blockbuster DS8201 (Enhertu) approve by NMPA... Impact to Remegen is material in the long run (-)</li>
</ul>


XPEV: BYD cut prices for the older models of its Dynasty series (-)
700HK/SE/NTES: &lt;Undawn&gt; performance lower than expectation  (-/-/+)， hence we cut our estimation of annual gross billings of the game
9995HK: Daiichi Sangyo/Astra Zeneca's ADC blockbuster DS8201 (Enhertu) approve by NMPA... Impact to Remegen is material in the long run (-)


China TMT Update(Feb.28):  700HK/SE/NTES/XPEV/9995HK - BYD Cut Prices for the Older Models

China

XPeng Inc. designs, produces, and distributes electric vehicles. The Company designs, develops, manufactures and markets smart smart electric vehicles, as well as finance, parts, and maintenance services. XPeng serves customers in China.

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XPeng (XPEV US)

[XPeng (XPEV US) Earnings Review]: Facing Price War and Fiercer Competition in 2023

We maintain SELL, because 1) price war and intensified competition in 2023; 2) margin pressure ahead amid the price war.

Blue Lotus Research Institute

[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

Chinese underconsumption is only half true. It only occurs in categories associated with development stages; Our TOP PICKS are Li Auto, Atour,...

Blue Lotus Research Institute

Xpeng - Bold Intentions on Costs and Sales System Provide Some Silver Linings

25% reduction on hardware cost of car production in one year would be remarkable if achieved. Integrating two sales systems into one is a positive...

Victoria Li

China TMT Update(Mar.10): 9926hk/XPEV/981.HK/1347.HK/ACMR: Xpeng to Unveils Facelift of P7 (+)

Akeso and China's 2nd largest pharmaceutical distributor signed collaborative R&D agreement ; Xpeng to officially unveils facelift of P7:...

Blue Lotus Research Institute

China TMT Update(Feb.28): 700HK/SE/NTES/XPEV/9995HK - BYD Cut Prices for the Older Models

9995HK: Daiichi Sangyo/Astra Zeneca's ADC blockbuster DS8201 (Enhertu) approve by NMPA; XPEV: BYD cut prices for the older models (-); 700HK/SE...

Blue Lotus Research Institute

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