The company released its 2025 annual report. The company recorded total operating revenue of RMB165.054bn, YoY +13.69%. Total profit reached RMB7.518bn, YoY +50.86%. Net profit attributable to shareholders of the parent company was RMB5.957bn, YoY +0.18%. In 25Q4, the company maintained a high gross margin of 28.7%. Performance was affected by expenses and asset impairments. In 25Q4, the company’s expense ratio was 24.4%, QoQ +3.4pcts. Asset impairment of RMB1.26bn was recognized in Q4, QoQ +RMB1.21bn, leading to pressure on 25Q4 performance. Net profit attributable to shareholders of the parent company was RMB0.644bn, YoY -66.2%, QoQ -72.8%. The AITO M6 started pre-sales on March 23 and is expected to reach a broader and younger customer base. We remain optimistic that under the company’s blockbuster product strategy, the product matrix will continue to expand, while sales volume and product mix will keep improving.

Event

The company released its 2025 annual report. The company recorded total operating revenue of RMB165.054bn, YoY +13.69%. Total profit reached RMB7.518bn, YoY +50.86%. Net profit attributable to shareholders of the parent company was RMB5.957bn, YoY +0.18%.

Quick Take

25Q4 earnings breakdown:

1) Revenue: In Q4 the company recorded revenue of RMB53.409bn, YoY +47.6%, QoQ +17.9%, mainly benefiting from increased deliveries after the facelift launch of the M7;

2) Gross margin: Q4 gross margin reached 28.7%, flat YoY and QoQ -1.3pcts. The change was mainly due to sales mix changes driven by a higher proportion of M7;

3) Net profit attributable to shareholders of the parent company: Net profit attributable to shareholders of the parent company was RMB0.644bn, YoY -66.2%, QoQ -72.8%, mainly affected by a significant QoQ increase in period expenses and asset i mpairments;

4) Expenses: In Q4, selling/administrative/R&D/financing expense ratios were 15.05%/4.04%/5.31%/ -0.03%, respectively. The total expense ratio was 24.4%, QoQ +3.4pcts. Among them, administrative expense and R&D expense ratios increased significantly QoQ, mainly due to staff expansion. By the end of 2025, the company had 9,676 technical personnel, an increase of 2,559 YoY;

5) Sales volume: In Q4, AITO brand sales reached 154k vehicles, QoQ +30k. By model, 25Q4 sales of AITO M5/7/8/9 were 6k/74.4k/48k/25.4k vehicles, respectively.

6) Impairment: Asset impairment of RMB1.26bn was recognized in Q4, QoQ +RMB1.21bn, based on the accounting prudence principle to impair assets that can no longer continuously generate value.

Emphasis on shareholder returns, with dividend pay-out and share buyback plans announced simultaneously:

1) Dividend: The company plans to distribute a cash dividend of RMB0.8 per share (tax included) to all shareholders, totaling RMB1.39bn (tax included). Full-year cash dividends reached RMB19.0bn, with a payout ratio of 31.9%;

2) Share buyback plan: The company plans to use its own funds to buy back shares worth RMB1-2bn for cancellation, with a buyback price not exceeding RMB150/share.

Sales volume and product mix continue to optimize under a strong product cycle:

1) New model performance: AITO M6 started pre-sales on March 23, with pre-orders exceeding 60,000 within 24 hours, and is expected to reach more younger customer segments;

2) Sales target: While maintaining a leading position in the high-end market, the company aims to pursue scale growth and achieve its second 1mn-unit sales target within the next two years; in the long term, overseas business is targeted to account for 30% of the company’s total sales.

3) Product strategy: The company will adhere to a blockbuster product strategy, focus on the core SUV segment, and expand toward sport-oriented, crossover, and multifunctional segments; based on the Cube technology platform, it supports expansion across multiple powertrains, product categories, and sizes, while advancing the development of new categories in line with market timing.

Investment recommendation: We estimate the company will achieve revenue of RMB228.15bn/RMB265.37bn/RMB318.22bn in 2026–2028, and net profit attributable to shareholders of the parent company of RMB8.15bn/RMB10.85bn/RMB14.44bn, corresponding toPE multiples of 18.52x/13.91x/10.45x. We maintain “Buy” rating.

Risks: Risk of raw material price fluctuations, risk of intensified industry competition, and risk of demand falling short of expectations.

Risks:

1) Fluctuation in raw material prices. Lithium carbonate costs account for a high proportion of the company's NEV battery costs. If the lithium carbonate price sees slight decrease or rise again in the future, the company's material costs will fall at a pace slower than expected.

2) Intensified industry competition. At present, the launch of NEVs has been significantly accelerated by OEMs, with certain competitors lowering product prices. If market competition significantly intensifies, the company's sales growth will be affected and the revenue will be lower than expected.

3) Weaker-than-expected demand. The NEVs are a main business growth driver for the company. If the NEV penetration rate fails short of expectations, or the overall demand for passenger vehicles declines, the company's operating revenue will be lower than expected.