Goldman Sachs: Assigns a target price of HKD 94 to XPENG-W and upgrades the rating to "Buy"

According to the Zhitong Finance APP, Goldman Sachs has released a research report stating that it has upgraded XPeng (XPEV.US, 09868) to a buy rating, with a 12-month target price of $24/94 HKD, implying an upside potential of 29%/27%. The bank sees the results of a series of efforts (including organizational and supply chain restructuring, cost reduction through technology, and platformization) becoming evident, which have transformed the company's product and cost structure competitiveness, thereby providing higher visibility for sustainable sales growth and margin improvement in the future. Goldman Sachs' main points are as follows: Enhanced Model Competitiveness According to the bank's product comparison framework, XPeng has continuously improved in the release of new and updated models over the past two quarters, with its Mona M03 and P7+ ranking in the top three in their respective market segments (Charts 2 and 3). This continuous improvement has increased the bank's confidence in XPeng's sales, not only for existing models but also for the strong new models and updated models pipeline set to launch in the remainder of 2025, including the G7/P7 (third quarter) and its first extended-range electric vehicle (EREV) model (fourth quarter). Accelerated New Model Launches XPeng has also accelerated the frequency of new model releases. Compared to only launching 1-2 new models per year from 2019 to 2023, XPeng is now set to launch 10 new models + updated models each year to remain competitive in a fiercely competitive market environment. The bank believes this will keep the brand visible to consumers throughout the year, and new model activities will also provide opportunities to sell old models, thereby helping to extend the sales growth cycle of all models. Cost Reduction Effects Evident XPeng implemented a cost reduction plan at the beginning of 2023, aiming to reduce overall bill of materials (BOM) costs by 25% through technological innovation and optimization of sensor suites (including a 50% reduction in advanced driver assistance systems (ADAS) BOM costs). The P7+ (set to launch in the fourth quarter of 2024) is the first model to achieve total cost reduction, followed by the 2025 versions of the G6 and G9 (launching in March). For example, according to the bank's calculations, cost reductions have led to a 7 percentage point increase in gross margin and a 156% improvement in gross profit for the G6. Looking ahead, all new models from XPeng will benefit from the reduction in BOM costs, laying the foundation for further improvements in the company's gross margin and overall profitability