Analysts expect Leapmotor's sales to start improving gradually in the second quarter, meeting the company's guidance of selling more than 30,000 units in the quarter.
Chinese electric vehicle startup Leapmotor surged on the Hong Kong stock market today, recovering almost all of its losses since going public.
Leapmotor rose as much as about 20 percent today to HK$39.2 a share, close to its highest price of HK$41 on the day it went public last September 29.
As of press time, that gain has eased back to about 16 percent, with a cumulative gain of about 27 percent so far this month.
There are no immediate factors driving the company's share price surge, though some recent developments are worth noting.
On March 21, Leapmotor released its annual results for 2022, showing it achieved revenue of RMB 12.38 billion ($1.8 billion) last year, up 295.4 percent year-on-year.
The company reported revenue of RMB 3.015 billion in the fourth quarter, up 116.16 percent year-on-year.
Leapmotor's deliveries in 2022 were 111,168 units, up 154 percent year-on-year. Of the total, 23,566 units were delivered in the fourth quarter, up 37.9 percent year-on-year.
The company's management said at the time that Leapmotor was targeting 200,000 unit sales in 2023, nearly doubling from 2022.
The effect of Leapmotor's price cut in March was affected by the price war in the Chinese auto industry, but the new orders will still start to pull full-year sales back up in the second quarter, said CITIC Securities analyst Yin Xinchi's team in a March 23 research note.
While sales are climbing, Leapmotor can keep its gross losses manageable and gradually narrow to near break-even through a series of cost-cutting measures and scale effects, the team said.
Leapmotor's gross margin in 2022 was -15.4 percent, better than the -44.3 percent in 2021. It had a gross margin of -6.9 percent in the fourth quarter.
The large improvement in both Leapmotor's revenue and gross margin in 2022 was mainly due to the growth in sales of the C series models and the obvious scale effect, the team said, adding that the company's average selling price of its products has increased with the product mix adjustment.
With the improvement of the sales network, overseas market expansion, and the application of new R&D results, Leapmotor's sales and profits are expected to further improve, Yin's team said.
The team expects Leapmotor's sales to start improving gradually in the second quarter, meeting the company's guidance of more than 30,000 units sold in the second quarter and revenue growth of more than 50 percent year-on-year.
In the third quarter, deliveries of the more profitable C01 extended-range electric vehicle (EREV) will begin, which is expected to further boost the company's sales and drive gross profit closer to break-even, the team said.
Leapmotor delivered 3,198 units in February, up 180.77 percent from 1,139 units in January and down 6.9 percent from 3,435 units in the same month last year, according to data released by the company on March 1.
Along with the delivery figures, Leapmotor announced the official launch of the C11 EREV, a rare shift back to internal combustion engines among Chinese electric vehicle startups.
($1 = RMB 6.8835)