Stellantis Partnership And Global Expansion Will Open New EV Markets

Key Takeaways

• International expansion and strategic partnerships are broadening market access, diversifying revenue, and positioning Leapmotor for strong top-line growth and improved margins.
  
• Advances in vehicle technology and proprietary R&D are enhancing product competitiveness, supporting pricing power, and enabling sustainable growth amid rising global demand for feature-rich EVs.
  
• Expansion abroad and intense domestic competition, coupled with high R&D spend, threaten profitability and earnings stability amid regulatory, tariff, and funding uncertainties.

Catalysts

Engages in the research and development, production, and sale of new energy vehicles in Mainland China and internationally.

• Leapmotor's rapid international expansion-particularly through the Stellantis partnership enabling local manufacturing in Malaysia and soon in Europe-positions the company to access new markets rapidly and diversify revenue streams, offsetting saturation and price competition in China; this is expected to drive strong top-line revenue growth over time.
  
• The introduction of advanced new vehicle architectures (LEAP 3.5), which feature higher integration, smarter drive features, and 30–40% lower component costs, is increasing product competitiveness while improving gross margins and operating efficiencies, setting the stage for improved long-term earnings.
  
• Significant investments in proprietary R&D-especially for smart driving systems using advanced Qualcomm chips and LiDAR-are enhancing Leapmotor's technological differentiation, which should support better pricing power and sustainable revenue growth as consumer demand for AI-driven and feature-rich EVs accelerates.
  
• Leapmotor's ability to scale production and sales channels, with plans to exceed 1,000 stores and penetrate lower-tier cities in China while quickly ramping overseas sales infrastructure, is expanding its addressable market and should drive higher sales volumes and operating leverage, improving both revenues and eventual net margins.
  
• Participation in the global EV adoption wave, driven by more stringent emissions standards and the global push towards carbon neutrality, continues to expand Leapmotor's total addressable market and supports analysts' expectations of sustained revenue growth and margin improvement as battery costs fall and regulatory tailwinds persist.

Zhejiang Leapmotor Technology Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Zhejiang Leapmotor Technology's revenue will grow by 50.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -8.8% today to 4.6% in 3 years time.
• Analysts expect earnings to reach CN¥5.0 billion (and earnings per share of CN¥3.76) by about July 2028, up from CN¥-2.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CN¥7.0 billion in earnings, and the most bearish expecting CN¥3.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.8x on those 2028 earnings, up from -26.4x today. This future PE is greater than the current PE for the HK Auto industry at 18.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.11%, as per the Simply Wall St company report.

Zhejiang Leapmotor Technology Future Earnings Per Share Growth

Risks

• Overseas expansion efforts, particularly in Europe and other markets, face significant risks from rising tariffs, trade barriers, and evolving local regulations, which could limit revenue growth and increase compliance costs, pressuring net margins.
  
• The company's early-stage international business strategy prioritizes rapid market share gains over profitability, with low initial gross profit margins in export markets, potentially leading to sustained earnings volatility or net losses in the short-to-medium term.
  
• Aggressive price reductions on new and updated models (e.g., B10 and upgraded C series) to drive sales growth may compress gross profit margins, especially amid intensifying competition and consumer price sensitivity, impacting long-term profitability.
  
• High and increasing R&D expenses, required to keep up with smart driving and battery advancements, could strain operating cash flows and delay a clear path to sustainable profitability-particularly if external funding conditions tighten.
  
• Heavy reliance on domestic Chinese sales, though expanding to lower-tier cities, leaves the company exposed to domestic market saturation and intense price competition, which could constrain top-line revenue growth if international offsets do not materialize as projected.

Valuation

• The analysts have a consensus price target of HK$69.583 for Zhejiang Leapmotor Technology based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$89.84, and the most bearish reporting a price target of just HK$25.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥109.4 billion, earnings will come to CN¥5.0 billion, and it would be trading on a PE ratio of 23.8x, assuming you use a discount rate of 12.1%.
• Given the current share price of HK$61.15, the analyst price target of HK$69.58 is 12.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.