Global Electrification And Smart Cities Will Expand EV Markets

Key Takeaways

• Rapid overseas expansion, diverse model launches, and digital process integration position Leapmotor for faster global growth, greater pricing power, and higher profitability than market expectations.
  
• Advanced R&D and early-mover advantages support structural cost reductions and market share gains, enabling long-term leadership in the global EV and smart mobility sectors.
  
• Overseas expansion is challenged by protectionism, rising costs, competitive pricing, ongoing losses, and heavy reliance on external funding, threatening profitability and shareholder returns.

Catalysts

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

• While analyst consensus sees the Stellantis joint venture and overseas channel expansion as a path to stronger international revenue, the speed and scale of Leapmotor's market entry-already boasting exports, rapid network establishment, and imminent localized manufacturing in Malaysia and Europe-points toward a far faster and broader global revenue acceleration than currently expected by most analysts, with potential to materially outpace global peers in market share gains and topline growth.
  
• Analyst consensus expects product launches in the B and C Series plus future D platform to boost sales, but with Leapmotor's rapid model rollout cadence, high-volume hits across diversified segments, and proven resonance with young and international EV buyers, there is a strong case for structurally higher delivery volumes and greater pricing power than assumed, offering significant upside for both revenue and net profit margins.
  
• Leapmotor's deep integration of digital sales, after-sales, and operational processes-already showing measurable efficiency gains and customer satisfaction-positions the company to leverage big data and AI-driven personalization, potentially enabling industry-leading customer retention rates and high-margin recurring revenue streams, which could drive sustained growth in earnings and margins.
  
• As global battery and smart driving technology costs plunge further and urban, tech-forward markets increasingly demand software-defined vehicles, Leapmotor's full-stack R&D investment and third-party recognition of its proprietary architectures suggest a path to outsize cost reductions and margin expansion well ahead of the industry, supporting a virtuous cycle of reinvestment and profitability.
  
• Supported by accelerating global government mandates for electrification and growing regulatory acceptance of autonomous/connected vehicles, Leapmotor's early-mover advantage in differentiated, globally adaptable EV platforms could enable it to capture a disproportionate share of the fast-growing EV and smart mobility markets, resulting in long-term outperformance in revenue, gross margin, and free cash flow.

Zhejiang Leapmotor Technology Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Zhejiang Leapmotor Technology compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Zhejiang Leapmotor Technology's revenue will grow by 89.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -8.8% today to 4.1% in 3 years time.
• The bullish analysts expect earnings to reach CN¥9.0 billion (and earnings per share of CN¥6.71) by about July 2028, up from CN¥-2.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.2x on those 2028 earnings, up from -26.4x today. This future PE is lower 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

• The company's aggressive overseas expansion strategy, particularly into the EU, may face headwinds due to tightening global protectionism, rising tariffs, and evolving regulatory barriers, making it difficult to achieve projected revenue growth and reducing the likelihood of strong net margins from international markets.
  
• Despite recent gross margin improvements, management repeatedly notes that current and near-future international sales focus on gaining market share over profitability, with low gross profit margins for exports and a stated expectation of underwhelming return on investment from overseas business in 2025 and 2026, which signals long-term earnings pressure.
  
• Leapmotor continues to report net losses and has only recently narrowed them, while emphasizing significant ongoing investments in R&D and global expansion; given the industry trend of persistent negative free cash flow and dependence on external financing, shareholder value could be threatened by future equity dilution or increased debt, dampening potential for EPS growth.
  
• The company acknowledges intense price competition and downward price pressure in both domestic and overseas EV markets, with product launches often accompanied by meaningful price reductions despite increased functionality, which may compress gross profit margins and limit net income over time.
  
• The need to rapidly scale up technology and service capabilities for new markets, coupled with frequent regulatory change, poses risks in lagging proprietary innovation and possible compliance failures, which could erode market share, bring about penalties, and have a negative impact on future revenue and profitability.

Valuation

• The assumed bullish price target for Zhejiang Leapmotor Technology is HK$89.84, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Zhejiang Leapmotor Technology's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be CN¥217.8 billion, earnings will come to CN¥9.0 billion, and it would be trading on a PE ratio of 17.2x, assuming you use a discount rate of 12.1%.
• Given the current share price of HK$61.15, the bullish analyst price target of HK$89.84 is 31.9% 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.