9863: Electronics Self Reliance Will Support Future Upside Despite 2026 Sector Sales Caution

Analysts have lifted their price target on Zhejiang Leapmotor Technology to HK$61, up from HK$59, citing slightly higher fair value estimates and updated assumptions on revenue growth, discount rates and future P/E, despite recent sector wide caution on 2026 sales for Chinese automakers.

Analyst Commentary

Analysts are framing the latest sector data as a mixed backdrop for Zhejiang Leapmotor Technology, with the higher HK$61 price target sitting against more cautious views on 2026 sales for Chinese automakers overall.

Bullish Takeaways

Bullish analysts see the HK$61 target as reflecting slightly higher fair value estimates, suggesting that current valuation assumptions still leave room for execution on the existing growth plan.
The updated target incorporates revised assumptions on revenue growth, discount rates and future P/E, which indicates that, even under refreshed modelling, Zhejiang Leapmotor can still justify a premium relative to some sector peers.
The explicit HK$61 target stands out in a sector where some names are tied to more cautious stances, which signals confidence that Zhejiang Leapmotor can manage through sector wide uncertainty better than some competitors.
Within the context of year to date sector sales that are indicated to be at least 15% lower, the maintained positive stance on Zhejiang Leapmotor suggests analysts view company specific execution as a key support for its valuation.

Bearish Takeaways

Bearish analysts point to year to date sales for Chinese automakers tracking at least 15% lower and the view that 2026 sales estimates require downward revisions, which introduces risk to revenue assumptions for Zhejiang Leapmotor.
The comment that a forecast of a 3% year over year sector sales decline may be too optimistic highlights the chance that current models could still be using aggressive demand assumptions for 2026.
Most companies reported year over year declines in February, partly due to the timing of Chinese New Year, and this adds short term execution risk for automakers that rely heavily on volume to support their P/E multiples.
With caution across the sector on 2026 sales, there is a risk that any further weakening in delivery data could pressure fair value estimates and lead to renewed scrutiny of Zhejiang Leapmotor's growth and margin assumptions.

What's in the News

Board meeting scheduled for March 16, 2026, to approve the Group's final results for the year ended December 31, 2025, and to consider a recommendation for a final dividend, if any (Key Developments).

Valuation Changes

Fair Value: HK$70.72 to HK$72.96, a slight upward reset in the modelled equity value.
Discount Rate: 10.95% to 10.95%, a marginal technical tweak rather than a meaningful shift in risk assumptions.
Revenue Growth: CN¥-based growth assumption adjusted from 34.22% to 34.77%, pointing to a modestly higher topline outlook within the model.
Net Profit Margin: CN¥ margin assumption moved from 4.56% to 4.31%, indicating a small reduction in expected profitability.
Future P/E: forward multiple lifted from 20.33x to 21.71x, suggesting the shares are modelled with a slightly higher earnings multiple.

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Key Takeaways

Expanding global presence and strategic partnerships, combined with localized production, are broadening market reach and diversifying revenue sources.
Emphasis on affordable, tech-driven vehicles and vertical integration is boosting margins, differentiation, and sustainable growth.
Heavy international expansion, rising competition, and reliance on subsidies and partnerships create significant risks for profitability, margin stability, and long-term cash flow sustainability.

Catalysts

About Zhejiang Leapmotor Technology

Engages in the research and development, production, and sale of new energy vehicles in Mainland China and internationally.What are the underlying business or industry changes driving this perspective?

Leapmotor is positioned to benefit from rapid expansion in global electric vehicle adoption, with strong execution in both domestic and overseas markets demonstrated by rapid sales growth (221,664 units in H1, ~156% YoY growth), ongoing model launches (B-/C-/D-series), and aggressive international ramp-up through local production in Malaysia and Europe; this supports rising revenue and a larger addressable market.
The company's focus on affordable, intelligently connected vehicles and continued R&D investment in proprietary smart driving systems (urban NOA, in-house AR-HUD, and full-stack autonomous solutions) enhances product differentiation, catering to growing consumer demand for high-tech mobility and supporting both top-line growth and margin expansion.
Scaling production, deeper vertical integration, and optimized cost management (now showing 14%+ GP margin, targeting 15%) are driving sustained improvements in gross profit margin and operational leverage, creating conditions for higher earnings and robust net margin recovery.
International expansion (leveraging Stellantis and FAW partnerships) in multiple regions with localized production and distribution (over 600 overseas outlets, production in Malaysia/Europe starting 2026, leadership in overseas start-up exports) increases volume potential and diversifies revenue streams, while regulatory tailwinds (carbon credits, EV incentives) drive additional non-auto and auto revenue.
Intensification of channel coverage (now in 286 Chinese cities, outlet operation efficiency up 27%) and successful entrance into less-penetrated urban and rural markets in China, paired with best-in-class service and fast product refresh cycle, support continued domestic growth momentum and customer retention, positively impacting revenue and future profit sustainability.

Zhejiang Leapmotor Technology Earnings and Revenue Growth

Zhejiang Leapmotor Technology Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Zhejiang Leapmotor Technology's revenue will grow by 34.8% annually over the next 3 years.
Analysts assume that profit margins will increase from 0.8% today to 4.3% in 3 years time.
Analysts expect earnings to reach CN¥6.8 billion (and earnings per share of CN¥4.74) by about April 2029, up from CN¥538.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CN¥10.0 billion in earnings, and the most bearish expecting CN¥5.0 billion.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 21.7x on those 2029 earnings, down from 130.9x today. This future PE is greater than the current PE for the HK Auto industry at 17.6x.
Analysts expect the number of shares outstanding to grow by 6.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.95%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Rapid international expansion-especially into Europe and Southeast Asia-is relying heavily on partnerships (e.g., Stellantis) and joint ventures, carrying execution risk and potential for lower net margins due to revenue-sharing and complex integration, which may impact long-term earnings and margin consistency.
The company's short
to medium-term strategy prioritizes aggressive sales growth and brand building over overseas profitability, with Leapmotor International reinvesting initial profit margins into marketing and expansion rather than sustaining earnings, raising the risk of delayed or unpredictable earnings improvement from non-China markets.
The competitive landscape in China's EV market is intensifying, with new, well-funded entrants (like Xiaomi and Li Auto) launching blockbuster models and ongoing price wars, risking margin compression and necessitating continual product innovation and pricing discipline to avoid revenue and gross margin erosion.
The company's recent improvements in GP margin and profitability benefited partially from ancillary sources like carbon credit trading and government subsidies, which may be subject to policy change or non-recurring effects, threatening the sustainability of earnings and stable cash flows in future periods.
As Leapmotor pushes into lower-tier Chinese cities and international markets, its reliance on offering high-spec, value-for-money vehicles will be challenged by possible input cost volatility (e.g., batteries, raw materials) and the rapid pace of technological change-potentially forcing higher R&D and CapEx just to maintain product competitiveness, thus impacting long-term free cash flow and return on investment.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of HK$72.96 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$101.03, and the most bearish reporting a price target of just HK$50.3.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be CN¥158.4 billion, earnings will come to CN¥6.8 billion, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 11.0%.
Given the current share price of HK$56.95, the analyst price target of HK$72.96 is 21.9% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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