Macquarie starts ZEEKR coverage with Outperform rating

Macquarie initiated coverage on ZEEKR Intelligent Technology, a premium electric vehicle (EV) manufacturer, assigning an Outperform rating and setting a price target of USD33.00. The firm is optimistic about ZEEKR's prospects in expanding its market share within the premium battery electric vehicle (BEV) segment. Macquarie's analysis forecasts a significant growth trajectory for ZEEKR, with expectations for the company's sales volumes to surge at a compound annual growth rate (CAGR) of 47% through to the fiscal year 2026, potentially reaching 373,000 units.

The current business model of ZEEKR, which involves outsourcing EV production, is seen as advantageous in the short term. Macquarie notes that while this strategy may limit profits due to the fees involved, it allows ZEEKR to benefit immediately without the financial burdens of establishing and maintaining its own production facilities. However, the firm also points out that in the long term, owning production facilities could yield greater economic benefits due to scale.

The Outperform rating reflects Macquarie's confidence in ZEEKR's potential to overcome challenges related to its complex corporate structure and the current low liquidity of its shares. According to Macquarie, the market has excessively penalized ZEEKR's stock for these factors. The firm believes that the stock's current valuation does not fully account for the company's growth potential in the premium BEV market.

ZEEKR's strategic position in the EV industry and its ambitious growth targets are central to Macquarie's positive outlook. The company's focus on the premium BEV market is expected to drive its expansion and increase its local market share.

Macquarie's coverage initiation and the accompanying price target highlight a positive view on ZEEKR's business trajectory and its ability to navigate the complexities of the EV market.

ZEEKR Intelligent Technology has reported significant financial results and projections. The company's second-quarter financial results for 2024 revealed a substantial increase in total revenue, reaching 20 billion RMB, marking a 58% rise from the same period last year and a 36% increase from the previous quarter.

The gross profit margin (GPM) exceeded expectations, landing at 17.2%, primarily due to higher battery and component sales GPM. The company expects the GPM for its battery business to stabilize between 10% and 12% in 2024.

Despite these achievements, ZEEKR noted a non-GAAP net loss of 1.2 billion RMB, which was 36% greater than the estimated loss.

ZEEKR Intelligent Technology's recent market performance aligns with Macquarie's optimistic outlook. According to InvestingPro data, the company has shown strong returns over the last week (41.57%) and month (62.7%), indicating growing investor confidence. This surge in stock price correlates with Macquarie's Outperform rating and USD33 price target.

InvestingPro Tips highlight that ZEEKR is a prominent player in the Automobiles industry, supporting Macquarie's view on its potential to expand market share in the premium BEV segment. The company's high price volatility, as noted by InvestingPro, reflects the dynamic nature of the EV market and investor reactions to growth prospects.

However, it's important to note that ZEEKR is not currently profitable, with a negative P/E ratio of -5.09 for the last twelve months as of Q2 2024. This aligns with Macquarie's observation about the company's current business model potentially limiting profits due to outsourcing production.