CICC has initiated a net profit forecast of RMB 6.15 billion for LEAPMOTOR (09863) in 2027. The current share price implies a price-to-earnings ratio of 14.3 times for 2026 and 9.0 times for 2027. The firm has maintained its 'Outperform Industry' rating and set a target price of HK$60.80, corresponding to 20 times and 12 times the 2026 and 2027 P/E ratios respectively, indicating a potential upside of 36.5% from the current level.

CICC's primary views are outlined as follows:

**2025 Performance Meets Market Expectations** The company reported its 2025 results: full-year revenue increased by 101.3% year-on-year to RMB 647.32 billion, while net profit attributable to shareholders turned from a loss to a profit of RMB 538 million. Specifically, fourth-quarter 2025 revenue was RMB 210.32 billion, up 56.3% year-on-year and 8.1% quarter-on-quarter. Net profit attributable to shareholders was RMB 355 million, showing significant improvement both year-on-year and quarter-on-quarter. The 2025 performance was in line with market expectations.

**Strong Sales Drive High Revenue Growth; Overseas Business Becomes New Growth Driver** Key drivers for the full-year revenue growth include: 1) The company's sales volume in 2025 reached 596,555 units, a 103.1% year-on-year increase, achieving a doubling of sales for two consecutive years. 2) Contributions from overseas and diversified revenue streams, with 67,052 units exported in 2025, boosting related carbon credit trading income. Looking ahead, with the upcoming launches of models from the A platform (A10) and D platform (D19 and D99), the company is gradually forming a complete product matrix covering sedans, SUVs, and MPVs. It is believed that with the successive introduction of new models and continuous upgrades in product configurations, LEAPMOTOR's product cycle is strengthening, providing solid support for future sales growth.

**Gross Margin Reaches Record High; Operating Cash Flow Surges Significantly** The gross margin for 2025 was 14.5%, an increase of 6.1 percentage points year-on-year. The fourth-quarter 2025 gross margin was 15.0%, up 0.5 percentage points quarter-on-quarter, both setting new historical highs. This was primarily due to continued cost management efforts, optimization of the product mix, technological upgrades, and increased overseas sales driving carbon credit trading revenue. The expense ratio for 2025 continued to decline, dropping 3.9 percentage points year-on-year to 15.3%, demonstrating scale effects. Operating cash flow for 2025 increased by 49% year-on-year to RMB 12.62 billion. The company achieved a full-year net profit of RMB 540 million, marking its first annual profit.

**Advancing Premiumization and Globalization Strategies; Ample Medium-to-Long-Term Growth Momentum** The company is actively advancing its product premiumization strategy, having launched the new flagship D platform. In terms of globalization, its overseas sales network covers nearly 900 outlets in approximately 40 international markets. The Spain CKD project is progressing steadily, with the B10 model expected to achieve localized production gradually in 2026. It is believed that with the launch of premium products and the ramp-up of global production capacity, LEAPMOTOR is poised to further expand its profit margins and market share while maintaining its leading position among new energy vehicle startups.

Risk warnings include slower-than-expected new model ramp-up, a decline in industry-wide sales, and profit recovery falling short of expectations.