Key Points Summary
ZeroRun Automobile has achieved impressive results in the first half of the year, with 356,000 vehicles delivered, revenue of 27.29 billion yuan in Q2, and a net profit of 210 million yuan for the entire half-year. In July, it became the first new entrant in the domestic market to deliver over 100,000 vehicles per month. However, its market value is only 60.8 billion Hong Kong dollars, far below Zhu Jiangming's expected target of “at least 200 billion yuan,” and it also lags behind companies like NIO, Xpeng, and Li Auto, which have lower delivery volumes. The main issues are: ZeroRun lacks a “technology story” that would appeal to the capital market, has thin profit margins per vehicle, insufficient R&D investment, and faces a shrinking valuation environment in the Hong Kong stock market, resulting in a significant gap between sales volume and market value.
1. Dual Growth in Sales and Profit, but Still Needing to Reach the Annual Target
ZeroRun delivered 356,000 vehicles in the first half of the year (a 60.8% increase year-on-year), with sales exceeding 100,000 vehicles in July alone. Its overseas business has also seen a surge, with 96,000 vehicles exported (a 372.6% increase year-on-year), exceeding the total exports for the entire last year. It now has over 1,000 overseas outlets and aims to export 200,000 vehicles this year. Profit-wise, the gross margin in Q2 rose to 12.6%, and the net profit for the first half of the year was 600 million yuan, after a loss of 390 million yuan in the first quarter, marking its first consecutive half-year of profitability.
However, it has only achieved 34% of its annual target of 1.05 million vehicles, meaning it needs to sell an average of 115,000 vehicles per month for the remaining six months (with just over 100,000 vehicles sold in July), which is a considerable challenge. Additionally, sales expenses in Q2 (1.31 billion yuan) exceeded R&D expenses (1.28 billion yuan) for the first time, indicating that ZeroRun is increasing its investment in advertising and distribution channels to maintain sales growth.
2. Unable to Boost Market Value? Lack of a “Technological Story”
The capital market prefers companies with compelling “technology stories,” but ZeroRun’s focus on cost-effectiveness and self-developed components (65%) does not offer much in terms of unique technologies in popular areas like autonomous driving and chips:
- Xpeng has its own chips and large models for Robotaxi;
- Li Auto has its Mahao large model and chips;
- NIO has its own chip (funded with over 2.2 billion yuan);
- ZeroRun adopts a wait-and-see approach to autonomous driving, lacking the technologies that would excite investors.
As a result, institutions view ZeroRun as a traditional manufacturing company, and its valuation can only grow linearly, without the potential for a significant leap like that of tech companies.
3. High Sales but Low Profit Margins
Although ZeroRun has the highest sales volume, the average price per vehicle is only 110,000 yuan (compared to NIO’s over 200,000 yuan and Li Auto’s 165,000 yuan). The gross margin in Q2 was 12.6% (NIO’s was 19% in Q1, and Xpeng’s was 12%), and the net profit margin was only 2% (on revenue of 27.2 billion yuan). Although its market value of 60 billion yuan may not seem high, the price-earnings ratio (market value ÷ annual net profit) is over 70 times, which is quite high for a manufacturing company. The market believes that despite high sales, ZeroRun does not earn enough per vehicle to support a higher market value.
4. Inadequate R&D Investment
ZeroRun’s R&D expenses in Q2 accounted for only 4.7% of its revenue, and its annual R&D investment has been around 200-300 million yuan, compared to NIO and Li Auto’s 1 billion yuan or more for high-end car companies. While lower R&D costs allow ZeroRun to offer lower-priced vehicles, it also results in weaker technical capabilities, making it difficult to catch up with leading players in autonomous driving and chip technology.
5. Hong Kong Stock Market Hinders Growth
ZeroRun is listed on the Hong Kong Stock Market, where valuations for new entrants have been declining. The U.S. stock market offers liquidity premiums for tech companies, but Hong Kong does not, so even with leading sales, ZeroRun cannot benefit from this advantage. Zhu Jiangming claims that each of ZeroRun’s four business segments could be worth 50-100 billion yuan, but the market disagrees. To increase its market value, ZeroRun needs to improve its profit margins and average vehicle price and provide a compelling “technology story” that convinces investors.
In Conclusion: ZeroRun is a “top student” in the manufacturing sector but not a “potential stock” in the tech industry. The capital market’s valuation logic is straightforward: if you earn money through manufacturing, you will be valued as a manufacturing company; if you want to be valued as a tech company, you need to demonstrate the capabilities of a tech company. This is a common challenge for both Zhu Jiangming and Lei Jun—it’s not that ZeroRun is not good enough, but the market has a different perception of its potential.