Dongwu Securities: Issue a Buy rating for Seres

Dongwu Securities Co., Ltd. Huang Xili, Meng Lu recently conducted research on Seres and released a research report titled “2025 Annual Report Review: Performance Below Expectations, M6 Launch Imminent,” assigning Seres a “Buy” rating.

Seres (601127)

Key Investment Points

Company announcement: In 2025, the company’s operating revenue was 165.05 billion yuan, year-on-year +13.7%, and its net profit attributable to shareholders was 5.96 billion yuan, year-on-year +0.2%. After non-recurring items, net profit attributable to shareholders was 5.14 billion yuan, year-on-year -7.8%. In 2025Q4, the company’s single-quarter revenue was 54.52 billion yuan; year-on-year and quarter-on-quarter changes were +41%/+13%, respectively. Net profit attributable to shareholders was 0.64 billion yuan; year-on-year and quarter-on-quarter changes were -66%/-73%, respectively. After non-recurring items, net profit attributable to shareholders was 0.37 billion yuan; year-on-year and quarter-on-quarter changes were -80%/-84%, respectively. Performance was below our expectations.

Sales and marketing expense spending for the new car lineup was higher; gross margin performance was strong. 1）At the revenue level: the new M7 accounts for the main incremental growth. In the Q4 single quarter, the AITO brand delivered 154,000 units; year-on-year and quarter-on-quarter changes were +60%/+24%, respectively. The increment mainly came from the new M7. The 2025 model M7 was officially launched at the end of September. The first full delivery quarter performed well, with 74,000 units delivered; year-on-year and quarter-on-quarter changes were +77%/+360%, respectively. The sales share of M8 and M9 decreased by 29pct quarter-on-quarter. A decline in the sales share of higher-priced models led to a quarter-on-quarter drop in the company’s ASP. 2）On gross margin: the gross margin level of the high-end brand remains high. Q4 gross margin was 28.7%; year-on-year and quarter-on-quarter changes were 0/-1.3pct, mainly also affected by vehicle mix. 3）On expense ratios: in Q4, the company’s selling, general & administrative and R&D expense ratios combined were 24.4%; year-on-year and quarter-on-quarter changes were +4/+3pct, respectively. Of which, in 25Q4 single quarter, the selling expense ratio was 15%. The increase in the expense ratio quarter-on-quarter was mainly due to: ① increased employee incentives this period; ② higher expenses for establishing new overseas trading companies and building overseas teams; ③ continued investment in the fields of complete vehicles and other innovative businesses, leading to higher R&D spending. 4）Impairment impact: in Q4, the company accrued 1.26 billion yuan in asset impairment losses for the quarter, accounting for 80% of the total annual asset impairment losses of 1.58 billion yuan. 5）Net profit: higher employee incentives & impairment impact weighed on Q4 performance. In 25Q4, the company achieved net profit attributable to shareholders of 0.64 billion yuan; year-on-year and quarter-on-quarter changes were -66%/-73%, respectively.

Earnings Forecasts and Investment Rating: Due to intensifying industry competition, we downgrade our net profit attributable to shareholders expectations for 2026/2027 to 7.6/9.4 billion yuan (from 12.1/16.0 billion yuan). We forecast the company’s net profit attributable to shareholders for 2028 to be 12.0 billion yuan, corresponding to PE of 22/18/14x. The AITO brand targets the high-end market; brand momentum continues to move upward. M6 has started pre-sales and is set to be launched soon. In addition, the company’s innovative businesses continue to expand. We maintain the company’s “Buy” rating.

Risk Warning: Intensifying industry competition, and the push of new-platform vehicle models not meeting expectations, etc.

The latest detailed earnings forecast is as follows:

Over the past 90 days, there have been 8 institutional rating agencies for this stock: 7 rated it as “Buy,” and 1 rated it as “Increase Holdings”; within the past 90 days, the average institutional target price was 169.87.

The above content is compiled by Securities Star based on publicly available information and generated by an AI algorithm (filing number: 310104345710301240019). It does not constitute investment advice.