Leapmotor Technology posts wider 26Q1 loss, UBS keeps 12-month Neutral rating

Overview

This report is UBS's company research update on Zhejiang Leapmotor Technology. The report focuses on Leapmotor Technology's 26Q1 results, gross margin changes, risks to its full-year profit target, and valuation and sector risks. The company is positioned as a Chinese smart EV maker, primarily serving the mid-to-high-end segment of China's new energy vehicle market in the RMB 150,000 to RMB 300,000 price band, and is expanding overseas sales through its partnership with Stellantis.

Core views

UBS's core view is cautious and neutral: Leapmotor Technology's 26Q1 sales rose 26% year on year, but net loss widened to RMB 390 million, indicating that scale growth has not yet translated into profit improvement. Vehicle gross margin fell to around 7%, mainly due to a sequential decline in sales and a weaker product mix. Management expects raw material cost inflation to hit margins starting in 26Q2 and flagged downside risk to the full-year RMB 5 billion net profit target.

Analysis framework

The report combines a company fundamentals and valuation framework, focusing on sales growth, net loss, vehicle gross margin, product mix, raw material costs, and full-year profit target risk, and values Leapmotor Technology using a P/S multiple.

Methodology notes

• Valuation methodsP/S multiple

  Price-to-sales multiple

  UBS values Leapmotor Technology using a P/S multiple, which is suitable for a growth-oriented EV company whose revenue base is still expanding while earnings remain volatile.

• rating_definition12-month rating

  12-month rating framework

  The Neutral rating in the report reflects UBS's view of investment returns over the next 12 months, and the price target has a 12-month investment horizon.

• risk_frameworkUpside and downside risk assessment

  Upside and downside risk assessment

  The report separately lists factors such as demand, competition, policy, overseas execution, subsidy changes, and industry capacity that could affect the investment view.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Zhejiang Leapmotor Technology / 9863.HK

  Primary covered asset

  Strengths

  A Chinese smart EV company focused on the RMB 150,000 to RMB 300,000 price band; expanding overseas sales through Stellantis; and also discussing supplying core EV components to third-party OEMs.

  Weaknesses

  26Q1 net loss widened, vehicle gross margin fell to around 7%, and a weaker product mix and cost pressure weighed on profitability.

  Comparison

  Compared with the broader NEV sector, the company benefits from sales growth and overseas expansion opportunities, but it also faces intense price competition, heavy new model launches, and subsidy roll-off risks.

  Risks

  Demand weaker than expected, more intense industry competition, price cuts, new model shocks, subsidy declines, rising raw material costs, and overseas execution below expectations.

• China NEV sector

  Industry background

  Strengths

  Policy support, consumer electrification penetration, overseas expansion, and smart-upgrade trends may create growth opportunities.

  Weaknesses

  Intense industry competition, price wars, and capacity expansion may compress automakers' margins.

  Comparison

  Leapmotor Technology's profitability needs to be viewed together with industry competition intensity and the policy environment.

  Risks

  Changes in NEV policy, a significant reduction in subsidies, new entrants causing market share loss, and potential overcapacity in the power battery industry.

Key data

• 12-month ratingNeutralListed on the report cover as 12-month rating Neutral.
• 12-month target priceHK$50.00The 12-month price target given by UBS.
• Current priceHK$45.22Price date: 15 May 2026.
• Implied upsideapproximately 10.6%A rough calculation based on the HK$50.00 target price and HK$45.22 current price, excluding dividends.
• 26Q1 net lossRMB 390 millionRoughly tripled year on year.
• 26Q1 sales change+26% y/ySales increased year on year, but profitability remained under significant pressure.
• 26Q1 vehicle gross marginaround 7%Affected by a sequential decline in sales and a weaker product mix.
• Management profit target riskDownside risk to the RMB 5 billion net profit targetManagement warned that raw material cost inflation may affect margins starting from 26Q2.
• Revenue mixVehicle and parts sales accounted for 99%As of H124, services revenue accounted for less than 1%.

Impact & implications

The investment implication for Leapmotor Technology is that the market needs to balance sales growth against earnings quality in the short term. If demand, overseas expansion, and cost control improve, valuation may be supported; but if price competition, a weaker product mix, rising raw material costs, or subsidy reductions intensify, margins and the full-year profit target may remain under pressure.

Risks

• Demand for Leapmotor models is weaker than expected.
• Industry competition is more intense than expected, including price cuts and more EV model launches.
• Government subsidies for NEV and EV manufacturers decline.
• Raw material cost inflation starts affecting margins from 26Q2.
• Changes in NEV policy may affect industry demand and profitability.
• New entrants may cause the company's market share to decline.
• Potential overcapacity in the NEV battery industry.
• Overseas market execution and scaling progress fall short of expectations.

What to watch

• The actual impact of raw material costs on vehicle gross margin starting from 26Q2.
• Whether Leapmotor Technology can reverse the decline in vehicle gross margin.
• Whether the full-year RMB 5 billion net profit target faces further cuts.
• Whether demand remains strong in the RMB 150,000 to RMB 300,000 vehicle price band.
• The pace of overseas sales expansion through the Stellantis partnership.
• Progress in supplying core EV components to third-party OEMs.
• Changes in China NEV subsidies, policy support, and price competition.