GTHT has released a research report commenting on the recent signing of an investment and cooperation agreement between China FAW Group and LEAPMOTOR (09863). The institution views this collaboration as a significant milestone that deepens the strategic synergy between the two parties and injects sustained momentum for long-term development. It maintains an "Overweight" rating and keeps its net profit attributable to parent company forecasts for 2025/26/27 unchanged at RMB 1.3/4.8/7.6 billion. Using the PS valuation method and referencing comparable companies, GTHT assigns LEAPMOTOR a 2026 valuation of 0.8x PS, corresponding to a target price of HK$68.73 (converted at an exchange rate of HK$1 = RMB 0.8991). Key points from GTHT are as follows:
On December 28, 2025, China FAW Group and LEAPMOTOR held a signing ceremony in Hangzhou. FAW Equity Investment Co., Ltd., a wholly-owned subsidiary of FAW, and FAW Qixin New Power Technology Co., Ltd. signed an investment agreement and a cooperation agreement with LEAPMOTOR, respectively. According to the agreements, FAW Equity will become a strategic shareholder of LEAPMOTOR by subscribing to a domestic share issuance, promoting strategic coordination between the two major automotive groups through capital integration. Qixin New Power will further share resources with LEAPMOTOR to jointly advance the co-development and co-production of powertrains, including plug-in hybrid and range-extender technologies.
The overall shareholding structure of the company is expected to remain stable. According to the company's announcement, LEAPMOTOR has conditionally agreed to issue 74.8322 million domestic shares, and FAW Equity has conditionally agreed to subscribe for 74.8322 million domestic shares at a price of RMB 50.03 per share (equivalent to HK$55.29). This subscription price represents a premium compared to both LEAPMOTOR's closing price of HK$49.94 on December 24 and the average closing price of HK$49.23 over the five consecutive trading days preceding the agreement date. The 74.8322 million domestic shares represent approximately 25.74% of the total issued domestic shares and approximately 20.47% of the enlarged issued domestic shares; they also account for about 5.26% of the total issued shares and approximately 5% of the enlarged issued share capital. Upon completion of this subscription, the combined shareholding of Chairman Zhu and persons acting in concert will be 22.56%, while Stellantis will hold 18.99%, indicating the overall ownership structure remains stable.
The collaboration strengthens strategic synergy and leverages shared resource advantages. Cooperation between FAW and LEAPMOTOR began as early as 2019 with joint research on systems like the three-electric system. In 2020, FAW Bestune and LEAPMOTOR signed a technical agreement. In March 2025, FAW and LEAPMOTOR signed a Memorandum of Understanding on Strategic Cooperation, planning in-depth collaboration on the joint development of new energy passenger vehicles and component cooperation. Merely 20 days after this signing, the China FAW Electronic Bidding Procurement Platform indicated that LEAPMOTOR Technology was the successful bidder for the Hongqi brand G117 product whole-vehicle joint development and platform licensing fee technology procurement project.
According to the company announcement, the total gross proceeds from the domestic share subscription are expected to be approximately RMB 3.744 billion. Approximately 50% of these funds will be allocated to research and development investment; about 25% will be used to supplement working capital and for general corporate purposes; and the remaining 25% will be dedicated to expanding the sales and service network and enhancing brand awareness.
Risk warnings include potential underperformance in new energy vehicle sales and significant increases in raw material prices.
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