A friend asked: The gross profit margin of XPeng Motors in the first quarter was abnormal. It used to be around 1%, but this year, the gross profit margin in the first quarter rose to 12.9%. What happened?

Seeing such a question, I couldn't help but shake my head. Such friends are obviously not in the habit of reading the quarterly and annual reports of listed companies. The company's quarterly report has already explained it very clearly. You can see the text in the red box below:

Mainly because the company's service and other income in the first quarter was RMB 1 billion, which was RMB 520 million in the same period last year. This extra RMB 480 million is the main reason for the significant increase in gross profit and gross profit margin in this quarter. This income comes from the technical research and development service revenue related to the strategic cooperation on platform software with Volkswagen Group.

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We can see in the company's quarterly report published on the Hong Kong Stock Exchange that the income column in the financial report is divided into "Automobile Sales" and "Service and Other Sales". In the "Service and Other Sales", it was a little more than 1 billion on March 31, 2024, and a little more than 5 billion on March 31, 2023.

In summary, the gross profit margin of XPeng Motors in the first quarter of 2024 increased significantly to 12.9%, mainly due to three factors:

1. The company's strategic cooperation with Volkswagen Group, which obtained high gross profit service income through platform and software technology cooperation, significantly improved the overall gross profit margin.

2. The sales of XPeng's X9 model in the first quarter were good. The XPeng X9 model is a high-end model, and the delivery of high gross profit margin models has driven the improvement of the product structure, increased the average price per car, and also had a positive impact on the gross profit margin.

3. The company did a good job in cost control in the first quarter, and the cost of car manufacturing decreased.Despite this, Xiaopeng Motors is still in the red. The company's future operations are still a long and arduous journey. In the past, I mentioned in an article that "the role of financial reports in investment is not as great as previously imagined." As a result, some fans have gone to the other extreme, thinking that there is no use in looking at financial reports at all.

Of course, looking at financial statements is meaningful for reference, but its reference value is limited and can only interpret a limited and partial problem in investment. Never think that reading financial statements is of no use at all.

For example, Kuaishou's first quarter financial report shows that its revenue and profits have achieved significant growth, with e-commerce transaction volume increasing by 28.2% year-on-year, reaching 288.1 billion yuan! Some friends may wonder: How did it achieve such good profits in the current economic environment?

For such questions, we can only look for some answers from the company's first quarter financial report. There is a lot of text in the company's first quarter report explaining the reasons for the performance improvement in the quarter:

The quarterly report shows the following reasons:

1. User growth and increased active users

The average daily active users of the Kuaishou app increased by 5.2% year-on-year to 394 million, and the monthly active users increased by 6.6% year-on-year to 697 million, with the total user usage time increasing by 8.6% year-on-year. This indicates that users' stickiness and activity on the platform continue to improve.

2. Growth in online marketing business: Online marketing service revenue increased by 27.4% year-on-year, reaching 16.7 billion yuan, accounting for 56.6% of total revenue.3 Overseas Business Growth: Kuaishou has achieved growth in daily active users and user engagement time in overseas markets, especially in the Brazilian region, indicating that its internationalization strategy has been effective.

Although the statements in the financial report may not be completely reliable, they do provide us with some data for investment reference, which is better than making baseless guesses. To truly understand a company, in addition to the financial report, we still have a lot of homework to do. For example, product experience, market research, on-site visits, and so on.