"East Wind" Helps Lantu: Falls 13% on First Trading Day, What Is Hong Kong Stock Market Worried About?

Ask AI · How does Dongfeng Group’s “replace the cage and switch the bird” strategy help Laotou reassess its value?

Text | Ning Chengque

Source | Bowang Finance

Recently, Laotou Motors listed on the Hong Kong Stock Exchange as the “Number One High-End New Energy Vehicle Stock of Central State-Owned Enterprises,” but on its first trading day, it experienced a 13.2% drop, with the stock price falling to HKD 5.94 per share.

This decline contrasts with its impressive financial data in the prospectus—net profit of 1.02 billion yuan in 2025 and a gross margin of 20.9%—creating a subtle tension.

In the fiercely competitive new energy sector, the impression of the national team is often that they start early but arrive late. However, Laotou’s listing story was unexpected: no fundraising, no bloodletting, with a net profit of 1 billion yuan and a 20.9% gross margin, it achieved a lightning-fast listing on the Hong Kong Stock Exchange in just 120 days.

This seemingly abrupt capital operation is actually a grand “replace the cage and switch the bird” play by Dongfeng Group, and a key move for Chinese state-owned automakers to reshape their value coordinates in the new energy era.

Based on detailed data and public information, this article attempts to penetrate the mixed reputation of this event and explore a question: under the halo of the national team and the scrutiny of the capital market, is Laotou’s listing a model of SOE reform and value revaluation, or a bloodletting breakout hidden behind the data?

01

Laotou’s listing: the truth behind the “pole vault” performance

On paper, Laotou indeed delivered a performance that the capital market cannot ignore.

The prospectus shows that from 2023 to 2025, Laotou’s revenue soared from 12.75 billion yuan to 34.86 billion yuan, with a compound annual growth rate of 65.4%; sales volume increased from 50,300 units to 150,200 units, with a CAGR of 73%.

More importantly, in 2025, the company achieved a net profit of 1.02 billion yuan, ending a period of continuous losses, with a stable gross margin of 20.9%.

Compared to this, in 2025, Li Auto’s gross margin was 18.7%, NIO’s was 13.6%, and Tesla’s was 18%. Laotou’s gross margin outperformed most new entrants and even surpassed industry leader Tesla.

In 2025, when price wars raged fiercely, how did Laotou make money? The answer may lie in its unique “system red envelope + scale effect.”

First, platform-based cost reduction: Laotou’s ESSA native intelligent architecture supports multiple powertrain configurations on the same line, with hardware commonality rates as high as 90% for models like Dreamer and Zhi Guang. This significantly dilutes R&D and procurement costs.

Second, premiumization and high-end premiums: Laotou did not get caught in the red ocean of sub-200,000 yuan vehicles. The Dreamer, with an average price exceeding 389,000 yuan, is a major player in the high-end new energy MPV market, with one in three units sold being Laotou. This market dominance ensures its profit pool remains intact.

Third, efficiency revolution: Lu Fang repeatedly emphasizes “rejecting bloodletting operations.” While new entrants still rely on capital markets to subsidize each order, Laotou leverages Dongfeng’s 57 years of car-making experience, giving it natural advantages in supply chain management and manufacturing cost control.

However, behind these dazzling data lies a fragile profit structure.

According to the prospectus and multiple media reports, Laotou received approximately 1.08 billion yuan in government subsidies in 2025. This means that if non-recurring gains and losses are excluded, the company’s core net profit might still be negative.

Laotou explained that these subsidies are part of national inclusive policies and are not exclusive favors.

But the capital market is clearly wary—reliance on subsidies in the second half of the fiercely competitive new energy vehicle industry directly affects the company’s risk resistance and valuation logic.

This was evident in the first-day stock performance. Laotou opened at HKD 7.5, 30% below the implied privatization valuation of HKD 10.85, and ultimately closed down 13.2%, with a market cap around HKD 24 billion. The market expressed doubts about the quality of profits through the decline: when the tide recedes, who is left swimming naked?

02

“Number One” SOE’s capital operation: privatization + spin-off listing

Setting aside short-term stock price fluctuations, Laotou’s listing itself is a sophisticated state-owned asset capital operation. It was not a traditional IPO but an “introduction listing”—no new shares issued, no capital raised.

The operation involved: Dongfeng Group first privatized and delisted Laotou, distributing its holdings to original Dongfeng shareholders, then Laotou as an independent entity listed separately. This “replace the cage and switch the bird” move achieved multiple goals precisely.

On one hand, it addressed Dongfeng Group’s valuation dilemma as a traditional fuel vehicle giant. Dongfeng, a long-established Hong Kong-listed company with complex assets including joint ventures in traditional fuel vehicles and commercial vehicles, has long been undervalued by the market. Laotou, with growth rates over 70%, as a high-end new energy brand, was tied to the parent company and thus unable to be properly valued.

Through “privatization + spin-off listing,” Dongfeng achieved a revaluation of its state assets, while Laotou shed institutional constraints, gaining an independent financing platform and governance structure. The financial logic is clear: make the valuable assets more valuable, and let the less valuable ones exit.

On the other hand, it opened a new independent financing channel and an international brand window for Laotou. Although no funds were raised on the first day, becoming a public company will facilitate future share issuance and bond issuance.

As Laotou Chairman Lu Fang said, “Listing opens up financing channels and provides resources and imagination for future development.” Meanwhile, the Hong Kong platform, with its international reach, supports its “6655” overseas expansion strategy—entering 60 countries by 2030 with 500,000 overseas sales.

The underlying message is: the national team not only builds cars but also learns to sell stories in the capital market. But whether this story can be sustained depends ultimately on whether products can carve out a niche in fierce market competition.

03

High-end breakthrough: reliance on best-sellers and the hidden risks of “Huawei brand”

On the product side, Laotou has shown rare market sensitivity among the national team.

It has built a full-category matrix covering SUVs, MPVs, and sedans. Especially the Dreamer, with an average price exceeding 400,000 yuan, has secured a position in the high-end new energy MPV market, with rumors that “for every three high-end MPVs sold, one is Laotou Dreamer.”

But the flip side is a serious “dependence on best-sellers.” Data shows that out of the total 150,200 units sold in 2025, the Dreamer alone contributed 76,000 units, over 50%.

Models like FREE, Zhi Guang, and Zhi Yin contributed relatively less. This single-model dominance poses high risks in intensified market competition—if a stronger competitor or price war emerges in this segment, the company’s overall sales and revenue could face huge pressure.

2026 is defined as a product year for Laotou, with the launch of the “Three Kings and One Bomb” new product matrix: Tieshan Ultra, Tieshan X8, FE, and Everest. All are equipped with L3 hardware, but competition in the high-end market is already fierce. How to break through amid strong rivals like Wenjie M9 and Li Auto L9 will test the company’s marketing and service capabilities.

Here, the “Huawei brand” must be mentioned. In the era of intelligence, any automaker ignoring intelligent driving will be marginalized. Laotou’s strategy is to fully embrace Huawei.

From the Tieshan Ultra equipped with Huawei’s Qian Kun ADS 4.0 to the debut of the new generation Hongmeng cockpit in Tieshan X8, Laotou’s 2026 “Three Kings and One Bomb” lineup is almost all branded with Huawei.

This strategy enhances product intelligence but also harbors risks: in consumers’ minds, the core of smart driving has been deeply associated with Huawei, making Laotou more of a shell provider than a creator of the core technology.

Lu Fang responded that “Laotou and Huawei are not simply competitors but share a common original intention.” However, in the battle for user perception, this ambiguous positioning may limit brand premium.

Despite the dual challenges of dependence on best-sellers and brand positioning, Laotou’s arrival in the Hong Kong capital market remains timely.

In recent years, although Hong Kong stocks have attracted new forces like Li Auto, NIO, and Xpeng, their valuation logic remains unstable, and most are still unprofitable. Investors are tired of the “burn money for growth” model. At this moment, a target with both SOE credit and private enterprise growth speed fills a market gap.

Laotou’s listing brought three rare charts to the Hong Kong new energy sector: profitability visibility—achieved annual profit in 2025, proving a closed-loop business model; technological certainty—L3 autonomous driving completed over 110,000 km of real-road testing, with multiple models designed with L3 architecture ready for regulation approval; and overseas expansion prospects—entered over 40 countries and regions, leveraging the Hong Kong platform to go from China’s Laotou to the world’s Laotou.

Although the start was smooth, the “first stock” still faces challenges. Lu Fang emphasized in multiple occasions: “Companies cannot follow a bloodletting approach; they must generate self-sustaining cash flow.” Shao Mingfeng also reiterated the importance of “profitable sales and cash flow profits.”

But Laotou faces a “impossible trinity” of profitability.

To achieve scale, it often requires sacrificing gross margin or external blood transfusions. Laotou’s 2025 gross margin of 20.9% is industry-leading but achieved largely with government subsidies covering nearly all profits. As previously mentioned, subsidies in 2025 amounted to about 1.08 billion yuan, meaning the bottom line of net profit after excluding non-recurring gains and losses is far less glamorous.

In 2026, as the half-price purchase tax policy for new energy vehicles phases out, market competition will intensify. Laotou faces a dilemma: to maintain over 20% gross margin, it must keep current pricing, possibly slowing sales growth; or to push for higher sales, it may be forced into price wars, eroding margins.

Data from January–February 2026 shows Laotou delivered 18,900 units, up 18% year-on-year, a significant slowdown from 87% growth last year. This may be a signal: in the era of stock competition, the story of high growth is becoming harder to tell.

Listing is just a coming-of-age ceremony, not a golden ticket.

The market’s first-day drop expressed doubts about profit quality, reliance on subsidies, single-model risk, and ambiguous brand positioning with Huawei—all issues Laotou must face.

In this marathon of the automotive industry, Laotou has just completed the first refueling stop. Going forward, it needs to demonstrate sustainable self-sustaining ability—beyond surface gross margins, with real confidence to face the market after deducting non-recurring gains and losses.

Otherwise, this gong from Hong Kong will eventually be drowned out in the noise of industry reshuffle.