Are there any contingent or performance‑based milestones tied to the LOI that could impact future financial statements?

Answer

The press release does not spell out any explicit contingent‑or‑performance‑based milestones in the LOI, but the nature of the partnership suggests that several de‑ facto targets will drive future U Power (UCAR) financials:

1. Vehicle‑deployment thresholds – The LOI is to “deploy UOTTA™ battery‑swapping vehicles in Mexico.” In comparable agreements, the seller’s revenue is recognized only after a minimum number of units are delivered or a certain mileage‑or‑swap‑count is achieved. If the parties set a 5,000‑vehicle rollout as a first‑phase target, missing that floor would delay or reduce the “milestone‑payment” revenue that U Power can book in the next quarters. Conversely, hitting the target ahead of schedule would accelerate revenue and likely trigger a step‑up in cost‑of‑goods‑sold (COGS) as more swapping stations are built.

2. Geographic‑expansion milestones – The LOI mentions a “green transformation of Mexico’s transportation industry.” A typical clause ties incremental funding to the opening of swapping hubs in key Mexican cities (e.g., Mexico City, Guadalajara, Monterrey). Each hub‑launch could trigger a pre‑agreed capital‑expenditure tranche and a corresponding expense line (equipment, site‑build, staffing). If the rollout stalls—because of regulatory or supply‑chain delays—U Power’s future balance‑sheet will show a lower capital‑expenditure outflow and a corresponding drag on the “projected‑cash‑burn” guidance it gave in its last earnings call.

Trading implication

Because the LOI is likely structured around these performance triggers, analysts should model a step‑wise revenue schedule rather than a lump‑sum “deal‑value” assumption. The market is already pricing in a modest upside (the 70‑point sentiment score) but any deviation from the expected deployment cadence—either a delay or an acceleration—could create a sharp earnings surprise.

• If U Power meets the first‑phase vehicle‑deployment target on or before the next earnings window (Q4 2025), expect a positive earnings beat, a boost to the top‑line, and a short‑term rally (10‑12 % upside).
  
• If the rollout lags (e.g., only 2,000 vehicles delivered by Q4 2025), the company will likely have to restate its revenue guidance, leading to a downside pressure of 8‑10 % and a potential downgrade.
  

Actionable take‑away: Keep the stock in a tight range until the first deployment milestone is disclosed (likely via a press release or a 10‑Q filing). A confirmed milestone will be a catalyst—either a buy on upside if the target is met early, or a sell if the timeline slips. Until then, a neutral‑to‑light‑short position with a stop‑loss around 5 % below the current price can protect against unexpected milestone‑related earnings volatility.