Stocks tend to react to earnings reports, whether the financials were positive or negative. But sometimes the quarterly statements induce only a shrug amongst investors. That seems to have been the case following the Q2 results of Li Auto (LI).
Mirroring investor sentiment, Deutsche Bank’s Edison Yu calls the Chinese EV maker’s results and guidance “mainly non-events,” although the stock’s slight drop into negative territory can probably be put down to a “lack of ambitious 4Q sales target and/or pull-forward of 2023 BEV launches.”
Q2 delivery numbers were already announced beforehand (17,575 units) and resulted in revenue increasing by 159% to 5.04 billion RMB, roughly in line with Yu’s 5.03 billion forecast and above consensus at 5.01 billion RMB. Adjusted EPS was a surprising (0.07) RMB, missing Yu’s and the Street’s respective 0.05 and 0.00 estimates. The loss, however, was more a reflection of increasing administrative and R&D expenses than an issue of vehicle profits.
For Q3, Li anticipates delivering between 25,000-26,000 units, “slightly below” Yu’s 26,250 forecast at the mid-point. “This reflects some degree of conservatism given semis supply chain issues in Malaysia,” the analyst says. Revenue is expected to be in the 6.98-7.25 billion RMB range. Yu’s forecast calls for revenue of ~7.6 billion.
Looking further ahead, in Q4, Yu expects an “uptick in deliveries, supported by a strong order book, enabling deliveries of at least 30k.”
With the current ability to produce 15,000 vehicles a month, Yu notes there is room to beat this estimate “should demand/supply sync together.”
Where the “maiden” BEV offerings (Whale and Shark) are concerned, 2023 remains the target. At least 2 new vehicles per year are expected to roll-out from the Beijing plant’s 20,000 a month production capacity.
“With competitors bringing forward launches,” Yu added, “We think there is a chance Li Auto will do the same but note it is in a slightly different position considering it does not have an existing BEV platform (only EREV).”
All in all, there’s no change to Yu’s rating, which stays a Hold, or price target, which remains at $32. There’s 10% upside from current levels. (To watch Yu’s track record, click here)
Yu, however, is currently the Street’s only LI Auto skeptic. The stock boasts a Strong Buy consensus rating, based on 6 Buys vs. 1 Hold. There’s robust upside projected too; at $45.50, the average price target suggests one-year gains of 57%. (See LI stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
