There has been much talk recently about the soft demand seen in the EV segment, but you wouldn’t know that if you are an XPeng (NYSE:XPEV) investor.
After already delivering a record 15,310 EVs in September, in October, the Chinese EV maker clocked another record as monthly deliveries reached 20,002 units, amounting to an impressive month-over-month increase of 31% while showing a very strong 292% year-over-year uptick and thereby reaching its quarterly peak delivery target two months ahead of schedule.
That bodes well for when the company announces its Q3 results and outlook next week (Wednesday, Nov 15th), says Deutsche Bank analyst Edison Yu, who expects the company will close out 2023 on a high note.
“We expect generally in-line results with cautious optimism margins may beat for the first time in awhile and more importantly, anticipate a robust 4Q23 outlook after Oct deliveries surprised to the upside,” Yu said. “In light of China’s EV market remaining ultra-competitive for the foreseeable future, XPeng’s strategy continues to resonate well with us, making the stock our Top Pick in the group.”
For Q3, anticipating a “better mix and tailwind from lower battery costs,” Yu sees margins improving sequentially with the possibility of an upside surprise. By the numbers, the analyst is calling for RMB 8.8 billion in revenue ($1.21 billion), 0.8% gross margin (-1.9% vehicle margin representing a sequential improvement of 670 bps), and adjusted EPS of -2.87 (-$0.39). For comparison purposes, consensus has RMB 8.6 billion ($1.18 billion), 3.3%, and -3.88 (-$0.53), respectively.
Looking to Q4, Yu expects the company will guide for over 65,000 deliveries, up from the prior 55,000 forecasts, suggesting almost 147,000 units for the full year. That amounts to a 21% YoY improvement and should result in more than RMB 32 billion ($4.39 billion) of revenue.
On the gross margin front, as vehicle margin returns to low-mid SD (single-digit) due to higher volume and a favorable mix, Yu expects a “major improvement” in Q4.
Finally, looking ahead to next year, depending on the timing/contribution of three new models, Yu thinks sales can reach 250,000 in 2024.
All told, Yu maintained a Buy rating on XPEV shares, although to reflect “weaker sentiment on the broader group,” the analyst slightly lowered his price target from $21 to $20, implying shares will rise by 37% in the year ahead. (To watch Yu’s track record, click here)
On Wall Street, 3 other analysts join Yu in the bull camp and with the addition of 1 Hold and 2 Sells, the stock claims a Moderate Buy consensus rating. Going by the $17.65 average target, the shares will stay rangebound for the foreseeable future. (See XPeng stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
