Li Auto maintains its price target with strong Q2 growth

Morgan Stanley reaffirmed its confidence in Li Auto Inc (NASDAQ:LI), maintaining an Overweight rating and a $29.00 price target on the company's shares. The electric vehicle manufacturer reported a significant 86% quarter-over-quarter increase in net income for the second quarter of 2024, reaching Rmb1.1 billion.

This performance exceeded market expectations, which anticipated a GAAP profit between Rmb500 million and Rmb1 billion.

Li Auto's Q2 revenue rose 24% quarter-over-quarter to Rmb31.7 billion, driven by a 35% increase in vehicle volume. Despite an 11% decline in average selling price (ASP), the company's vehicle gross profit margin (GPM) was stronger than expected, dropping slightly by 0.6 percentage points quarter-over-quarter to 18.7%, compared to Morgan Stanley's estimate of 18.0%.

The company's effective cost control measures were evident in its reduced expenses. Research and development (R&D) expenses decreased by 1% quarter-over-quarter to Rmb3 billion, reflecting the company's recent organizational restructuring.

Selling, general, and administrative (SG&A) expenses also saw a 6% quarter-over-quarter decrease to Rmb2.8 billion, even as Li Auto expanded its retail presence with 23 new stores in the quarter.

Investment income for Li Auto dipped 65% quarter-over-quarter to Rmb370 million. Looking ahead, the company provided guidance for the third quarter of 2024, projecting vehicle deliveries between 145,000 and 155,000 units, which represents a 34-43% quarter-over-quarter increase.

This forecast suggests an average monthly run-rate of 47,000 to 52,000 units for August and September, slightly below the 51,000 units delivered in July.

For the Q3, Li Auto anticipates revenue growth of 24-33% quarter-over-quarter, which would amount to Rmb39.4 billion to Rmb42.2 billion. This projection also implies a 7% erosion in ASP. The company's performance and future guidance are based on strong order intake for its L series models.

To meet investor expectations of 480,000 to 500,000 units for the full year of 2024, Li Auto will need to sustain a monthly delivery volume of approximately 50,000 units in the fourth quarter.

Li Auto, the Chinese electric vehicle maker, has reported noteworthy Q2 results. The company exceeded expectations with adjusted earnings per ADS of RMB1.42 ($0.20), surpassing analyst estimates of RMB1.33.

Revenue also saw a significant rise, growing 10.6% YoY to RMB31.7 billion ($4.4 billion), beating the projected RMB31.52 billion.

Li Auto's vehicle deliveries for Q2 reached 108,581, marking a 25.5% increase from the same period last year. Despite this, the vehicle margin dropped to 18.7% from 21.0% due to changes in product mix and pricing strategy.

Looking forward, Li Auto anticipates Q3 deliveries to be between 145,000 and 155,000 vehicles, indicating a YoY growth of 38.0% to 47.5%. The company also projects Q3 revenue to range from RMB39.4-42.2 billion, implying a YoY growth of 13.7% to 21.6%.

InvestingPro Insights

As Li Auto Inc (NASDAQ:LI) continues to navigate the dynamic electric vehicle market, real-time data and expert analysis become invaluable for investors. According to InvestingPro, Li Auto holds a market capitalization of $22.51 billion and has demonstrated a substantial revenue growth of 139.76% over the last twelve months as of Q1 2024. These figures underscore the company's rapid expansion in the competitive automobile industry.

InvestingPro Tips highlight Li Auto's strong financial position, noting that the company holds more cash than debt on its balance sheet, which is a positive sign for investors concerned about financial stability. Additionally, the company's valuation implies a robust free cash flow yield, suggesting that it is generating ample cash relative to its share price. These insights, coupled with the fact that two analysts have revised their earnings upwards for the upcoming period, paint a promising picture for Li Auto's financial health and growth prospects.

For those looking to delve deeper into the company's financial metrics and analyst predictions, InvestingPro offers additional tips, providing a more comprehensive understanding of Li Auto's market position. With a P/E ratio of 12.71 and a forward-looking PEG ratio of just 0.01, the company presents an interesting valuation to potential investors. To explore further, investors can access a wealth of additional InvestingPro Tips by visiting the dedicated page for Li Auto.

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