On Monday, Citi has increased its price target on shares of Li Auto (NASDAQ:LI) to $57.30, up from the previous target of $52.90. The firm has also affirmed its Buy rating on the stock. The adjustment follows the analyst's revised sales estimates for the years 2024-2026, which have been increased from 700,000/790,000/850,000 units to 730,000/860,000/950,000 units.
The change is attributed to Li Auto's robust product lineup and the management's positive sales outlook, which anticipates monthly sales to reach 70,000 units in June 2024 and 100,000 units by the end of 2024.
The analyst also reported a slight increase in the net profit forecast for the same period, adjusting the figures upward by 2-5% to RMB 16.0 billion, RMB 20.4 billion, and RMB 26.0 billion, respectively. The projected earnings before interest and taxes (EBIT) margin for 2024 is set conservatively at 6.9%, with a return on invested capital (ROIC) of 21% and an asset turnover of 1.4 times.
The forecast for Li Auto's free cash flow in 2024 stands at RMB 45.0 billion. The price target adjustment is based on applying a 1.0x price-earnings-growth (PEG) ratio to the estimated 27% net profit compound annual growth rate (CAGR) from 2024 to 2026.
The new American Depositary Receipt (ADR)/H share target price translates to 27 times the estimated 2024 price-to-earnings ratio (PER) and 21 times the estimated 2025 PER under generally accepted accounting principles (GAAP).
The analyst's outlook underscores a strong confidence in Li Auto's financial performance and market position, maintaining the Buy rating with a High Risk categorization. The revised price target reflects an optimistic view of the company's future growth potential, supported by anticipated sales increases and solid financial forecasts.
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