Deutsche Bank upgraded Li Auto (NASDAQ:LI) to a Buy rating (From Hold) but cut their 12-month price target to $41.00 (From $45.00) after the stocks 32% decline in late November places company shares in a compelling position.
Despite the broader challenges faced by China ADRs and global EV stocks, Deutsche Bank sees a compelling set-up for Li Auto in the coming quarters. The upgrade is based on a robust product pipeline and an attractive valuation for a top-tier EV player.
Li Auto's management team has consistently proven to be best-in-class, being the first original equipment manufacturer (OEM) to embrace EREV powertrain technology. The company has also achieved or beaten ambitious targets on volume and costs, distinguishing itself among the emerging EV players. Deutsche Bank acknowledges the soft first quarter but anticipates a rebound in volume and margin starting in the second quarter, driven by the launch of new and refreshed models.
A key highlight in Li Auto's upcoming product cycle is the launch of the L6 mid-large SUV (EREV) in April. Priced competitively at mid-200k RMB, Deutsche Bank believes the L6 will target a younger family audience, particularly in Tier 3-5 cities. With a target of 30,000 monthly deliveries, the L6 is expected to compete directly against popular NEV models like the AITO M7 and traditional internal combustion engine models like Audi Q5 and BMW X3.
Li Auto's existing L-series models, including the L7, L8, and L9, will receive refreshed facelift versions in March before the launch of the L6. Deutsche Bank forecasts these models to sell about 400,000 units in 2024, compared to 376,000 in the previous year.
On the battery electric vehicle (BEV) side, Li Auto's MEGA MPV will begin deliveries in March, followed by three new models in the second half of 2024. Despite a delayed launch, Deutsche Bank estimates a 15,000-20,000 order backlog for the MEGA. Analysts expect a normalized volume of around 2,000 units per month, with high average selling prices (ASPs) and distinctive styling. Three other BEVs are expected to contribute approximately 45,000-50,000 units to Li Auto's total deliveries for the year.
In all, Deutsche Bank analysts forecast a total of 625,000 deliveries for Li Auto in 2024, reflecting a significant 66% YoY increase.
Shares of LI are up 8.64% in pre-market trading Tuesday morning.