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Investing.com-- Li Auto Inc (HK:2015) (NASDAQ:LI) shares rose from a four-month low in Hong Kong trade on Friday, even as the electric vehicle maker clocked disappointing second-quarter earnings and was slapped with a slew of rating cuts.
Li Auto’s Hong Kong shares rose 4.5% to HK$92.10, compared to a 0.6% rise in the Hang Seng index.
The company on Thursday reported weaker-than-expected second-quarter earnings, with earnings per share at 1.37 yuan, lower than expectations of 1.81 yuan.
The company also forecast underwhelming third-quarter earnings, with vehicle deliveries expected to fall between 37.8% and 41.1% year-on-year, to 90,000 and 95,000 vehicles.
But the company’s margins on its vehicle sales improved to 19.4% in Q2 from 18.7% last year, while its gross margin also improved. The margin improvements were welcomed, especially given that Li is embroiled in a bitter EV price war in China, the world’s biggest EV market.
BofA downgraded the stock to Neutral from Buy and cut its price objective to HK$101 from HK$121, citing the disappointing earnings and outlook.
BofA’s downgrade was the latest rating cut on Li over the past week, with Macquarie and Morgan Stanley also downgrading the stock.
BofA noted that Li was “very profitable” in the family use SUV segment, but was now facing more competition in the sector from new entrants including Xiaomi’s YU7, AITO’s M8/M7 and Onvo’s L90.
“Li may consider stepping into other segments like sedans or be more aggressive in oversea markets to resume its fast growth path, as China’s EV market growth may slow down soon due to its high base,” BofA analysts said.
The brokerage expects Li’s i6 to be a popular product, although the EV is likely to cannibalize sales of Li’s L6.
But BofA expects Li’s sales momentum to pick up when it launches a new generation of its L series next year.