<Earnings first take> Record 3Q23 non-GAAP net earnings boosted by strong vehicle deliveries and vehicle margins improvement
- Li Auto posted record level 3Q23 non-GAAP net earnings of c.Rmb3.5bn compared to net loss of Rmb1.24bn in 3Q22 and +27% qoq; above expectation by about 75%
- Vehicle sales revenue +272%/20% yoy/qoq to Rmb33.62bn, translating to ASP of Rmb320k, down 6%/1% yoy/qoq, respectively. Vehicle margins improved to 21.2% (+9.3ppt/0.2ppt on yoy/qoq)
- Li Auto expects 4Q23 vehicle delivery of 125-128k units (+170-176% yoy) and total revenue growth of 118-123% yoy to Rmb38.5-39bn
- Company taking actions to mitigate vehicle margin pressure from rising competition via better supply chain management, improvement in production efficiency and vehicle portfolio expansion
Solid 3Q23 performance beating expectation by c.75%. Key revenue and non-GAAP net earnings drivers were robust volume shipments (+296%/21% yoy/qoq), strong growth in vehicle revenue (+272%/20% yoy/qoq), vehicle margins expansion of 9.3ppt/0.2ppt yoy/qoq to 21.2% and declining OPEX-to-sales ratio to 15.3%, down from 35.4% in 3Q22. Hence, non-GAAP net profit hit record level of Rmb3.5bn vs net loss of Rmb1.24bn a year ago and +27% qoq. As a result, Li Auto generated operating cash inflow of Rmb14.5bn vs Rmb508m in 3Q22 and Rmb11.1bn in 2Q23. Free cash flow amounted to Rmb13.2bn compared to negative c.Rmb2bn free cash flow in 3Q22. As of end Sep-23, Li Auto had net cash of Rmb80bn.
4Q23 outlook hinges on vehicle margins as price discounting pressure rises. October strong vehicle deliveries crossed the 40k units, an important milestone for the company. Management estimate 4Q23 vehicle delivery of 125-128k units (+170-176% yoy) and total revenue growth of 118-123% yoy to Rmb38.5-39bn. However, we estimate a sequential decline in ASP by about 2-3ppt in 4Q23 as peers are offering higher discounts to drive sales and secure market share. Hence, vehicle margin could see some slight compression. The company will roll out its first BEV model “Li MEGA” in Dec-23 and start delivery in Feb-24. In the pipeline includes three BEV models to be launched in 2024. Li Auto will also expand its super charging network to support future BEV model launch programme. Over the medium-term, the management expect vehicle margin at around 20% level. The strong 3Q23 results should lend support to share price performance. We currently have BUY rating and reviewing our earnings assumptions post the strong 3Q23 results.
Li Auto quarterly financial performance