EREVs and BEVs drive EV sales in FY24F
- 3Q23 net profit was up 271% yoy to Rmb3.47bn; 9M23 net profit formed 88% of our previous FY23F due to higher-than-expected EV deliveries and VPM.
- We expect Li Auto’s EV deliveries of c.43k units in Nov-Dec 23F (40k units in Oct 23), increasing to c.50k units/month in 1Q24F and 560k units in FY24F.
- We reiterate our Add call, with a higher DCF-based TP of HK$272.60.
Strong 3Q23 results on EV deliveries’ c.300% yoy growth
Li Auto reported strong net profit growth in 3Q23, driven by c.300% yoy EV deliveries growth and c.9%-pt vehicle profit margin (VPM) expansion, as a result of: 1) strong consumer demand for extended-range electric vehicle (EREV) models, 2) increased production capacity, and 3) improved delivery efficiency. 3Q23 net profit (non-GAAP) reached a record high of Rmb3.47bn (+272% yoy, +23% qoq), with revenue rising 21% qoq (+271% yoy) to Rmb34.7bn and GPM increasing 0.2% pt qoq (9.4% pt yoy) to 22.0%.
EV delivery outlook remains strong for 4Q23F and FY24F
In 3Q23, Li Auto delivered 105k EVs (+296% yoy, +21% qoq) due to strong demand for its L7 and L9 models and increased production capacity. Supported by the launch of the new variant of the L9, expanding sales channels, and improving delivery efficiency, the company guided for 125k-128k deliveries in 4Q23F (above our estimate of 106k units), which would mean over 43k units in Nov-Dec 23F (on top of the 40k units in Oct 23), bringing total EV delivery in FY23F to 372k units (+179% yoy). We believe Li Auto would maintain its market leadership in China’s SUVs and NEVs priced above Rmb300k, thanks to its leading EREV technology. More importantly, we are optimistic about its battery electric vehicle (BEV) model Li MEGA, which will be launched in Dec 23F (Li Auto expects delivery in Feb 24F). We expect Li MEGA to drive stronger EV delivery of 560k units in FY24F (+51% yoy; previous forecast: 550k units) and 800k units in FY25F (+43% yoy), with its enriched EV portfolios (4 EREV and 3 BEV models) and further expansion in its production capacity (from 45k/month by end-FY23F to c.70k/month by end-FY24F).
Raise FY23-25F EPS on stronger EV sales and stable VPM outlook
We expect VPM to remain above 22% in 4Q23F and FY24F (21.2% in 3Q23 and 21% in 2Q22), despite rising competition in the premium price segment, as a result of higher economies of scale and price discipline. We raise our FY23F-25F EPS forecasts by 22- 25% to reflect stronger EV deliveries and stable VPM outlook.
Reiterate Add with a higher target price of HK$272.6
We reiterate our Add call on Li Auto, with a higher DCF-based TP of HK$272.6 (WACC: 14.4%, TGR: 3.0%), as we remain positive about its BEV launches, which would generate new revenue, and its market position in the premium SUV segment (Rmb400k and above) due to product differentiation (family car for the younger generation). Share price catalysts are successful Li MEGA launch, stable VPM outlook, and stable EV battery costs. Increased competition in the Rmb400k+ EV price segment (both BEV and EREV) and lower-than-expected VPM in its BEV models are potential downside risks.