<Results Analysis> 4Q23/FY23 results were weak but in line, with cautious tone set for FY24F
- 4Q23/FY23A were in-line with expectations, down -23% yoy due to weak margins despite +38% volume growth
- FY24F guided to see lower volume growth and margin uncertainties; We anticipate consensus estimates to see more negative revisions
- Focus on launch of next-generation vehicle in 2H25 and continued cost reductions. Maintain HOLD with lower TP of US$215 (previous US$240) on continued uncertainties on volume/margins and limited near-term catalysts.
4Q23/FY23 results in-line, with FY23 seeing 23% yoy contraction in earnings. Tesla achieved record FY23A deliveries at 1.8m vehicles (+38% yoy) which met management’s 2023 target, with 4Q23 deliveries coming in at an all-time-high of 484k (+11% qoq, +20% yoy). FY23A revenue was also in-line at US$97bn (+19% yoy), with 4Q23 revenue at US$25bn (+8% qoq, +3% yoy). Despite firm growth in vehicle sales and revenue, FY23 non-GAAP EPS came in at US$3.12 (-23% yoy) on the back of weak margins, with automotive gross margins at 17.1% down from 26.2% the previous year. On a quarterly basis, 4Q23 saw non-GAAP EPS at US$0.71 in-line with consensus, and automotive gross margins at 16.6% (+0.9% qoq, -7.1% yoy). Weak margins in FY23 were largely on the back of Tesla’s aggressive price cuts, with FY23 automotive ASP coming in at US$43k (versus US$51k in the previous year, down -15% yoy) and 4Q23 ASP at US$42.5k (+0% qoq). Furthermore, with increases in operating expenses as a result of AI/R&D and Cybertruck production ramp up, this has resulted in lower profitability, with Tesla’s FY23A profit per vehicle halving to US$4.6k (versus US$10.7k in the previous year, down -57%). All in all, Tesla’s FY23 results saw a -23% decline in earnings, which were as anticipated and largely in-line with consensus estimates of FY23 and 4Q23 EPS estimate of US$3.12 and US$0.72 respectively, based on latest Visiblealpha estimates. On a positive note, Tesla has seen (i) lower cost per vehicle at US$36k (versus US$37.7k previous year) on the back of declining raw material prices, and (ii) positive progress in the profitability of its energy storage business with FY23A gross margins of 19% (up from 7% in FY22), which contributes around ~5% of Tesla’s overall revenue.
Cautious tone set for FY24F on slower volume growth and margin uncertainty; Watch for volume execution and sustained q-o-q recovery in margins. Tesla has guided for slower volume growth going into FY24F as it focuses on the launch of its next-generation vehicle in 2H25, with plans for a new Gigafactory in Mexico to continue to be on pause amid the uncertain macroeconomic outlook. Separately, output ramp up in Cybertruck is also guided to be longer than other models given its manufacturing complexity, with Cybertruck sales constrained by supply. Management continues to focus on cost reduction, potentially via renegotiation with existing suppliers for better pricing. Tesla has also touched on other areas, such as increasing spending on raising consumer awareness towards EVs, higher 4680 battery production (in 3Q24), Elon Musk’s desire for more control in the company (with mentions of dual class shares), ongoing investments into AI and more. Post earnings, consensus have revised their FY24E and FY25E delivery shipments to 2.1m (+16% yoy) and 2.3m (+15% yoy) respectively (down 4% for both years), with FY24E/25E consensus non-GAAP EPS estimates revised down by 4% each to US$3.62/US$5.08 which translates into a 2-year EPS CAGR growth of 28%. In our view, we see the possibility for more negative revisions by brokers to come as the market digests Tesla’s FY24F cautious outlook, noting that FY24F delivery volumes could see further downside risks to its latest estimates of 2.1m, given Tesla’s latest reported annualised run rate of 2m cars per annum and focus on its next-generation vehicle launch. We continue to watch for volume shipments, and sustained q-o-q recovery in margins. Maintain HOLD with lower TP of US$215 (versus previous US$240) on continued uncertainty on volume/margins and limited near-term catalysts. Our TP is based on forward PE ratio of 58x (previous 76x), pegged to -0.8 SD of its historical PE ratio (previous -0.4SD).