20220511-招银国际-2Q22_could_be_resilient_after_solid_1Q22_4页_913kb

Li Auto Inc. (LI US) Company Update Summary

Core Content

This report provides an equity research update on Li Auto Inc. (LI US), highlighting its financial performance, outlook, and market positioning in the context of the broader China auto sector. The analysis is based on the company's guidance, financial data, and CMB International Global Markets' (CMBIGM) estimates.

Main Points

• Earnings Performance (1Q22):
  Li Auto's 1Q22 earnings were solid, particularly in gross margin, which slightly widened by 0.2 percentage points compared to 4Q21. Despite a sequential decline in sales volume, net profit was in line with expectations, aided by other income of RMB 280mn.

• 2Q22 Outlook:

  • Sales guidance of 21,000–24,000 units for 2Q22E implies an average monthly volume of 8,500–10,000 units in May–June 2022.
  • Gross margin is projected at 19–20%, leading to a net loss of RMB 500–800mn.
  • The company is expected to turn profitable at net level in 2H22E, driven by higher sales volume and higher-margin L9 deliveries.

• Product Positioning:

  • Li Auto is fine-tuning new model launches for 2023, with clear building blocks such as EREV, 800V fast-charging, autonomous driving, smart cockpit, and E/E architecture.
  • The company is minimizing product cannibalization, emphasizing efficiency in its strategy.
  • The Li One model has demonstrated its product value creation capabilities.

• Financial Forecasts:

  • FY22E sales-volume forecast was cut by 25,000 units to 155,000 units due to production loss in 2Q22.
  • ASP projection was raised, leading to an 11% decline in FY22E revenue forecast.
  • CMBIGM maintains a BUY rating with a target price of US$48.00, based on a 6x P/S multiple.

• Key Risks:

  • Slower AD development, lower sales volume than expected, and sector de-rating could affect the rating and target price.

Financial Highlights

Earnings Summary (YE 31 Dec)

Key Ratios

Share Performance

• Market Cap: US$19,521 million
• Avg 3 mths t/o (US$ mn): 250 million
• 52w High/Low (US$): 37.45 / 15.98
• Total Issued Shares (mn): 2,066
• 1-mth return: -26.9%
• 3-mth return: -37.3%
• 6-mth return: -38.3%

Shareholding Structure

Analyst Ratings

• Rating: BUY (Maintain)
• Target Price: US$48.00
• Up/Downside: +154.0%
• Current Price: US$18.90

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months

Key Financial Summary

• Net cash from operating (RMB mn): Increased in FY21A and FY22E, with a slight decline in FY23E.
• Net cash from financing (RMB mn): Positive in FY20A and FY21A, with a significant drop in FY22E.
• Current ratio (x): Declined from 7.3 to 1.4, indicating potential liquidity concerns.
• Inventory turnover days: Increased from 28 to 28, suggesting inventory management remains stable.
• Payable turnover days: Decreased from 161 to 130, indicating improved efficiency in managing payables.

Conclusion

Li Auto Inc. remains a BUY based on its resilient profitability, clear product positioning, and strong long-term fundamentals. While short-term challenges such as supply chain constraints and production losses are noted, the company is expected to turn profitable in 2H22E. The lower battery capacity is expected to mitigate the impact of battery price hikes, and the higher-margin L9 model is anticipated to drive future growth.

The target price of US$48.00 is based on a 6x P/S multiple, reflecting confidence in its future performance and market potential. However, key risks include slower AD development, lower-than-expected sales, and sector-wide de-rating. Investors are advised to consult professional advisors and conduct independent evaluations.