20231110-招银国际-Mega_could_be_a_positive_catalyst_4页_822kb

Summary of Li Auto Inc. Equity Research Report

The report provides an update on Li Auto Inc. (LI US), a leading electric vehicle company in the China auto sector. Key points from the analysis include:

• Financial Performance: For the third quarter of 2023, Li Auto's revenue was slightly lower than projected due to heavier promotions, but operating and net profits were in line with expectations. The company's gross margin remained stable at 22%. The valuation was updated, with a cut in the 2024 earnings forecast due to increased R&D investments, resulting in a reduced net profit estimate for 2024 by RMB 3 billion.

• Potential Catalyst: The upcoming flagship model, the Mega, is seen as a positive driver for the stock price. Its controversial design may draw more attention and reduce product cannibalization with the existing Li L9 model.

• Valuation and Rating: The rating is maintained as "BUY" with an updated target price lowered to US$ 50.00 from US$ 55.00, based on a revised 2024 earnings estimate. Key risks include slower autonomous driving development, lower sales volumes, or sector de-risking.

• Financial Ratios (Selected): The stock price has shown strong growth, with current performance data highlighting increases in sales volume and margins. Analysts expect continued growth driven by economies of scale and innovation.

Overall, the report suggests potential upside despite cutbacks, emphasizing the importance of monitoring competition and new product launches.