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Shares of China’s hybrid electric-vehicle maker Li Auto (LI) have more than doubled in price since falling to a record low last October, and the company is emerging as the leader among China’s electric vehicle (EV) makers. Li Auto unexpectedly reported profits for the past two quarters as it keeps releasing new models and is making money while other Chinese EV makers flounder.
Many analysts remain bullish on the outlook for Li Auto. Citigroup projects that shares of Li Auto will rally another +88% this year, and Morgan Stanley raised its price target for the stock by more than +40% this month. Analysts have raised their 12-month target price for the company by about 10% over the past month alone. Li Auto has outperformed its peers by introducing a new model in each quarter since the middle of last year, which is a faster pace than competitors such as XPeng (XPEV) and Nio Inc (NIO).
Li Auto, which was founded in 2015, reported earlier this month that its revenue nearly doubled in Q1 to 18.8 billion yuan ($2.7 billion), up +96% from the same period a year ago. Also, the company’s deliveries in Q1 jumped +66% y/y to a record 52,584 units, and it projects deliveries of as many as 81,000 cars for the Q2 that ends June 30.
Unlike its rivals, Tesla (TSLA) and Nio Inc, Li Auto has been focusing on designing and manufacturing extended-range-electric cars, a type of vehicle that can use a gasoline engine to power up its electric motor for more range. The company also expects to introduce its first purely electric-powered vehicle later this year to complement its existing hybrid cars. Li Auto is moving ahead with manufacturing pure electric vehicles and plans to have a lineup of 11 models by 2025, including five high-voltage pure-electric cars, and is targeting 3,000 charging stations by then.
A price war among Chinese EV makers has squeezed profit margins for most of the automakers. Bloomberg Intelligence said that rising R&D and selling expenses still pose challenges to Li Auto breaking even on an operating profit level considering the company’s investment in autonomous driving technologies and fast-charging solutions. However, Morgan Stanley said Li Auto deserves more credit for its well-rounded strategy, with “two profitable quarters in a row, quality execution in model launches, and cost control, underpin a more favorable volume and margin outlook.”
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
