Daiwa commented in a report that Li Auto (LI.US) 's 1Q results were disappointing, and expected margin pressure to increase in 2Q, although higher L6 deliveries and a new pricing strategy for L7/8/9 could drive a quarterly rebound in sales. The broker further forecasted the launch of a battery-electric model in 1H25 to help the group regain market share in new energy vehicles.
According to Daiwa, Li Auto is unlikely to achieve its sales target for 2024 and short-term margin pressure will continue. The broker downgraded its rating from Buy to Outperform due to the low delivery outlook for 2024 and dropped its gross margin forecast by 2.1-2.3% due to intensifying competition and the increasing proportion of mass-market models within sales. The broker also reduced its revenue forecast for 2024-26 by 14-25%, as well as chopping its EPS forecast for the period by 31-52%.
Furthermore, Daiwa lowered its valuation basis on Li Auto to a combined P/E ratio of 20x for this year and next year, and accordingly slashed its target price by nearly half from US$49 to US$25.
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