LI AUTO shares soared in Hong Kong after upbeat earnings showed the electric-vehicle maker is showing promise in China’s hyper-competitive market.
The stock rose 25 per cent on Tuesday (Feb 27), the most since March 2022. The move takes its rally this month to more than 60 per cent, far outstripping all other members of an index tracking Chinese technology companies listed in Hong Kong.
The automaker reported net income of 11.8 billion yuan (S$2.2 billion) last year, making it the first of the three major Chinese EV startups – ahead of Xpeng and Nio – to post an annual profit after vehicle shipments more than doubled.
The milestone comes after China spearheaded the global shift towards EVs and last year became the world’s top car exporter.
Analysts from Jefferies Financial Group to Citigroup applauded Li Auto’s better-than-expected profitability per vehicle in the December quarter, a metric investors use to assess the impact from the sector’s intensifying price war.
Fourth-quarter vehicle gross profit margin of 22.7 per cent was up from the prior period and above the consensus estimate of 20 to 21 per cent, according to Citigroup.
The company reiterated its goal of selling 800,000 vehicles this year and expects the margin to stay above 20 per cent despite ongoing price competition.
The rally has pushed by Li Auto’s shares into overbought territory, a condition technical analysts use to show moves may be excessive. The 14-day relative strength index is 84, surpassing the 70 level often seen as indicating that the stock is overbought.
Investors’ focus will now turn to Li Auto’s product launch on Friday, with the company set to unveil a new minivan called MEGA and refreshed L9, L8 and L7 SUVs. The event may have a “transformational impact” on the market’s perception of Li Auto’s addressable market and competitive position, Morgan Stanley analysts including Tim Hsiao wrote in a Feb 23 note.
“Li Auto’s beefed-up product lineup could keep powering its consensus-beating profit growth in 2024,” Bloomberg Intelligence analyst Joanna Chen wrote in a note.
“Greater volume and better profitability should enable Li to boost its sales network and technology investments more aggressively than peers Nio and Xpeng this year.”
Other Chinese EV stocks also gained on Tuesday. Sector leader BYD and peer XPeng rose more than 5 per cent, while Nio climbed 4.2 per cent. BLOOMBERG
