Preview of Financial Report | LI AUTO-W's Gross Margin Expected to Remain Above 20%, Optimistic about L7's Continued Growth.

LI AUTO-W L7 became the best-selling large SUV in the Chinese market within a month after delivery began in March, continuing the explosive performance of the L series.

Tianfeng Securities expects L9 to have higher gross profit margin on the new platform and at a price range of 460,000 yuan. With the efficient production capacity of L9&8, there is room for continuous improvement in gross profit margin.

On Wednesday, May 10th, Li Auto released its first-quarter financial report.

Overall Performance Outlook

Tianfeng Securities expects Li Auto's revenue to maintain high growth after the launch of new platform models in the first quarter, and Non-gaap net profit to accelerate into positive territory.

As of April 30th, Bloomberg's consensus forecast for Q1 23 revenue is RMB 18.88 billion, up 97.5% YoY, with a gross profit margin of 20.5%, down 2.2pct YoY but up 0.3pct MoM. Non-gaap net profit attributable to shareholders is expected to be RMB 710 million.

Tianfeng Securities expects Q1 gross profit margin to remain above 20%, and Non-gaap profitability to be achieved after the launch of new models.

Total expenses are expected to be RMB 3.61 billion, up 40.2% YoY, with R&D expenses of RMB 2.27 billion, up 65.7% YoY, and sales expenses of RMB 1.335 billion, up 10.9% YoY.

Li Auto expects to continue to increase investment in R&D in 2023, with R&D expenses expected to exceed RMB 10 billion, while sales expenses are expected to continue to grow due to new models and stores, but the sales expense ratio may decline.

Q2 Outlook

LI AUTO-W announced its dual-energy strategy on April 18th, marking Li Auto's official entry into a new stage of "extended-range electric" and "high-voltage pure electric" vehicles.

We believe that the L7 is one of the ceiling models for medium and large 5-seat SUV space and intelligence, with sales expected to reach 100,000-120,000 units in 2023, with monthly sales exceeding 10,000 units.

We expect L9&L8 to have a total sales volume of about 160,000 units in 2023, with monthly sales of 12,000-14,000 units; the overall sales volume of LI AUTO-W in 2023 is expected to be 260,000-280,000 units.

Investment Recommendation

Tianfeng Securities believes that LI AUTO-W has a solid and highly competitive product portfolio and better cost management capabilities, and is optimistic about its growth and profitability, which is demonstrated by its scale effect.

Against the backdrop of steady recovery in consumption and the economy, and potential local policy stimulus, the company is expected to show higher growth in the first half of the year than last year, and is expected to achieve monthly sales of nearly 30,000 units in Q2, with profitability expected to continue to improve with scale effect. It is recommended to closely monitor LI AUTO-W's order volume, sales, and production capacity ramp-up for the three vehicle models this year.