Li Auto Shares Plunge Nearly 13% over Weaker Q2 Guidance

Li Auto Q1 revenue surged 36.4% year-over-year while the company expected Q2 revenue to grow 4% to 9% to up to US$4.3 billion, compared with analysts' estimated US$5.17 billion.

TMTPost -- The American Depositary Receipts (ADRs) of Li Auto Inc. plunged as much as 16.5% in the morning trading of Monday, their biggest intraday losses since October 2022. Shares settled around 12.8% lower to US$21.71, the lowest close since March 2023, after Chinese electric vehicle (EV) maker posted weaker-than-expected guidance for the current quarter.

Credit:Li Auto

Credit:Li Auto

Li Auto disclosed mixed financial results for the quarter ended March 31, 2024. Total revenue that quarter surged 36.4% year-over-year (YoY) to RMB25.6 billion (US$3.6 billion), roughly in line with the Wall Street projection of RMB25.58 billion, while non-GAAP diluted net earnings per American depositary share (ADS) fell 10.4% YoY to RMB1.21 (US$0.17), missing analysts’ expected US$0.19. Net income dived 36.7% YoY to RMB591.1 million, well short of analysts’ estimates of RMB16.3 billion.

The results showcased robust growth of vehicle sales offset by jump of sales and other operating expenses. The vehicle delivery in the first quarter were 80,400 units, representing a 52.9% YoY increase and a decrease of 39% from the previous quarter that saw a record delivery of 131,805 vehicles. Vehicle sales gained 32.3% YoY to RMB24.3 billion in the March quarter, accelerating from a 20% YoY growth three months ago. Vehicle margin was 19.3%, down from 19.8% in the beginning quarter of 2023 and 22.7% in the fourth quarter of 2023. The margin decrease over the fourth quarter was mainly due to lower average selling price as a result of pricing strategy changes in the first quarter and true-up adjustments of warranty reserve in the fourth quarter based on updated estimate of costs of future claims.

Operating expenses in the first quarter climbed 71.4% YoY to RMB5.9 billion. Out of them, selling, general and administrative expenses increased 81% YoY to RMB3.0 billion, primarily due to increased employee compensation as a result of the growth in number of staff as well as increased rental and other expenses associated with the expansion of sales and servicing network. Research and development (R&D) expenses that quarter grew 64.6% YoY to RMB3.0 billion, driven by increased employee compensation as a result of the growth in number of staff as well as increased expenses to support the expanding product portfolios and technologies.

Li Auto expected revenue for the second quarter of 2024 to be between RMB29.9 billion and RMB31.4 billion (US$4.1 billion and US$4.3 billion). That guidance range suggested a YoY increase of 4% and 9%, further slowing down from the first quarter,  whereas, analysts had anticipated revenue to be increased to US$5.17 billion. Li Auto’s delivery outlook in the second quarter between 105,000 and 110,000 vehicles represented a 21.3% to 27.1% YoY growth, also missing analysts’ forecast.    

At the beginning of this month, Li Auto said its delivery in May even dropped 11% month-over-month to 25,787 vehicles. The figure represented a mere 0.3% YoY rise, the slowest monthly expansion since August, 2022. However, the chairman and CEO Li Xiang expressed optimism about sales.

“Li L6, our first model priced under RMB300,000, has garnered widespread popularity among young families following its April debut. We will commence large-scale deliveries in May,” Li said at a statement of the monthly delivery. He added Li Auto will provide users with complimentary charging services and cover the electricity costs at all of its super charging stations during the May Day holiday period. The company will also roll out OTA version 5.2 this month, significantly enhancing Li AD Pro and Li AD Max systems with more advanced and safer autonomous driving, automated parking, and active safety features, among others, Li said. He noted users will be able to control their vehicles through Siri following the upgrade, enjoying a more convenient and faster voice control experience.

Li Auto found sales momentum has gradually improved, and felt optimistic about the continued ramp-up of the monthly sales going forward, James Liangjun Zou, Senior Vice President of Sales and Service, told analysts at an earnings conference call on Monday. Zou noted accumulated orders of SUV model L6 reached over 41,000 units during initial sales period from April 18 to May 5, and the order intake of L6 Series has maintained strong growth momentum post the initial sales period.  The order flow of L7, L8, and L9 has also showed ongoing improvements after the company cut prices for these models, Zou added. Chief Financial Officer (CFO)  Johnny Tie Li said he believes the gross margin pressure will be relieved as sales come back. But he admitted challenges since March will weigh on the margin, stating the second quarter will be the most difficult for Li Auto this year.

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