Zhao Yin Guo Ji·2026-03-13 01:24Investment Rating - The report maintains a HOLD rating for Li Auto Inc. with a target price of US$18.00 for ADS and HK$70.00 for H-share, reflecting a slight upside potential of 1.0% for ADS and a minor downside of (0.2%) for H-share from current prices [3]. Core Insights - Li Auto is viewed as a strong company with potential for recovery due to its solid cash position, but the transition to an AI device company is expected to take time. The redesigned L9's outlook remains uncertain amid increased competition in the large SUV market [1][8]. - The company is projected to incur a net loss in the first half of FY26, and even with a successful launch of the L9, the valuation may still appear unattractive based on FY26 earnings estimates [1][8]. Financial Summary - Revenue projections show a significant increase from RMB 123.9 billion in FY23 to RMB 144.5 billion in FY24, followed by a decline to RMB 112.3 billion in FY25, before recovering to RMB 130.7 billion in FY26 and RMB 153.8 billion in FY27 [2][12]. - Gross margin is expected to decrease from 22.2% in FY23 to 20.5% in FY24, further declining to 18.7% in FY25, before slightly recovering to 17.6% in FY26 and 18.2% in FY27 [2][12]. - The net profit is forecasted to drop significantly from RMB 11.7 billion in FY23 to RMB 8.0 billion in FY24, then to RMB 1.1 billion in FY25, before rebounding to RMB 3.4 billion in FY26 and RMB 7.7 billion in FY27 [2][12]. Earnings Performance - In 4Q25, Li Auto's revenue exceeded prior forecasts by approximately 1%, with a gross profit margin increase of 1.5 percentage points to 17.8% quarter-over-quarter, attributed to better-than-expected performance from the i6 model and year-end supplier rebates [8]. - The company achieved a net profit of RMB 7 million in 4Q25, indicating a slight recovery despite ongoing challenges [8]. Sales Volume and Market Outlook - The sales volume target for FY26 has been revised down from over 500,000 units to approximately 490,000 units, reflecting a 20% year-over-year increase. The management anticipates vehicle gross profit margin to be around 5% in 1Q26 due to inventory clearance and tax benefits [8]. - The redesigned L9 and new i9 models are considered critical for the company's performance in the competitive large SUV market in China, with expectations of average monthly sales of over 10,000 units for the L9 [8].