LI AUTO(US:LI) Zhao Yin Guo Ji·2024-05-21 03:27Investment Rating - The report maintains a "Buy" rating for Li Auto Inc. with a target price reduced from $48.00 to $26.00, based on a revised FY25 earnings per share estimate of 15 times [2][3]. Core Insights - Li Auto has lowered its FY24 earnings capability priority, focusing on a new BEV strategy and anticipating a sales recovery for EREV in the second half of 2024, while BEV sales growth has been postponed to FY25 [2]. - The company reported a 3% increase in 1Q24 revenue compared to previous forecasts, primarily due to other sales and services, while R&D and SG&A expenses exceeded expectations by 1.6 billion RMB, leading to a net profit that was 1.4 billion RMB lower than anticipated [2]. - The management expects challenges in 2Q24, guiding vehicle gross margin down to 18% from 19.3% in 1Q24, with R&D and SG&A expenses projected to be more difficult to predict due to recent organizational restructuring [2]. Summary by Sections Financial Performance - 1Q24 revenue was 45,287 million RMB, with a year-over-year growth rate of 67.7% [3]. - Gross margin for FY24E is adjusted to 20.1%, down by 0.8 percentage points, with net profit estimates halved to 7.2 billion RMB [2][3]. - The company expects FY25E sales volume to reach 660,000 units with a net profit of 12.3 billion RMB, similar to previous FY24E forecasts [2]. Valuation and Risks - The target price adjustment reflects a higher valuation multiple for FY25 due to anticipated successful BEV products, despite increased uncertainty and lower profit growth trajectory [2]. - Key risks to the rating and target price include lower-than-expected sales and/or gross margins, as well as potential downgrades in industry ratings [2].