2025-09-01 03:21Summary of Li Auto Inc. (LI/2015.HK) Conference Call Company Overview - Company: Li Auto Inc. - Industry: New Energy Vehicles (NEV) Key Points and Arguments 1. Earnings Performance - Li Auto reported a 2Q25 result with sales volume down 2% year-over-year, while the overall NEV retail market in China grew by 29% [1][2] - The company guided for 3Q25 volume and revenue to be over 40% below expectations, primarily due to weak sales of L series EREV models (L7/L8/L9), which declined by 32% year-to-date [1][2] 2. Sales Volume and Pricing - Expected sales volume for 3Q25 is 90k-95k units, a decrease of 17% quarter-over-quarter, with a projected increase to 115k units in 4Q25, driven by the i8 ramp-up and i6 launch [2][6] - Average Selling Price (ASP) is expected to increase by 2% in 3Q25 due to a higher sales mix of the MEGA model, but decline by 3% in 4Q25 due to the i6 launch [2][6] 3. Margin Outlook - Vehicle gross margin is projected to be 19% in 3Q25, down from 19.4% in 2Q25, but expected to recover to 19.4% in 4Q25 as sales volume increases [2][6] - Operating margin is anticipated to decline to 0.4% in 3Q25, improving to 1.5% in 4Q25 [2][6] 4. Product Strategy - Li Auto plans to accelerate product and technology refresh cycles, targeting a 2-year iteration speed for new models, compared to the industry average of 4 years [7] - The company will enhance its assisted driving capabilities with the release of the VLA driver large model, which aims to improve driving comfort and parking experience [7] 5. Self-Developed Technology - Li Auto's self-developed ADAS chips are expected to be deployed on flagship models starting next year, which could reduce BOM costs and improve margins [7] 6. Global Expansion - 2025 marks the beginning of Li Auto's global strategy, with R&D centers established in Germany and the US, targeting markets in the Middle East, Central Asia, and Europe [7] 7. Financial Estimates - Net profit estimates for 2025E-27E have been lowered from Rmb12.6/13.5/15.7 billion to Rmb5.3/8.9/12.6 billion due to the weaker outlook for L series models [3] - The 12-month DCF-based target prices have been adjusted from US$35.3/HK$138 to US$30.9/HK$120, indicating a potential upside of 37%/31% [3][10] 8. Investment Thesis - Li Auto is rated as a "Buy" with a 5% NEV market share in China for 2024, supported by improvements in urban NOA performance and a focus on AI [11] - The company has the best net cash position among major Chinese OEMs, which could facilitate future R&D spending [11] 9. Risks - Key risks include worsening market demand, intensifying competition, and potential pressure on volume and margins [11][12] Additional Important Information - Li Auto experienced Rmb3.0 billion of operating cash outflow in 2Q25, attributed to a decrease in accounts payables and shortened payment terms to 60 days [7] - The company is ramping up production capacity for the i8 model, targeting cumulative deliveries of 8k-10k by the end of September [4][6] This summary encapsulates the critical insights from the conference call, highlighting the company's current performance, strategic initiatives, and future outlook within the NEV industry.