Li Auto smashes estimates proving EVs can be profitable

Key Points

• Li Auto manufactures and sells luxury hybrid electric vehicles (HEVs) in China, with revenues growing over 270% YoY in Q3 2023.
• The company is profitable and raised its delivery estimates to come in between 125,000 to 128,000 in Q4 2023, up 169.9% to 176.3% YoY.
• LI shares will be added to the Hang Send Index on December 4, 2023.

The Chinese electric vehicle (EV) maker Li Auto Inc. NASDAQ: LI distinctly stands out from its peers Nio Inc. NYSE: NIO and Xpeng Inc. NASDAQ: XPEV because it's profitable. Profits and EVs seem to be two words that rarely belong in the same sentence. As a member of the Auto/Tires/Trucks sector, Li Auto smashed its latest earnings results with triple-digit YoY gains across many key metrics.

Granted, YoY comps will look exaggerated for all Chinese EV companies due to the zero-COVID restrictions in 2022. However, Li Auto is on a whole different level compared to its peers in terms of growth and profitability. Part of the reason for this is that it's not a 100% electric-only vehicle maker; instead, its models are hybrids that incorporate EV technology along with gas-powered engines.

Hybrid leads the transition

While EV adoption is underway, range anxiety is a high barrier for drivers to overcome. Hybrid electric vehicles (HEVs) are more practical, especially for families. EVs may not be practical for consumers living in apartments or away from nearby charging stations or accessible power sources. Converting internal combustion engine (ICE) drivers to EVs takes time, and Li Auto is proving that the hybrid approach may be the best and most profitable way to achieve this. The fear of running out of battery power with no nearby charging stations is a key deterrent for drivers to convert. In the U.S., two-thirds of EV owners also rely on an ICE vehicle.

Li Auto HEV SUVs

The design of Li Auto SUVs is very unique. Their L7, L8 and L9 models range from five to six-seat flagship, family and premium models. They have electric folding front and back seats that can turn the car interior into two twin-size beds or a single large queen-sized bed for three, enabling users to sleep comfortably in the car.

The Li8 has a 270-degree design, 21 speakers with a 7.3.4 panoramic sound layout, soundproof double layered heating insulating glass, three zones of individually controlled air conditioning, dual 15.7-inch dashboard LCD screens, 4,5,6-seater layouts, intelligent 4-wheel drive and a blackout roof that exposes the sky along with a drop-down 3K folding TV that can turn the car into a home theater. The base model starts around $50,000. It's powered by Nvidia Co. NASDAQ: NVDA AD Max intelligent driving chip. Check out the sector heatmap on MarketBeat.

Electric future

Li Auto is launching its fully battery electric vehicle (BEV) model, the Mega MPV, in December 2023, and deliveries will start in February 2024. This luxury model, starting at $70,000, will be its first pure EV. This SUV has five screens, including a 15-.7 LCD passenger entertainment screen with 7.3.4 Atmos, with the cockpit powered by Qualcomm Inc. NASDAQ: QCOM Snapdragon 8155 chips. The Li MEGA can gain up to 500 km of driving range with a 12-minute charge on its 800-volt BEV platform. The company also plans to build out 3,000 charging stations in the next two years.

Still growing and leading

On November 9, 2023, Li Auto released its third-quarter 2023. The company reported EPS of RMB3.29 per share, beating consensus analyst estimates by RMB60 cents. Gross profits were $1.05 billion. Net income was $385.5 million versus a loss of RMB1.65 billion in the year-ago period. Revenues rose 271.2% YoY to RMB34.68 billion ($4.75 billion), beating analyst estimates of RMB33.45 billion. Vehicle margins were an impressive 21.2%, a 9.2% improvement from the year-ago period. The company has 372 retail locations in 133 cities with 315 servicing centers and Li-Auto authorized body and pain shops in 210 cities.

Blockbuster deliveries

Li Auto had its highest deliveries of 40,422 EVs (more than Nio and Xpeng deliveries combined) in October 2023, up 302% YoY. This was the seventh delivery record in a row. Total third-quarter 2023 deliveries rose 296.3% to 105.1K units. Li Auto expects between 125,000 and 128,000 total deliveries in Q4 2023, representing a 169.9% to 176.3% YoY growth.

Raised guidance

Li Auto expects full-year revenues to grow to $25.69 billion in full-year 2023, up 53% YoY. Li Auto CEO Mr. Xiang Li commented, "In response to the evolving market demand in the third quarter, we continued to strengthen synergies across production, supply, and sales while enhancing our production capability. With these efforts, we achieved a number of breakthroughs across our delivery performance during the quarter, becoming China's first emerging new energy automaker to reach the milestone of 500,000 cumulative deliveries." Li Auto stock will be added to the Hang Seng Index on December 4, 2023.

Li Auto analyst ratings and price targets are at MarketBeat. Li Auto peers and competitor stocks can be found with the MarketBeat stock screener.

Daily ascending  price channel

The daily candlestick chart on LI illustrates an ascending price channel. The ascending lower trendline formed after bottoming at $31.43 on October 23, 2023. Shares continued to form higher lows and higher highs after signaling the daily market structure low (MSL) breakout through the $35.00 trigger. The daily 200-period moving average support is rising at $32.49. Shares initially sold off on its solid earnings, likely due to a sell-the-news reaction since the stock has a strong run up to $40.03. LI was able to bounce back to and through the pre-earnings peak, and the daily relative strength index (RSI) continues to chop towards the 70 band. Pullback support levels are $38.02, $35 daily MSL trigger, $33.43 and $31.03.