Is Li Auto (LI) Worth Betting on Post Encouraging Q3 Show?
While Li Auto (LI) impresses investors with a massive revenue surge in Q3 and looks well poised to tap the EV frenzy, it may not be a prudent pick at...
Li Auto LI scored the second straight day of price increase after delivering third-quarter 2021 numbers on Nov 29, before the opening bell. Quarterly results fueled optimism as revenues rocketed around 210% year over year. The rising electric vehicle (EV) star of China broke even in the quarter versus the Zacks Consensus Estimate of loss of a penny per ADS and loss of 8 cents a share incurred in the year-ago period.
Inside LI’s Q3 Report & How it Compares With NIO & XPEV
Li Auto’s third-quarter total revenues of $1.21 billion comprised $1.15 billion (up 200% year on year) from vehicle sales and $60.4 million (up 745.1% year over year) from other sales and services. Vehicle margin of 21.1% compared favorably with 19.8% recorded in the corresponding quarter of 2020. Gross profit increased 264.8% year over year. Deliveries of Li ONEs totaled 25,116 in the quarter under discussion, up a whopping 190% year over year.
Looking forward, Li Auto expects to deliver 30,000-32,000 vehicles in the fourth quarter, implying a year-over-year uptick of 107-121.2%. Revenues are envisioned in the band of $1.37-$1.46 billion, signaling growth of 112-126.9% from the fourth quarter of 2020. Amid the soaring popularity of green vehicles, the company is indeed growing rapidly. While Li Auto’s R&D and SG&A expenses flared up 165.6% and 198.5%, respectively, on a year-over-year basis, it’s understandable and expected as is the case with other EV companies. Overall, there wasn’t much to complain about LI’s Q3 report.
Meanwhile, Li Auto’s key peers including NIO Inc. NIO and XPeng XPEV reported third-quarter adjusted loss per ADS of 28 cents and 29 cents, respectively. Nonetheless, revenues and deliveries for both NIO and XPEV witnessed a triple-digit surge year over year.
NIO posted revenues of $1,521.8 million, up a whopping 116.6% year over year on the back of robust deliveries of 24,439 vehicles (up 100.2% year over year), including 5,418 ES8s, 11,271 ES6s and 7,750 EC6s. XPeng’s revenues soared 187.4% as deliveries were up a whopping 199.2% year over year. The P7 model constituted 76.8% of total deliveries. During the quarter, NIO and XPeng’s vehicle margin stood at 18% and 13.6%, lower than LI’s.
Talking about balance sheet strength, Li Auto takes the lead. As of Sep 30, LI, NIO and XPEV had cash and cash equivalents of $4.9 billion, $3.3 billion and $2.4 billion, respectively. Total debt to capitalization for Li Auto is 1.71%, better than NIO’s 31.7% and XPeng’s 3.05%. Encouragingly, LI is also among those few EV players that are FCF positive.
LI’s Prospects Seem Rosy
Li Auto is positioned for growth as it continues to invest in extended-range EVs, advanced driver-assist systems (ADAS) and capacity expansion efforts. Focus on cost-effective SUVs is the core of LI’s business strategy. It was one of the first firms to successfully commercialize extended-range EVs, which require a relatively small battery pack.
Li Auto currently has a single offering, Li One, which is equipped with an onboard gasoline generator that supplements battery and acts as a range extender. This month, the company intends to release its NOA upgrade to Li ONE users. Post the NOA upgrade, the model will be equipped with effective ADAS functions. The firm remains on track to launch its first high-power charging BEV product in the second half of 2023.
Li Auto is capitalizing on the growing demand for EVs by expanding its retail footprint to 162 stores that are operational across 86 cities along with 223 servicing centers (as of Oct 31). Meanwhile, the company is also expanding its manufacturing capacity. In October, it commenced construction of its Beijing manufacturing facility, which is expected to become functional by 2023, serving as the production base for the firm’s premium BEVs, as it seeks to expand its product lineup. Currently, it is manufacturing vehicles at its Changzhou facility. The company continues to capitalize on the growing demand for EVs by expanding its retail footprint to 162 stores that are operational across 86 cities along with 223 servicing centers as of Oct 31.
Still Not a Buy
While Li Auto acknowledges that the global chip crunch is likely to limit the firm’s near-term production capacity, the company is still on the right path. Despite hitting the right notes, it currently carries a Zacks Rank #4 (Sell). For one thing, the stock seems a little pricey at the moment. On the basis of the forward 12-month price-to-sales ratio, Li Auto is trading at 5.22, versus the industry’s 0.58. It carries a Value Score of D.
Notably, the stock has been up 115% since its IPO in July 2020 and is currently just 6% off its 52-week high levels. So, it just might not be the right time to hit the buy button on the stock. Instead, you can cash in on the share price gains currently, and buy it at an opportune time when the price dips.
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