On Tuesday, Bernstein SocGen Group revised its price target for Li Auto (NASDAQ:LI) Inc (2015:HK) (NASDAQ: LI), decreasing it to HK$163.00 from the previous HK$204.00, while maintaining an Outperform rating on the stock. This adjustment follows Li Auto's first-quarter financial results, which indicated a mix of growth and challenges.
The company's first-quarter revenue saw a year-over-year increase of 36.4% to RMB 25.6 billion, but experienced a significant quarter-over-quarter decline of 38.6%. Sales volume for the quarter was reported at 80.4 thousand units, marking a notable increase of 52.9% over the same period last year, yet a decrease of 39.0% from the previous quarter. Changes in the sales mix, particularly the higher contribution from the L7 model, led to a decrease in the average selling price (ASP) to RMB 301.6 thousand, down 13.5% year-over-year and 1.5% quarter-over-quarter.
Despite the mixed sales figures, Li Auto's gross margin remained resilient at 20.6%. However, the company's vehicle margin dipped slightly to 19.3% in the first quarter of 2024, compared to 19.8% in the first quarter of 2023 and 22.7% in the fourth quarter of 2023. Operating expenses rose to 23.5% of revenue, a significant increase from 12.2% in the first quarter of 2023 and 16.2% in the last quarter of 2023. This increase in expenses, attributed to operating leverage, resulted in the company posting a negative operating income of RMB 585 million for the quarter, translating to a -2.3% operating margin.
In terms of profitability, Li Auto reported a net income of RMB 591 million, which implies a margin of 2.3%. This figure represents a decline from a net margin of 5.0% in the first quarter of 2023 and 13.8% in the fourth quarter of 2023. The company also recorded cash outflows in both operating cash flow and free cash flow, totaling RMB 3.3 billion and RMB 5.1 billion, respectively, during the first quarter. These outflows were attributed to lower delivery volumes.
Despite the challenges faced in the first quarter, the analyst expects Li Auto's cash flow to improve with better delivery performance in the future. The company was noted to have a strong cash position, with RMB 98.9 billion on hand at the end of the quarter.
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