Morgan Stanley (NYSE:MS) has maintained its positive stance on Li Auto (NASDAQ: NASDAQ:LI), reiterating an Overweight rating with a price target of $29.00. The firm's perspective is based on Li Auto's current and future business strategies, as outlined by the company's management.
Li Auto's management has decided against expanding its Extended Range Electric Vehicle (EREV) lineup, opting instead to enhance operational efficiency and sales conversion across various regions. The focus is on fine-tuning the existing models to maximize market penetration.
Looking ahead to the introduction of Battery Electric Vehicles (BEVs), Li Auto plans to refine interior designs and expedite the establishment of charging infrastructure. This strategy is aimed at providing a seamless experience for customers upon the BEV market entry in 2025.
The company's long-term goal is to secure a one-third market share in China's new energy vehicle segment priced above 200,000 yuan, with a commitment to maintaining a strong presence in the high-end BEV market.
The company has observed a significant uptick in the adoption of its smart-driving features following the launch of its mapless Navigation on Autopilot (NOA) system. The data shows a considerable increase in NOA test drives, daily user engagement, and average NOA mileage per user. Currently, over 99% of Li Auto users regularly use the company's autonomous driving features, with total NOA mileage exceeding 1.11 billion kilometers.
Furthermore, the take rate for Li Auto's AD Max, an advanced autonomous driving package, has climbed to 70% for vehicles priced above 300,000 yuan, a substantial increase from the 20-30% rate in the previous year.
Management credits this growth to the company's ongoing investment in data and training capabilities, which includes vehicle learning models and end-to-end models, as well as the size of its vehicle fleet.
In other recent news, Li Auto has been making significant strides in its financial performance. The electric vehicle manufacturer reported an impressive 86% quarter-over-quarter increase in net income for Q2 2024, reaching Rmb1.1 billion, surpassing market expectations. The company's Q2 revenue also saw a 24% quarter-over-quarter increase to Rmb31.7 billion, driven by a 35% increase in vehicle volume.
Li Auto's effective cost control measures were evident with a decrease in research and development expenses by 1% quarter-over-quarter to Rmb3 billion. Selling, general, and administrative expenses also saw a 6% quarter-over-quarter decrease to Rmb2.8 billion.
The company provided guidance for Q3 2024, projecting vehicle deliveries between 145,000 and 155,000 units, a 34-43% quarter-over-quarter increase. The forecast suggests a revenue growth of 24-33% quarter-over-quarter, amounting to Rmb39.4 billion to Rmb42.2 billion. Morgan Stanley maintains confidence in Li Auto, reaffirming an Overweight rating and a $29.00 price target on the company's shares.
InvestingPro Insights
As Morgan Stanley maintains a bullish stance on Li Auto, current metrics from InvestingPro provide a deeper financial context to the company's market position. With a market capitalization of $18.98 billion and a P/E ratio sitting at 10.78, Li Auto presents an interesting valuation proposition. Notably, the company's revenue has seen a remarkable growth of 139.76% over the last twelve months as of Q1 2024, indicating a robust expansion in its business operations.
InvestingPro Tips underline Li Auto's financial health, highlighting that the company holds more cash than debt on its balance sheet and has the capacity to cover interest payments comfortably with its cash flows. These factors are crucial for Li Auto as it aims to solidify its market share in China's competitive new energy vehicle segment and invests heavily in autonomous driving technology and infrastructure for BEVs. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling confidence in Li Auto's strategic direction and operational efficiency improvements.
For those interested in a more comprehensive analysis, InvestingPro offers further tips on Li Auto, including insights on valuation, profitability, and stock performance trends.
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