Morgan Stanley maintains a "overweight" rating on XPeng, Inc. ADR Sponsored Class A (XPEV.US) with a target price of $17.00.

Morgan Stanley released a research report stating that it maintains a "hold" rating on XPeng, Inc. ADR Sponsored Class A (09868, XPEV.US), with weights of 25%/50%/25% for optimistic/basic/pessimistic scenarios, giving a target price of $17.00. Management expects that with the continuous launch of new models, the gross profit margin of the Mona series will exceed 10%. At the XPeng, Inc. ADR Sponsored Class A China BEST Conference, the focus was on autonomous driving technology, vehicle gross profit margin, and off-season order performance. The company's management stated that, thanks to their strong vehicle inventory, they are confident in the sales recovery at the end of the first quarter. Morgan Stanley believes that the automotive gross profit margin will increase quarter-on-quarter by the fourth quarter of 2024 (8.4% in the third quarter), but will still be below 10%. This growth is mainly attributed to product mix optimization, especially the increase in P7+ and overseas sales ratio, as well as the improvement in Mona MO3 economies of scale. XPeng, Inc. ADR Sponsored Class A stated that they expect to achieve a sales target of 400,000 units by 2025, with overseas market sales expected to more than double year-on-year. In terms of product planning, revamped models of G6 and G9 with advanced pure visual advanced driving assistance system will be launched in March. A five-seater SUV based on the same platform as P7+ is planned for delivery in the second quarter of 2025. Additionally, the company will launch a B-class sports sedan in the second to third quarter, and two extended-range electric vehicles in the second half of the year. Furthermore, the Volkswagen cooperation project is expected to bring annual revenue contributions similar to the fourth quarter of 2024 for XPeng, Inc. ADR Sponsored Class A by 2025, with the possibility of further authorized cooperation in the European Economic Area (EEA) in the future. Risk factors: (upside) enhanced competitiveness of new models driving sales growth, unexpected expansion of gross profit margins, improvement in brand image and market recognition brought by outstanding user experience; (downside) intensified competition in the mid-to-high-end market, decline in profitability leading to increased cash flow pressure, and the impact of the overall industry slowing down on valuation.