Goldman Sachs: Expects XPENG-W (09868) to outperform peers in the first quarter of next year, raising target price to HK$96.

Goldman Sachs Group, Inc. released a research report stating that XPeng, Inc. ADR Sponsored Class A (09868, XPEV.US) met expectations for the third quarter performance this year, but the revenue guidance for the fourth quarter is lower than expected, mainly due to slowing sales growth and increased market competition. The stock price dropped 10% after the performance announcement. After extending the discounted cash flow (DCF) valuation by one year, the 12-month target price for XPeng's U.S. stock has been raised from $24 to $25, and the Hong Kong stock target price from HK$94 to HK$96; maintaining a "buy" rating. Goldman Sachs Group, Inc. mentioned that while XPeng's sales momentum may be relatively mild in the short term with limited new car releases, looking ahead to the first quarter of next year, they believe the seasonal performance of XPeng, Inc. ADR Sponsored Class A will be better than its peers as the company is set to launch three extended-range electric vehicle versions (G6, G7, P7+). According to management's comments on pre-orders for the X9 extended-range electric vehicle, orders for the extended-range version may be three times higher than for the pure electric vehicles. For the full year next year, Goldman Sachs Group, Inc. expects that XPeng's strong new vehicle development pipeline and sustainable revenue contribution from Volkswagen will drive a 40% increase in revenue. Economies of scale and continued cost reductions will improve the gross profit margin, while ongoing research and development investments and improvements in accounts payable turnover days will lead to a Generally Accepted Accounting Principles (GAAP) net profit of 2.2 billion RMB (first time achieving a full year breakeven). After the third quarter performance this year, Goldman Sachs Group, Inc. lowered XPeng's profit forecasts for 2025 to 2027 from a loss of 400 million, a net profit of 3.8 billion, and a net profit of 5.5 billion RMB to a loss of 800 million, a net profit of 2.8 billion, and a net profit of 3.3 billion RMB, mainly due to higher costs for new business research and development. On the other hand, the forecast for changes in operating capital have been adjusted from 6.6 billion, 600 million, and 3.9 billion RMB to 7.7 billion, 2.9 billion, and 4.5 billion RMB respectively, due to a shorter accounts payable turnover days.