Bank of America Securities: LI AUTO-W (02015) second quarter performance slightly exceeded expectations, target price lowered to HKD 58.9, reflecting lower sales forecast.

Bank of America Securities has released a research report stating that it has lowered the target price for LI AUTO-W (02015) from HKD 64.4 to HKD 58.9, and the target price for Li Auto (LI.US) on the U.S. stock market from USD 16.5 to USD 15.1, reflecting lower sales forecasts. Based on expected sales growth in 2026 and profit margin pressure, it reaffirmed a "Neutral" rating, while being optimistic about the companys strong technological reserve in autonomous driving. Li Auto, Inc. Sponsored ADR Class A's Q2 performance slightly exceeded the bank's expectations. During the period, sales revenue was RMB 25.7 billion, down 15% year-on-year but up 12% quarter-on-quarter; vehicle deliveries were 98,000 units, down 11% year-on-year but up 3% quarter-on-quarter; the average selling price of vehicles was RMB 245,000, down 6% year-on-year but up 8% quarter-on-quarter. The overall gross margin was 11%, down 9 percentage points year-on-year but up 3.2 percentage points quarter-on-quarter; the vehicle gross margin was 9.4%, down 10 percentage points year-on-year but up 3.4 percentage points quarter-on-quarter, mainly affected by changes in the product mix. The non-GAAP net loss was RMB 1.5 billion, better than the bank's expectation of a net loss of RMB 1.7 billion, compared to a net profit of RMB 1.5 billion in the same period last year, and a net loss of RMB 2.1 billion in the previous quarter. The bank pointed out that management expects second-quarter vehicle deliveries to be between 95,000 and 100,000 units, an increase of 2% to 7% year-on-year; total revenue guidance is RMB 26.6 billion to RMB 28 billion, with year-on-year changes ranging from a decrease of 3% to an increase of 2%. Management targets a sustainable gross margin of 15% to 20%, and plans to mitigate raw material price fluctuations through vertical integration, long-term supply contracts, and ongoing cost-reduction measures. The new i9 six-seat SUV model will be launched in mid-September, while an updated version of the Li Mega will be released on September 2. Considering the second-quarter performance and the latest guidance, the bank has lowered its sales forecasts for 2026 to 2028 by 2%, 8%, and 10%, but raised the gross margin forecasts for the same period by 0.7, 0.6, and 0.3 percentage points. The bank expects Li Auto, Inc. Sponsored ADR Class A to incur a non-GAAP net loss of RMB 4.3 billion and RMB 500 million in 2026 and 2027, respectively.