Li Auto Earnings: Profit Missed on Lower Vehicle Margin and Higher Expenses

Li Auto’s first-quarter revenue was in line with Refinitiv consensus, but net profit missed expectations. Vehicle margin of 19% staged a small year-over-year decline due to the negative impact of price promotions despite a larger delivery volume. Vehicle delivery guidance also missed market expectations, with disappointing sales of the Mega, the firm's first pure battery electric vehicle, or BEV. We cut our 2023-26 revenue and profit estimates to reflect lower volume and margin assumptions. We reduce our fair value estimate to USD 37.50 per ADS (HKD 147.40 per share) from USD 51.00 (HKD 198.20), which implies a forward 2024 price/sales ratio of 2 times and price/earnings of 42 times.