XPeng’s Q4 Margin Missed but Investors Should Focus on Growth Recovery in 2023; Shares Undervalued

XPeng reported fourth-quarter revenue near the high end of company’s guidance. As it already announced vehicle delivery for the quarter in January, we consider the result in line with market expectation. The main focus of investors this year is whether the company can resume delivery growth with new launches, in our view. With enlarged losses on softer vehicle margin and rising operating expense levels, we increase our net loss forecasts for 2023-24. As a result, we reduce our fair value estimate to USD 15 per ADS (HKD 59 per share) from USD 18 per ADS (HKD 71 per share), which implies a forward 2023 price/sales ratio of 2.2 times. Despite a 6% gain in the share price last Friday, we think XPeng is still undervalued.