XPeng Earnings: Guidance Disappoints; Negative Vehicle Margin Amid Competition

No-moat XPeng’s first-quarter revenue was at the low end of its guidance. Vehicle margin of negative 2.5% was much weaker than we expected, due to price promotions amid industry competition. As it had announced delivery volume for the quarter in April, we believe the market has already priced in the disappointing quarter—the share price has fallen 22% since April. Still, we expect the disappointing second-quarter guidance to put extra pressure on XPeng's share price. With enlarged losses on softer vehicle margin and rising operating expense ratios, we increase our 2023-24 net loss forecasts. As a result, we reduce our fair value estimate to USD 12 per ADS (HKD 46.50 per share) from USD 15 (HKD 59.00), which implies a forward 2023 price/sales ratio of 2.4 times.