Analyst Note
| Vincent Sun |Li Auto’s first-quarter results look good at first glance, with revenue at the high end of the company’s guidance. However, profit turnaround came mainly from a jump in interest income following last year's capital raise and lower research and development spending. Vehicle margin of 20% for the quarter was slightly weaker than our expectation, with promotions on the Li One offsetting better product mix. Benefiting from lower operating expense ratios and CNY 419 million in interest income on bank deposits, first-quarter net profit rebounded to CNY 930 million from a net loss of CNY 11 million in the prior-year quarter. We reduce our 2023-25 operating expense estimates, but keep long-term assumptions largely unchanged. We slightly raise our fair value estimate to USD 31 per ADS (HKD 120 per share) from USD 30.50 (HKD 119), which implies a forward 2023 price/sales ratio of 2.2 times.