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XPeng Earnings: Guidance Disappoints; Negative Vehicle Margin Amid Competition

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No-moat XPeng’s XPEV 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.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Vincent Sun

Equity Analyst
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Vincent Sun, CFA, is an equity analyst for Morningstar Asia Limited, a wholly owned subsidiary of Morningstar, Inc. He covers the China auto/electric vehicle industry and related suppliers.

Before joining Morningstar in 2022, Sun was an executive director at a leading Chinese Internet company, conducting activities related to strategic investment and the capital markets. Prior to that, he spent more than eight years working as an equity analyst in Hong Kong and covered China's auto industry as a vice president at Deutsche Bank.

Sun holds a Master of Science from the University of British Columbia's Sauder School of Business and a bachelor's degree in business administration from Shanghai Jiao Tong University. He also holds the Chartered Financial Analyst® designation.

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