Li Auto Posts Robust Fourth-Quarter Earnings, Beats Expectations for First-Quarter Sales Outlook

Li Auto (NASDAQ: LI) has announced its financial results for the fourth quarter of 2023, exceeding expectations and providing an optimistic outlook for the first quarter of 2024, according to a report by Deutsche Bank.

The highlights of the results, as summarized by Deutsche Bank's analyst Edison Yu's team in a research note to investors, include:

Delivering strong performance in the fourth quarter, with 131,805 units delivered, surpassing forecasts.

· Generating revenue of 41.7 billion RMB, slightly above Deutsche Bank's estimate of 41.0 billion RMB, due to higher-than-expected average selling prices (ASP).

· Achieving a total gross margin of 23.5%, exceeding both Deutsche Bank's and consensus estimates of 21.0% and 21.7%, respectively. This was attributed to a stronger vehicle margin of 22.7%, a significant increase of 150 basis points quarter-over-quarter (QoQ), boosted by the true-up of warranty reserves.

· Generating strong free cash flow of over 14 billion RMB, materially better than anticipated, supported by positive working capital movements.

Management also provided a bullish first-quarter guidance, calling for deliveries of 100,000 to 103,000 units, exceeding Deutsche Bank's forecast of 95,000 units. This assumes a significant step-up in deliveries in March to over 50,000 units, compared to January's 31,165 units.

Revenue for the first quarter is expected to range from 31.25 billion to 32.19 billion RMB, implying a sequential decrease in ASP (likely due to promotional activities). Gross margin is expected to hover around 20%.

Looking ahead, Li Auto is targeting deliveries of over 70,000 units in June and aims to achieve monthly deliveries of 100,000 units by the end of the year.