Summary of Key Points
On May 20th, Li Auto released its Q1 2024 earnings report, revealing revenue of 25.6 billion RMB, a 36.4% year-on-year increase but falling short of the market's 27.4 billion RMB expectations and below the company's own guidance. This underperformance reflects broader challenges and competitive pressures in the EV market.
Individual Insights Summary
1. Weak Performance Compared to Previous Year
Compared to the robust performance in the previous year, Li Auto's Q1 results are notably weak. There was a significant drop in delivery volume and a sharp decline in growth rate, with profits also falling markedly.
2. Impact of Competition and Product Performance
The Li L series faced intense market competition, leading to a noticeable slowdown in delivery growth. The newly launched Li MEGA underperformed, placing the burden on the L6 model to help the company rebound from this slump.
3. Market Reaction and Future Prospects
Given the persistent weak delivery performance, the disappointing earnings were anticipated. Despite an overall market uptrend, Li Auto's stock declined sharply post-earnings. The market's reaction may have been overly negative, suggesting potential for strategic allocation. The future hinges on the performance of the L6 model, which could drive a recovery.
Financial Analysis: Revenue and Profit Decline
Revenue Misses Expectations
Li Auto reported Q1 revenue of 25.6 billion RMB, up 36.4% year-on-year but significantly below the market's forecast of 27.4 billion RMB and the company's guidance lower limit. The decline in performance compared to previous quarters is primarily due to weaker delivery growth, with quarterly deliveries reaching 80,000 units, a 52.9% year-on-year increase.
Profitability Decline
Profitability saw a sharper decline, with a substantial drop in gross margin being the primary driver. Net profit for Q1 was 591 million RMB, down 36.7% year-on-year and significantly lower than the previous quarter's 5.75 billion RMB. Adjusted net profit also declined by 9.7% year-on-year to 1.3 billion RMB.
Operational Analysis: Sales Decline and Product Challenges
Declining Sales Performance
Over the past year, Li Auto demonstrated strong product iteration and market adaptation, with notable sales recovery driven by the Li L series. However, Q1 2024 saw intensified competition and reduced consumer demand due to end-of-year promotions. The delivery volume, although reaching 80,400 units, reflected a significant slowdown compared to Q4 2023.
Li Auto's L series faced stiff competition from players like Huawei's AITO, which leveraged strong technological prowess and brand influence. The launch of Xiaomi's SU7 further intensified market competition, demanding continuous innovation and market sensitivity from Li Auto to remain competitive.
Underwhelming Li MEGA Performance
The Li MEGA, despite high pre-launch expectations, failed to deliver strong post-launch results. This could be attributed to the market's high expectations and Li Auto's traditional focus on extended-range vehicles, necessitating time for the new electric model to gain traction. The poor performance led to cost-cutting measures, including layoffs and potential delays in future model launches.
Despite challenges, Li Auto is banking on the L6, positioned in the 200,000-300,000 RMB range, to counter competition from Huawei and solidify its market presence.
Cautious Q2 Guidance
Li Auto initially projected optimistic Q1 2024 revenue and delivery volumes, but actual performance fell short. For Q2, the company has issued more cautious guidance, projecting deliveries of 105,000-110,000 units and revenue of 29.9-31.4 billion RMB. This conservative outlook aligns more closely with market realities.
Conclusion
Li Auto's Q1 2024 performance reflects significant challenges in the competitive EV market. While the L series and the new MEGA model struggled, the company's cautious Q2 outlook suggests an awareness of market dynamics and a strategic approach to future growth. Investors should consider the potential for recovery, particularly with the L6 model, while remaining mindful of market conditions and competitive pressures.
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