The stocks of U.S.-listed Chinese electric vehicle makersNio ($NIO Inc.(NIO)$ ),Li Auto ($Li Auto(LI)$ ), andXpeng ($XPeng Inc.(XPEV)$ ) have fared well, rising by between 20% to 25% each over the last two weeks, compared to the S&P 500 which gained about 4% over the same period. The recent rally is driven by a couple of factors. Firstly, delivery figures for January 2022 were quite strong. Xpeng saw monthly deliveries rise 115% year-over-year to 12,922, while Li Auto delivered 12,268 vehicles, marking a 128% increase year over year. Nio saw sales rise by about 34% to 9,652 units. Separately, the sentiment surrounding EV stocks, in general, has also picked up since bellwether Tesla ($Tesla Motors(TSLA)$ ) published a solid set of Q4 2021 results in late January, reporting solid revenue growth and margin expansion. Moreover, investors and brokerage analysts appear to be seeing value in Chinese EV stocks, considering that they declined considerably over the past year. For example, Nio is off 60% from all-time highs, while Xpeng is down about 40%, and all three companies trade at between 4x to 5.5x projected 2022 sales, which is not too high for EV companies posting big delivery growth.
So what’s the outlook like for these companies? While the stocks could see some volatility going forward, given the rising interest rate environment and potential tensions with China, the underlying business should continue to fare well. Demand for electric vehicles remains hot in China supported by favorable regulation. For perspective, EV penetration as a percentage of new-car sales in China stood at approximately 15% in 2021, compared to just about 4% in the U.S. Delivery growth is also likely to ramp up further this year, driven by new capacity additions and potential international expansion. Margins could also trend higher for these companies, driven by better economies of scale and fixed cost absorption.
See our analysis onNio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?for more details on how the three Chinese EV stocks compare.
Below you’ll find our previous coverage of Nio, Li Auto, and Xpeng where you can track our view over time.
[1/3/2022] Chinese EV Stocks Had A Good December. What Does 2022 Hold?
U.S.-listed Chinese electric vehicle makers Nio (NYSE: NIO), Li Auto (NASDAQ: LI), and Xpeng (NYSE: XPEV) reported solid delivery numbers for December 2021, despite the ongoing supply chain issues which has hurt vehicle production globally. While EV demand in China has remained robust through the past year, December proved to be particularly strong, due to a planned subsidy cut on electric vehicles in 2022, which likely caused some buyers to advance their purchases. So how did the three companies fare in December and for 2021?
Xpeng took the top spot for December and 2021, delivering a record 16,000 vehicles for the month, driven by strong sales of its P7 sedan and a quick production ramp of its recently launched Xpeng P5. Total deliveries for 2021 stood at a little over 98,000 vehicles, up 263% versus last year. Li Auto, too, delivered a record 14,087 units in December, with its full-year deliveries rising 177% to 90,491 vehicles as the company witnessed robust demand for the updated version of the Li-One SUV, its only vehicle model. Although Nio didn’t post record monthly numbers, with deliveries coming in at about 10,489 vehicles, its full-year numbers grew by around 109% year-over-year to 91,429 units.
So what’s the outlook like for these companies in 2022? While we expect delivery growth to ramp up further, driven by new capacity additions and potential international expansion, with margins also trending higher, driven by better economies of scale and fixed cost absorption, the outlook for the stock prices is likely to be less clear. The ongoing regulatory concerns in the Chinese markets and rising interest rates could weigh on the returns for EV stocks which are high growth, high multiple plays. See our analysis onNio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?for more details on how the three Chinese EV stocks compare.
Below you’ll find our previous coverage of Nio, Li Auto, and Xpeng where you can track our view over time.
[10/28/2021] What’s New With Li Auto Stock?
Li Auto stock (NASDAQ: LI) rose by almost 4.6% over the last week, compared to the broader S&P 500 which remained roughly flat over the same period. The stock also remains up by a solid 25% over the last month (about 21 trading days). While Li Auto stock faced some pressure in September due to the Evergrande debt crisis in China and concerns over rising bond yields, it has recovered sharply through October driven by a couple of factors. Firstly, Li Auto and other Chinese EV players have scaled up their deliveries nicely despite the ongoing chip shortage, likely enabling them to gain market share at the expense of rivals, particularly in the domestic market where they drive a bulk of sales. For example, Li Auto grew its deliveries by 190% year-over-year in Q3 to about 25,116 vehicles, while Mercedes Benz saw global retail sales drop by almost 30% over the same period. Secondly, the broader EV space has also gained, driven by positive news from EV bellwether Tesla, which posted a solid set of Q3 2021 earnings and won a 100,000 vehicle order from rental car major Hertz.
Now, is Li Auto stock poised to grow further? Based on our machine learning analysis of trends in the historical stock price, there is a 53% chance of a rise in LI stock over the next month (twenty-one trading days). See our analysis onLi Auto Stock Chance Of Risefor more details.
Five Days: LI 4.6%, vs. S&P 500 0.3%; Outperformed market
(23% event probability)
- Li Auto stockrose 4.6%over a five-day trading period ending 10/27/2021, compared to the broader market (S&P500) which rose 0.3% over the same period.
- A change of 4.6% or more over five trading days has a 23% event probability, which has occurred 114 times out of 496 in the last two years.
Ten Days: LI 14%, vs. S&P 500 4.3%; Outperformed market
(14% event probability)
- Li Auto stockrose 14%over the last ten trading days (two weeks), compared to the broader market (S&P500) which rose by 4.3%.
- A change of 14% or more over ten trading days has a 14% event probability, which has occurred 68 times out of 496 in the last two years.
Twenty-One Days: LI 25%, vs. S&P 500 4.7%; Outperformed market
(10% event probability)
- Li Auto stock rose 25% over the last twenty-one trading days (about one month), compared to the broader market (S&P500) which rose by 4.7%
- A change of 25% or more over twenty-one trading days has a 10% event probability, which has occurred 49 times out of 497 in the last two years.
Electric vehicles are the future of transportation, but picking the right EV stocks can be tricky. Investing inElectric Vehicle Component Supplier Stockscan be a good alternative to play the growth in the EV market.
[9/23/2021] Li Auto Stock Hit By Chip Shortage And Evergrande Crisis, But It May Be Time To Buy
Li Auto (NASDAQ: LI) stock declined by almost 7.5% in Monday’s trading and remains down by 9.5% over the last week. There are a couple of factors that drove the sell-off. Firstly, Li cut its guidance for the current quarter, noting that it expects to deliver about 24,500 vehicles, down from its previous guidance of 25,500 to 26,000 vehicles, due to the shortage of certain semiconductor components. This implies that September deliveries would stand at roughly 6,500 units – a decline of about 30% versus August. Moreover, last week, China’s minister for industry and information technology said that the country has “too many” EV players, and this is stoking fears that the EV space could see more interference from the Chinese state going forward. Separately, there are concerns that China’s second-largest real estate developer, the struggling Evergrande group, could default on its debt. The company apparently has liabilities to the tune of around $300 billion and a default could impact Chinese banks and credit markets, and this caused a broader sell-off in Chinese and global stocks on Monday.
So, is Li Auto stock worth a look following the recent sell-off? We think the stock is worth a look. EV demand clearly isn’t an issue in China as EV deliveries in August surged by 200% year-over-year to 249,000 across manufacturers. Moreover, the shortage of the specific chips that Li Auto appears to be waiting on appears to be caused by the current Covid surge in Malaysia, rather than by structural issues. This could resolve in the coming months, helping the company scale up production. Li’s valuation also remains attractive relative to other Chinese electric vehicle players, trading at about 8x projected 2021 revenue, compared to Nio, which trades at about 10x, and Xpeng which trades at over 11x. Li Auto stock also remains down by about 23% from its June 2021 highs, currently trading at about $27 per share, presenting a reasonable entry point for investors.
[8/31/2021] Li Auto Stock Updates
Li Auto (NASDAQ: LI) posted a slightly wider than expected net loss for Q2 2021, although its revenues and outlook for Q3 beat estimates. The company delivered a total of 17,575 vehicles in Q2 marking a sequential increase of about 40% and a year-over-year increase of about 166%, driven by surging demand for the upgraded version of the company’s Li-One SUV. Vehicle sales came in at about $759 million marking an increase of about 42% sequentially. Gross profit margins stood at 18.9%, up from 13.3% in Q2 2020 and 17.3% in Q1 2021, indicating that Li Auto is producing its vehicles much more efficiently.
Li Auto’s outlook was also solid, with the company expecting deliveries to come in at between 25,000 and 26,000 for Q3 2021, marking a sequential increase of over 45% at the mid-point. The guidance is particularly encouraging as it comes despite higher competition in the Chinese EV market and the ongoing semiconductor shortage which has constrained production in the auto industry. Moreover, Li’s projected growth is also stronger than its rivals such as Nio which has only guided for 10% sequential growth at the mid-point of its guidance for Q3, and Xpeng which projects about 25% growth. Li also expects total revenue to rise to between $1.08 billion and $1.12 billion for Q3.
So is Li Auto stock worth considering at current levels? Although the stock has rallied by around 70% from its May 2021 lows to about $29 currently, it still trades at just about 9.5x projected 2021 revenues, which is lower than rivals such as Nio (NYSE: NIO) and Xpeng, which trade at about 11x and 13x, respectively. We think the lower multiple and stronger near-term growth prospects make Li Auto a solid pick at current levels. See our analysis onNio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?for an overview of the financial and valuation metrics of the three Chinese EV players.
[7/6/2021] Chinese EV Players Post Record Deliveries
The top U.S. listed Chinese electric vehicle players Nio (NYSE: NIO), Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) all posted record delivery figures for June, as the automotive semiconductor shortage, which previously hurt production, shows signs of abating, while demand for EVs in China remains strong. While Nio delivered a total of 8,083 vehicles in June, marking a jump of over 20% versus May, Xpeng delivered a total of 6,565 vehicles in June, marking a sequential increase of 15%. Nio’s Q2 numbers were roughly in line with the upper end of its guidance, while Xpeng’s figures beat its guidance. Li Auto posted the biggest jump, delivering 7,713 vehicles in June, an increase of over 78% versus May. Growth was driven by strong sales of the upgraded version of the Li-One SUV. Li Auto also beat the upper end of its Q2 guidance of 15,500 vehicles, delivering a total of 17,575 vehicles over the quarter.
Now, although growth has certainly picked up, the stocks don’t exactly appear cheap at current valuations. Nio and Xpeng trade at 15x forward revenue, while Li Auto trades at 10x. Near-term threats to EV valuations include higher inflation and recent commentary by the U.S. Federal Reserve, which is now apparently looking at two interest rate hikes in 2023, instead of 2024. This could put pressure on high-multiple, high-growth stocks, including EV names. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?we compare the financial performance and valuations of the major U.S.-listed Chinese electric vehicle players.
[6/21/2021] Chinese EV Stocks Fully Priced After Recent Rally?
The stocks of Chinese EV players have surged over the last month, largely reversing the effects of the sell-off seen earlier this year. Nio stock (NYSE: NIO) has rallied by almost 38% over the last month, Li Auto (NASDAQ: LI) gained 45%, and Xpeng (NYSE: XPEV) surged by almost 58%. Now although the three companies posted mixed delivery figures for the month of May, with Nio and Li Auto both posting declines in their deliveries versus April, and Xpeng growing sales marginally, the sales numbers likely weren’t as bad as expected, considering the semiconductor shortage that has roiled the auto industry. In contrast, major auto players such as GM and Ford had to temporarily idle or scale back production at several plants.
The outlook provided by the three companies was also stronger than expected, giving investors confidence that the worst of the semiconductor shortage is likely over. Li Auto has guided to 14,500 to 15,500 deliveries for the second quarter, a sequential increase of 22% on the upper end. The company says that it is optimistic that actual numbers will exceed guidance, given that it is seeing stronger than expected orders for the upgraded version of its Li-One SUV. Nio also reiterated its Q2 2021 delivery guidance of 21,000 to 22,000 vehicles, implying that it could deliver a record 8,200 vehicles in June.
Now are the stocks a buy at current levels? While the growth outlook is certainly strong, the stocks don’t exactly appear cheap at current valuations. Nio trades at 14x forward revenue, while Li Auto trades at 9x, and Xpeng trades at about 16x. Near-term threats to EV valuations include higher inflation and recent commentary by the U.S. Federal Reserve, which is now apparently looking at two interest rate hikes in 2023, instead of 2024. This could put pressure on high-multiple, high-growth stocks, including EV names. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?we compare the financial performance and valuations of the major U.S.-listed Chinese electric vehicle players.
[10/30/2020] How Do Nio, Xpeng, and Li Auto Compare
The Chinese electric vehicle (EV) space is booming, with China-based manufacturers accounting for over 50% of global EV deliveries. Demand for EVs in China is likely to remain robust as the Chinese government wants about 25% of all new cars sold in the country to be electric by 2025, up from roughly 5% at present. While Tesla is a leader in the Chinese luxury EV market driven by production at its new Shanghai facility, Nio (NYSE:NIO), Xpeng (NYSE: XPEV), and Li Auto (NASDAQ: LI) – three relatively young U.S. listed Chinese electric vehicle players, have also been gaining traction. In our analysis Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare?we compare the financial performance and valuation of the major U.S. listed Chinese electric vehicle players. Parts of the analysis are summarized below.
Overview Of Nio, Li Auto & Xpeng’s Business
Nio, which was founded in 2014, currently offers three premium electric SUVs, ES8, ES6, and EC6, which are priced starting at about $50k. The company is working on developing self-driving technology and also offers other unique innovations such as Battery as a Service (BaaS) – which allows customers to subscribe for car batteries, rather than paying for them upfront. While the company has scaled up production, it hasn’t come without challenges, as it recalled about 5,000 vehicles last year after reports of multiple fires.
Li Auto sells Extended-Range Electric Vehicles, which are essentially EVs that also have a small gasoline engine that can generate additional electric power for the battery. This reduces the need for EV-charging infrastructure, which is currently limited in China. The company’s hybrid strategy appears to be paying off – with its Li ONE SUV, which is priced at about $46,000 – ranking as the top-selling SUV in the new energy vehicle segment in China in September 2020. The new energy segment includes fuel cell, electric, and plug-in hybrid vehicles.
Xpeng produces and sells premium electric vehicles including the G3 SUV and the P7 four-door sedan, which are roughly positioned as rivals to Tesla’s Model Y SUV and Model 3 sedan, although they are more affordable, with the basic version of the G3 starting at about $22,000 post subsidies. The G3 SUV was among the top 3 Electric SUVs in terms of sales in China in 2019. While the company began production in late 2018, initially via a deal with an established automaker, it has started production at its own factory in the Guangdong province.
How Have The Deliveries, Revenues & Margins Trended
Nio delivered about 21k vehicles in 2019, up from about 11k vehicles in 2018. This compares to Xpeng which delivered about 13k vehicles in 2019 and Li Auto which delivered about 1k vehicles, considering that it began production only late last year. While Nio’s deliveries this year could approach about 40k units, Li Auto and Xpeng are likely to deliver around 25k vehicles with Li Auto seeing the highest growth. Over 2019, Nio’s Revenues stood at $1.1 billion, compared to about $40 million for Li Auto and $330 million for Xpeng. Nio’s Revenues are likely to grow 95% this year, while Xpeng’s Revenues are likely to grow by about 120%. All three companies remain deeply lossmaking as costs related to R&D and SG&A remain high relative to Revenues. Nio’s Net Margins stood at -195% in 2019, Li Auto’s margins stood at about -860% while Xpeng’s margins stood at -160%. However, margins are likely to improve sharply in 2020, as volumes pick up.
Nio’s Market Cap stood at about $37 billion as of October 28, 2020, with its stock price rising by about 7x year-to-date due to surging investor interest in EV stocks. Li Auto and Xpeng, which were both listed in the U.S. around August as they looked to capitalize on surging valuations, have a market cap of about $15 billion and $14 billion, respectively. On a relative basis, Nio trades at about 15x projected 2020 Revenues, Li Auto trades at about 12x, while Xpeng trades at about 20x.
While valuations are certainly high, investors are likely betting that these companies will continue to grow in the domestic market, while eventually playing a larger role in the global EV space leveraging China’s relatively low-cost manufacturing, and the country’s ecosystem of battery and auto parts suppliers. Of the three companies, Nio might be the safer bet, considering its slightly longer track record, higher Revenues, and investments in technology such as battery swaps and self-driving. Li Auto also looks attractive considering its rapid growth – driven by the uptake of its hybrid powertrains – and relatively attractive valuation of about 12x 2020 Revenues.
Comments