Chinese investment bank CICC raised its price target on Li Auto by 86% to $40, which corresponds to 28% upside potential in the current share price and maintained its Outperform rating, citing Li Auto's strong cost control and efficient operations.
CICC reduced Li Auto's 2020/21 loss forecast to RMB 480/190 million, saying the current share price corresponds to 1.7 times 2025 EV/revenue, raising Li Auto's 2025 EV/revenue to 2.1 times.
CICC said that as Li Auto expands its sales and service network, it can continue to leverage its growing brand recognition to maintain efficient operating efficiencies at each of its retail stores.
At the end of October 2020, Li Auto had 41 retail stores in 36 cities across the country, with monthly sales of approximately 100 units per store.
Li Auto's gross profit per vehicle was RMB56,000 in the third quarter, up 45.7% from the previous quarter, and SG&A expenses per vehicle were RMB40,000, up 11.3% from the previous quarter, continuing to be low among new carmakers.
CICC expects Li Auto to continue to invest heavily in R&D for self-driving and intelligent cabin projects. As the company expands its sales network and invests in research and development, it expects to reach more customers, continue to unlock sales and remain competitive in the family segment.
In a recent conference call, Li Auto said it expects to triple its automated driving team in the first half of 2021, release a fully automated parking system based on its current hardware platform in 2021, and gradually achieve L4-level automated driving in 2022.
Li Auto is more concerned about the development of fast-charging technology. If 400KW fast-charging becomes widely available, Li Auto believes it will be the right time to launch a pure electric car.
At the same time, Li Auto believes that extended-range technology will still have a 5-10 year advantage in the configuration of medium and large SUVs.
CICC believes that Li Auto has successfully proven its product, R&D, supply chain, manufacturing and sales service capabilities in the Li ONE, and that it is expected to build more products with leading performance in intelligent driving and vehicle configuration in the future.
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