Citi has initiated coverage of 's Hong Kong shares with a Buy rating and a HK$165 ($21) price target. Li Auto closed at HK$106.3 on Tuesday, and the price target implies a 55 percent upside.

Li Auto's listing in Hong Kong will benefit the company by providing more funds for research and development, according to Citi's report as cited by Futunn on Wednesday.

That could offset the policy risks associated with a US listing for Li Auto and greater access to institutional investors in the Chinese mainland, the report said.

Li Auto delivered 8,589 units in July, up 251 percent year-over-year and up 11 percent from the previous month. The market expects its September deliveries to reach 10,000 units, which is expected to be a positive catalyst, the report said.

China's new energy passenger vehicle market remained strong in the third quarter and the momentum is believed to continue into the fourth quarter, the report said.

But the bank lowered its price target on Li Auto's US shares to $42.50 from $48.1, maintaining its Buy rating.

The new target price incorporates the impact of H-share Hong Kong-listed equity dilution, the bank said.

Li Auto's Hong Kong-traded shares jumped 5.36 percent to HK$112 as of press time.

CICC initiates coverage on Li Auto H shares with Outperform rating and HK$187 price target