Industrial Securities believes that XPeng's short-term model changeover and sales pressure will not affect the company's long-term value.

Industrial Securities initiates coverage on XPeng with 'Buy' rating and HK$38.84 price target-CnEVPost

China-based brokerage firm Industrial Securities initiated coverage of XPeng Motors, giving it a Buy rating and a target price of HK$38.84.

XPeng is targeting the mass market in the mid-to-high end of the space, with a clear advantage in intelligence, and new model product power and sales are expected to increase significantly, the brokerage said in a research note on November 10.

In 2019-2022, the company launched a new model each year, with core models priced in the range of RMB 150,000 ($21,270)-400,000, corresponding to a market space of more than 8 million units, according to the note.

XPeng uses a direct sales plus dealership model to achieve rapid expansion of its sales and service network, and to rapidly increase production capacity by building factories and building supercharging piles to enhance the consumer replenishment experience, the brokerage said.

The company achieved sales of 12,728, 27,011 and 98,188 units of pure electric vehicles from 2019-2021, respectively. From January to October of this year, the figure was 103,470 units, ranking among the top performers in the industry, the brokerage noted.

The G9 SUV, equipped with 800V high-voltage fast charging and advanced intelligent driving technology, has strong competitiveness and is expected to reach 5,000 units in a single month, the note said.

A facelift of XPeng's flagship P7 sedan is expected to be released in the fourth quarter and deliveries to begin in the first quarter of 2023, with its smart driving capabilities, fast-charging capabilities, cabin comfort and intelligence expected to be significantly enhanced, according to the note.

Sales of the facelifted P7 are expected to rise to more than 8,000 units per month, Industrial Securities said.

XPeng will release two new models in 2023, with the B-class SUV expected to be released in the middle of the year and the C-class car expected to be released in the third quarter of 2023.

As the product matrix continues to improve, XPeng sales are expected to return to a rapid growth trajectory in the second quarter of 2023, the note said.

Industrial Securities believes that XPeng's short-term model changeover and sales pressure will not affect the company's long-term value.

XPeng is expected to sell 120,000 units, 158,000 units and 271,000 units in 2022-2024, with operating revenues of RMB 26.918 billion, RMB 41.080 billion and RMB 70.615 billion, respectively, according to the note.

Industrial Securities gave XPeng a Buy rating and a target price of HKD38.84/USD9.90, corresponding to 1.5x PS in 2023.

The day after the note was released, XPeng closed up 16 percent to HK$30.45 on November 11, as China's Covid control easing inspired investor optimism. Industrial Securities' price target implies an additional upside of 27.55 percent.

Stocks of electric vehicle companies trading in Hong Kong extended their gains today, with XPeng outperforming its local peer NIO as well as Li Auto.

At press time, XPeng was up 13.96 percent to HK$34.7, NIO was up 7.97 percent to HK$91.45 and Li Auto was up 2.3 percent to HK$73.35.

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