Chinese EV innovator, Li Auto (LI), released its third-quarter results for the period ending September 30 on Monday. Revenue and earnings widely beat market expectations.
Li Auto designs, develops, and manufactures smart electric SUVs with cutting-edge technology and a wide driving range that could make a regular Tesla (TSLA) driver envious. The company currently sells just one vehicle, the hybrid-electric Li-One sport utility vehicle, and more models are expected.
I am neutral on the stock. (See Analysts’ Top Stocks on TipRanks)
Li Auto Reports Strong Revenue Growth
Total revenues for the third quarter were $1.21 billion, up 209.7% from $369 million in Q3 2020.
Deliveries grew by 190% from 8,660 vehicles in Q3 2020 to 25,116 vehicles in Q3 2021. The strong growth in revenue and deliveries was powered by the group’s expansion in retail stores which jumped from just 52 stores in December 2020 to 153 stores at the end of September 2021.
Q3 gross margins expanded sharply to 23.3%, up from 19.8% last year as vehicle sales margins increased with higher production volumes.
Vehicles margins reached 21.1% for the quarter, and Li Auto CFO, Tie Li, was quoted saying, “…gross margin reached 23.3%, further boosted by sales of regulatory credits in the quarter.”
Beating Analyst Expectations
Li Auto’s total revenue was 4.1% above the consensus of $1.16 billion. Its operating loss was thinner at $15.2 million, a 45.7% improvement from last year, and a sequential 82% decrease from Q2 2021.
The company’s net loss narrowed to US$3.3 million, 79.9% better than a comparable net loss for Q3 2020.
LI’s bottom line loss showed a 90.9% sequential improvement from the RMB235.5 million printed for the second quarter of 2021.
Li Auto Provides Strong Outlook for Q4
Going forward, Li Auto expects to deliver between 30,000 to 32,000 vehicles during the fourth quarter of the year. Should the company achieve that target, it would have increased deliveries by 107.4% to 121.2% from Q4 2020 – a strong execution performance by any standard.
Chairman and CEO of Li Auto, Xiang Li, highlighted that the industry has been facing chip supply shortages.
“To mitigate ongoing supply chain risks, we will continue to find solutions together with our supply chain partners”, Xiang said.
The company’s management team remains enthusiastic as ever about Li Auto’s growth prospects following a strong order intake and users’ rising acceptance of smart EVs.
Fourth-quarter total revenue is expected to increase by 112.7% to 127% year-over-year to somewhere around $1.37 billion to $1.46 billion.
Strong growth still lies ahead.
Wall Street’s Take
LI stock currently has a consensus Strong Buy rating from Wall Street analysts based on five Buy ratings. The average Li Auto price target of $46.58 represents 31.4% upside potential over the next 12 months.
Disclosure: At the time of publication, Brian Paradza did not have a position in any of the securities mentioned in this article.
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