XPeng (9868 HK): Sustained Losses Amid Growth Challenges

Recommendation: SELL

• Target Price: HK$18.00
• Date of Recommendation: September 9, 2024
• Broker Company: UOB Kay Hian

Investment Thesis:

XPeng faces ongoing financial challenges, with sustained losses and cash outflows continuing to plague the company. Despite recent sales growth driven by its sub-brand Mona, XPeng’s profitability remains a concern, leading to the sell recommendation.

Key reasons for the negative outlook include:

• Sales Growth Offset by Losses: XPeng saw a 13% yoy increase in insurance registrations in the 35th week of 2024, reaching 3,500 units. However, despite the positive sales trend, XPeng is expected to report a net loss of RMB7.80 billion for 2024, with continued losses projected through 2026.
• Mona’s Contribution: The introduction of the Mona sub-brand has boosted sales, but it is insufficient to reverse the company’s overall financial trajectory. XPeng’s net losses for 2024-2026 are forecasted at RMB7.80 billion, RMB6.13 billion, and RMB5.22 billion, respectively.

Financial Performance:

• Wholesale Shipments: XPeng’s wholesale shipments grew by 3% yoy to 14,036 units in August 2024, bringing the YTD total to 77,209 units.

Valuation and Catalysts:

The target price of HK$18.00 reflects XPeng’s ongoing financial difficulties and the uncertain outlook for profitability. Despite recent sales growth, the company’s cash burn and losses justify the sell recommendation.

Thank you