Date: 26 September 2024
Broker Name: UOB Kay Hian

Insurance Registrations and Sales Growth

Li Auto saw a strong performance in terms of insurance registrations in the 38th week of 2024 (16-22 September), with a 33.3% year-on-year (yoy) increase and a 3.4% month-on-month (mom) rise, although registrations declined 4.8% week-on-week (wow). The company recorded 12,000 units in the 38th week, bringing the cumulative insurance registrations for the first 38 weeks of 2024 to 328,274 units. This progress is in line with the broker’s estimated 2024 deliveries of 500,000 units, though it is still behind Li Auto’s own target of 560,000 to 640,000 deliveries for the year.

Strong Performance in the EV Market

Li Auto continues to carve out a strong presence in the electric vehicle (EV) market, with its insurance registrations and sales figures reflecting solid growth. The 33.3% yoy increase in insurance registrations highlights the company’s steady performance, despite minor fluctuations in week-over-week sales. This growth aligns with the broader trend of increasing demand for passenger electric vehicles (PEVs) in China, of which Li Auto is a significant player.

Financial Forecasts and Delivery Targets

The broker maintains its net profit forecasts for Li Auto for 2024-2026 at RMB4.814 billion, RMB4.355 billion, and RMB3.941 billion, respectively. These forecasts are based on delivery targets of 500,000 units in 2024, 550,000 units in 2025, and 600,000 units in 2026. Although Li Auto’s insurance registrations are growing, the company faces the challenge of closing the gap between actual performance and its higher internal target for 2024.

Market Challenges and Competition

Li Auto is positioned in a highly competitive market, where established players like BYD and emerging companies such as Geely and XPeng also vie for market share. The overall market environment is characterized by fierce competition, especially as companies introduce new models and technologies to attract consumers. While Li Auto has shown strong growth, maintaining its competitive edge in this dynamic market will require sustained innovation and market penetration.

Profitability Outlook

The broker’s analysis suggests that Li Auto will face decreasing net profit in the coming years. The projected net profit is expected to decline from RMB4.814 billion in 2024 to RMB3.941 billion by 2026, reflecting the company’s focus on expansion and higher operational costs associated with scaling up production. Despite these challenges, Li Auto’s growth in insurance registrations and steady sales performance offer a positive outlook for the company’s future in the EV market.