Tianfeng Securities released a research report stating that the bank believes the extreme sentiment regarding concerns over domestic consumer spending at the trading level has been digested in Q3. In fact, automotive consumption showed a slight recovery trend in July, driven by the vehicle replacement policy. Thereafter, it is indeed difficult to determine the continuity of market demand, but the fundamentals of Li Auto-W (02015) are expected to gradually trend upwards in Q3 and Q4. The bank also predicts that the development of asia vets technology is likely to drive the increase in unit value/gross margin. With the completion of L6 ramp-up and the gradual recovery of the 789 orders, gross margins are expected to be further released, thus determining that Li Auto is likely to release elasticity from gross profit and net income in the second half of the year. The bank forecasts the company's adjusted net income for 2024/25 to be 11.6/14.8 billion yuan.

Tianfeng Securities' main points are as follows:

Performance in Q3 2024:

Q3 total revenue was 42.9 billion yuan, +24% year-on-year, and +35.3% quarter-on-quarter; automotive sales revenue was 41.3 billion yuan, +22.9% year-on-year, and +36.3% quarter-on-quarter, mainly attributed to the increase in automobile delivery volumes; in the third quarter of 2024, other sales and service revenue was 1.6 billion yuan, a year-on-year increase of 45.8% and a quarter-on-quarter increase of 14.1%, mainly due to the increase in cumulative vehicle sales and delivery volumes, which also boosted sales of products and services.

Profit Situation:

Overall gross margin is 21.5%, with a vehicle gross margin of 20.9%. The bank expects the initial ramp-up gross margin of L6 to exceed expectations, with further economies of scale in H2 expected to reduce costs. Net income is 2.8 billion yuan, consistent year-on-year, and up 156.2% quarter-on-quarter; Non-GAAP net income is 3.9 billion yuan, a year-on-year increase of 11.1% and up 156.2% quarter-on-quarter.

Auto sales situation:

In Q3 2024, Li Auto delivered a total of 152,831 units, a year-on-year increase of 45.4%. In the market for new energy vehicles priced above 0.2 million yuan, market share increased from 14.4% in Q2 to 17.3% in Q3, ranking first among domestic passenger vehicle manufacturers in china for prices above 0.2 million yuan. The company's sales in the Chinese market for passenger vehicles priced above 0.2 million yuan have surpassed several established european premium brands for the first time, ranking among the top three across all brands and first among all domestic brands. From 2023 to date, in the new energy vehicle market priced above 0.3 million yuan, the total delivery volumes of the Li L7, Li L9, and Li L8 models ranked first, second, and third respectively in their segment; since its release, the monthly delivery volume of the Li L6 has exceeded 25,000 units, with cumulative deliveries surpassing 0.139 million units, ranking second in the passenger vehicle market priced above 0.2 million yuan, only below Tesla's Model Y.

Breakthrough in intelligent driving:

In October, the company released the OTA 6.4 update for the Ideal MEGA and L series, adding and upgrading features in smart driving, smart space, and smart electric areas; the company pushed a new intelligent driving solution combining end-to-end (E2E) and visual language models (VLM) to over 0.32 million Ideal AD MAX vehicle owners. Additionally, the Ideal assistant continues to evolve, achieving more natural human-like user interactions through upgrades to the voice model and the addition of eye tracking features. The firm believes the breakthroughs in intelligent driving will likely drive further order growth.

Continuous improvement in store and infrastructure layout:

As of September 30, 2024, Ideal Autos operates 479 retail centers across 145 cities nationwide, as well as 436 after-sales service and feedback centers in 221 cities. In terms of charging network construction, Ideal Autos has operated 894 Ideal Super Charging Stations, equipped with 4,286 super charging stations, which may enhance the user experience and encourage more users to choose the company’s products.

Future outlook:

Q4 vehicle delivery guidance of 0.16 million-0.17 million, year-on-year growth of 21.4%-29%; total revenue guidance of 43.2 billion-45.9 billion, year-on-year growth of 3.5%-10%.