Zhongtong Finance APP learned that CICC released a research report stating that it maintains the "outperform industry" rating for Li Auto Inc-W (02015), considering that the company's operational improvement exceeded expectations, raising the profit forecast for 24 years by 20% to 10.5 billion yuan, maintaining the profit forecast for 25 years, and increasing the target price by 28% to 128 Hong Kong dollars. The company's 3Q24 revenue was 42.87 billion yuan, up 35.3% quarter-on-quarter; Non-GAAP net income was 3.85 billion yuan, up 156.2% quarter-on-quarter. After the operational adjustments in the first half of the year, the company's 3Q sales volume returned to a high level of monthly sales of 0.05 million vehicles, driving performance beyond market expectations.

CICC's main points are as follows:

3Q performance exceeded market expectations; operations returned to steady growth.

The company returned to a track of steady growth in 3Q, with sales reaching 152,831 vehicles, an increase of 44,250 vehicles quarter-on-quarter, and revenue of 42.87 billion yuan. As for the gross margin, the gross margin of the automotive business was 20.9%, up 2.2ppt quarter-on-quarter. The bank expects that although the L6 model's proportion has increased, the increase in the proportion of various Max versions of the models and the effective cost reduction in the supply chain have boosted the gross margin performance, driving the gross margin beyond market expectations. In terms of expenses, R&D expenses in 3Q were 2.59 billion yuan, down 14.6% quarter-on-quarter, primarily driven by the reduction in the R&D cycle of models and the number of R&D personnel; sales and management expenses for 3.36 billion yuan in 3Q, up 19.3% quarter-on-quarter, mainly due to the confirmation of some of Li Xiang's CEO incentives and the expansion of sales and management personnel, diluting GAAP net income. The company's income tax expense in 3Q was 0.58 billion yuan, compared to 0.077 billion yuan in 2Q24. Corresponding to the company's Non-GAAP net income of 3.85 billion yuan, up 156.2% quarter-on-quarter.

4Q sales guidance is positive, supercharging layout is rapidly improving.

The company guides to achieve sales of 0.16-0.17 million vehicles in 4Q, corresponding to revenue of 43.2-45.9 billion yuan, with the average selling price per vehicle at 0.27 million yuan. The bank predicts that the company is expected to continue to maintain steady growth and profitability in 4Q under the stimulus of the old-for-new policy. As of October 31, the company officially completed the construction of the 1000th charging station. The company previously stated that the efficiency of replenishing power is a winning factor in the sales volume of pure electric models, and established a plan to equip subsequent pure electric models with 5C supercharging capacity as standard. In the long term, the company plans to invest 6 billion yuan in the 5C supercharging network, with plans to build 5000 company-owned 5C supercharging stations, aiming for a nationwide coverage of 95% on highways and national roads. The bank expects that with the pre-deployment layout of the supercharging network, the company is likely to better support the volume of new pure electric vehicles next year.

Asia vets driving capabilities continue to improve, leading the industry in data iteration capabilities.

Since 2021, the company has continuously increased its investment in intelligent driving research and development, gone through several rounds of technical architecture adjustments. Starting from July 2024, it fully pushed the imageless NOA function, and iterated to the end-to-end + VLM model technology roadmap, bringing the intelligent driving capabilities into the forefront of the industry. In addition, the company has increased promotion and test drive efforts for consumers in the store end. From the beginning of the year, the Max versions of each vehicle model have continued to improve to 60-70%, effectively driving the increase in vehicle gross margin and expanding the user base of intelligent driving products, further establishing the leading advantage in the next round of data iteration. In the long term, intelligent driving level is gradually becoming the core capability of auto companies, and the industry believes that the company has technological and data advantages.

Risks: Pure electric vehicle models falling short of expectations; intelligent driving falling short of expectations; intensifying market competition.