Goldman Sachs analyst Tina Hou reiterated a Buy rating on XPeng Inc. (NYSE:XPEV), with a price forecast of $11.50.

Yesterday, the company reported fiscal first-quarter sales growth of 62.3% year-on-year, to 6.55 billion Chinese Yuan ($0.91 billion), beating the analyst consensus estimate of 6.17 billion Chinese Yuan ($0.87 billion). Total revenues declined 49.8% sequentially.

Adjusted net loss per ADS of $0.21 beat the analyst consensus loss estimate of $0.27.

Per Hou, the beat is mainly from software services revenue with much higher margins versus the vehicle sales segment.

With recurring software services revenue recognition, the company gross margin should be sustainable at low-to-mid teens level throughout 2024.

In the near term, the analyst expects the company's vehicle delivery volume to regain momentum with the latest G6 model launch and the margin to improve on a larger vehicle delivery scale together with a battery pricing decline.

In the longer term, Hou projects XPeng's leading position in NOA (navigation on autopilot) with strong R&D focus could provide further upside to its revenue growth and margin profile.

Overall, the company's G6, together with P7/P7i, is expected to be a major volume contributor going forward, driving a 63% CAGR in vehicle sales and a market share gain from 2.5% to 4.0% over 2023E-2025E.

The analyst expects the company's FY24 revenues to be RMB34.75 billion and FY25 revenues to be RMB54.49 billion.

Price Action: XPEV shares are trading higher by 0.46% to $8.81 at last check Wednesday.

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