BEIJING, CHINA – NOVEMBER 20, 2023 – A Li AUTO new energy vehicle is seen in the showroom of … (+)
Chinese manufacturer of luxury electric vehicles Li automobile stock had a strong November, with the delivery of a record 41,030 units, an increase of approximately 2.7 times over last year. This number was also slightly higher than the 40,422 vehicles the company delivered in October. Li is seeing strong demand for its three SUVs, namely the Li L9, Li L7 and Li L8, all of which combine gasoline generators with batteries to extend the range of electric vehicles and reduce range anxiety . All three vehicles are relatively premium offerings, priced above RMB 300,000 ($42,000). Cumulative deliveries of Li Auto vehicles in 2023 reached 325,677 as of the end of last month, an increase of 191% from last year. XPeng also performed well in November, selling a record 20,041 units, 2.4 times more than November 2022. Nio delivered 15,959 vehicles for November, an increase of 12% compared to November 2022.
Today, in the current environment, LI stock has seen gains of 15%, going from $30 in early January 2021 to around $35 now, compared to an increase of around 25% for the S&P 500 over that period. ‘about 3 years. However, the increase in LI stock is far from constant. The stock’s returns were 11% in 2021, -36% in 2022, and 78% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 20% in 2023, which indicates that LI underperformed the S&P in 2021 and 2022. Indeed, consistently beating the S&P 500 – in good times and bad – has been difficult in recent years for individual stocks.
On the other hand, the Trefis High quality walletwith a collection of 30 titles, has has outperformed the S&P 500 every year during the same period. Why is that? As a group, stocks in the HQ portfolio have generated better returns with less risk relative to the benchmark; less of a roller coaster ride as evidenced by HQ Portfolio Performance Metrics. Given the current uncertain macroeconomic environment, characterized by high oil prices and high interest rates, could LI face a similar situation as it experienced in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a sharp rise?
There are concerns about global demand for electric vehicles, with most major automakers, including Volkswagen, Mercedes, Ford and GM, reporting slower adoption than expected. Automotive chip suppliers also reported lower-than-expected adoption of automotive semiconductors for the fourth quarter of 2023. However, demand does not appear to be an issue at the moment in China, with overall auto sales up 10%. % for October, with electric batteries. vehicles represent nearly 26% of total automobile sales.
Today, competition is intensifying, which has given rise to major price wars. But Li’s highly differentiated vehicles appear to give it an advantage in the market. Unlike its competitors who have experienced margin compression in recent quarters, Li’s margins have improved. In the third quarter, Li recorded a gross margin of 22%, compared to 12.7% in the third quarter of 2022 and 21.8% in the second quarter of 2023. Li Auto seeks to further strengthen its sales in December, targeting 50,000 monthly deliveries , given that it has sufficient production capacity. . Li is trading at around $36 per share, about 20% below recent all-time highs. In relative terms, the stock currently trades at 2.9x estimated 2023 earnings. While this is ahead of Chinese rival Nio, it is below Tesla.
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LI yield compared to the Trefis enhanced portfolio
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