To The Moon

$Li Auto(LI)$ is scheduled to report its unaudited financial results for the first quarter of 2025 before the U.S. market opens on Thursday, 29 May 2025.

Revenue Guidance/Estimates: Li Auto had previously guided Q1 2025 revenue to be in the range of RMB 23.4 billion yuan to RMB 24.7 billion yuan (approximately $3.2 billion to $3.4 billion USD). This would represent a year-on-year decrease of 3.5% to 8.7%. Analyst consensus estimates for Q1 2025 revenue are around RMB 25.13 billion.

EPS Estimates: The consensus EPS forecast for Q1 2025 is approximately RMB 0.36. This would be a significant year-on-year decrease of 34.93% compared to Q1 2024's reported EPS of $0.08 (which would translate to a different RMB figure, but the percentage change is what matters).

Vehicle Deliveries For Q1 2025

Vehicle Deliveries (Confirmed): Li Auto has already announced that it delivered 92,864 vehicles in the first quarter of 2025. This figure is near the upper end of their previously guided range of 88,000 to 93,000 units.

This represents a 15.50% year-on-year increase in deliveries, but a 41.48% decrease from Q4 2024. This sequential decline suggests a weak start to the year, likely due to seasonal factors and increased competition in the Chinese EV market.

Sales Target Adjusted and Product Mix

Product Mix: Li Auto's current lineup includes the Li L6, Li L7, Li L8, Li L9 (extended-range SUVs), and the Li Mega (pure electric MPV). The company launched updated versions of the Li Mega and L-series EREVs in Q1, with deliveries starting in May.

Sales Target Adjustment: Recently, Li Auto reportedly lowered its 2025 annual sales target to 640,000 units from an earlier target of 700,000 units. This 8.57% cut is attributed to lower-than-expected order intake following the launch of the updated Li L6 and reflects the competitive market environment.

Chinese EV Market Remains Highly Competitive

The Chinese EV market remains highly competitive, with numerous domestic players and foreign brands vying for market share. Price wars and evolving consumer preferences are putting pressure on profitability across the industry. Li Auto has historically focused on extended-range electric vehicles (EREVs), which have resonated well with consumers concerned about range anxiety. However, the introduction of their first pure electric MPV, the Li Mega, and the competitive landscape for BEVs will be closely watched.

Li Auto (LI) Last Positive Earnings Call Saw Share Price Gained 0.66% Modestly

Li Auto had a positive earnings call on 14 March 2025 which saw its share price gained a modest 0.66% since.

The earnings call highlighted strong delivery numbers, financial performance, and expansion efforts, particularly in autonomous driving and international markets. However, there were concerns about declining gross margins, reduced net income, and challenges in maintaining high average selling prices. Despite these challenges, the company's strategic initiatives in R&D, supercharging infrastructure, and global presence are promising for long-term growth.

Li Auto (LI) Guidance

In the Li Auto Fourth Quarter and Full Year 2024 Earnings Conference Call, the company provided guidance for continued growth in 2025. They aim to deliver between 88,000 and 93,000 vehicles in Q1 2025, marking a year-over-year increase of 9.5% to 15.7%. The first quarter total revenue is expected to be between RMB 23.4 billion and RMB 24.7 billion, representing a year-over-year decrease of 8.7% to 3.5%.

Li Auto achieved record vehicle deliveries in Q4 2024 with over 158,000 units, contributing to a full-year total of over 500,000 units. The company also highlighted its strong financial position with a cash reserve of RMB 112.8 billion at the end of 2024, supporting long-term investments in electrification and AI. Additionally, the company is accelerating the deployment of its supercharging network, aiming for 2,500 stations by the launch of its first battery electric SUV, Li i8, and plans to expand to 4,000 stations by the end of 2025.

What to look for in the official Q1 2025 earnings report

In Q4 2024, Li Auto delivered over 158,000 vehicles, setting a new quarterly record. Full year deliveries exceeded 500,000 units, marking a significant milestone as the first emerging NEV brand and Chinese premium auto brand to reach this level.

Gross Margin: This is a crucial metric for profitability in the competitive EV market. Investors will be keen to see if Li Auto can maintain or improve its gross margin despite price competition.

Total revenues for Q4 2024 reached RMB44.3 billion, with full year total revenues at RMB144.5 billion. The company reported cash reserves of RMB112.8 billion, demonstrating strong cash generation capabilities. Gross margin in Q4 2024 was 20.3%, down from 23.5% in the same period last year. This decline was attributed to a change in product mix and interest subsidies affecting average selling price.

Operating Expenses: How well is the company controlling its research and development (R&D) and selling, general, and administrative (SG&A) expenses?

The average selling price (ASP) saw a decline due to interest subsidies and changes in the product mix, impacting overall revenue generation from vehicle sales.

Net Income/Profitability: Overall profitability will be a key indicator of the company's financial health. Net income in Q4 2024 was RMB3.5 billion, a 38.6% decrease year-over-year, despite a quarter-over-quarter increase. This decline was influenced by various factors including lower gross margins.

Cash Flow: Strong cash flow from operations is essential for funding future growth and investments.

Future Guidance: The company's outlook for Q2 2025 and the full year 2025 will be critical. This will include vehicle delivery targets and revenue expectations.

Impact of New Models: While updated models like the L-series and Mega started deliveries in Q1/early Q2, the earnings call might provide insights into their initial reception and contribution to sales.

The company rolled out AD Max V13, upgrading highway NOA to an end-to-end architecture. It also introduced AI reasoning visualization for enhanced user understanding of autonomous driving functions.

Market Commentary: Management's commentary on the overall market conditions in China, competition, and their strategy to navigate these challenges will be important.

In 2024, Li Auto built 1,420 supercharging stations, operating the largest highway supercharging network among auto OEMs in China. Plans to expand to 4,000 stations by the end of 2025 were announced.

Li Auto opened an R&D center in Munich, Germany, marking its first overseas R&D facility. The company also established servicing centers in Kazakhstan, Dubai, and Uzbekistan, with plans to enhance overseas expansion efforts.

Li Auto (LI) Price Target

Based on 26 analysts offering 12 month price targets for Li Auto in the last 3 months. The average price target is $32.65 with a high forecast of $45.00 and a low forecast of $20.03. The average price target represents a 12.93% change from the last price of $28.91.

I think Li Auto deliveries for Q1 202 which was a decline of 41.48% decrease from Q4 2024, this demonstrate Li Auto challenge of maintaining the high average selling price (ASP), this was impacting its overall revenue generation from vehicle sales in Q4 2024, which I think should surface in Q1 2025.

Technical Analysis - Exponential Moving Average (EMA)

While we are seeing upside movement and positive momentum on Li Auto in recent month, but we need to look at how it was like before the last quarter (Q4 2024) earnings, similar pattern, there is a risk of Li Auto revenue and gross margin going to be impacted by high ASP maintenance, and with significant lower vehicle deliveries for Q1 2025 compared to Q4 2024.

I am expected a sharp pullback when market came back on Tuesday (27 May), and we could be seeing investors took profits as well, so unless we can see better cost management which could improve Li Auto net income.

This looks like a decline and much negative momentum coming for Li Auto.

Summary

I think I will be looking for signs of resilience and strategic agility from Li Auto as it navigates these market dynamics. There is a risk of challenges in maintaining high ASP coming back similar to Q4 2024.

This could be one of the factors hitting the gross margin and net income, so I might planned to do a put options on Li Auto for next week.

Appreciate if you could share your thoughts in the comment section whether you think Li Auto would suffer a pullback on Tuesday (27 May) before its earnings on Thursday (29 May).

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.