CLSA Assigns Outperform Rating to LI AUTO-W with Target Price of HKD140; Profit Margin Remains Strong

Financial Performance: LI AUTO-W reported a net profit of RMB6.5 million for Q4 2025, aligning with market expectations and marking a return to profitability.

Future Projections: The company anticipates delivering 85,000-90,000 units in Q1 2026, although profit margins may be affected by rising raw material costs and slow sales.

Product Launch Impact: The upcoming launch of the L9 Livis in Q2 2026 is expected to enhance profit margins for LI AUTO-W.

Analyst Ratings: CLSA has set a target price of HKD140 for LI AUTO-W, maintaining an Outperform rating amidst the current market conditions.

Earnings Performance: LI AUTO-W reported a net profit of RMB20 million for 4Q25, significantly below the market expectation of RMB140 million, as per Citi's report.

Sales Guidance: The company anticipates sales of 85,000 to 90,000 units for 1Q26, with projected total revenue between RMB20.4 billion and RMB21.6 billion, indicating a 9% quarter-over-quarter decline in average vehicle selling price.

Future Projections: Management aims for over 20% sales growth in 2026, with a full-year vehicle gross margin target of 15%, although Citi has revised its net profit forecasts downward for 2026-27 due to lower gross margin expectations.

Analyst Ratings: Citi maintains a Neutral rating on LI AUTO-W with a target price of RMB72.7, while CLSA rates it as Outperform with a target price of HKD140, highlighting resilience in profit margins.

Weak Financial Performance: LI AUTO-W reported a significant decline in 4Q25 results, with revenue falling 35% year-over-year to RMB28.8 billion and a 94% drop in adjusted non-GAAP net profit.

Future Outlook: Despite the poor performance, Daiwa assigned a Buy rating, anticipating improvements in efficiency due to strategic adjustments, though growth in embodied AI may take time.

Sales Performance: LI AUTO-W reported a 35% year-over-year decline in 4Q25 sales, totaling RMB28.8 billion, although there was a 5% quarter-over-quarter increase. Sales volume also fell by 31% YoY but rose by 17% QoQ to 109,000 units.

Gross Margin and Income: The automotive gross margin decreased to 16.8%, impacted by product mix changes and a recall, while the non-GAAP net income was RMB261 million, surpassing market expectations but down significantly from RMB4 billion in the previous year.

Market Outlook: BofA Securities maintained a target price of HKD86 for LI AUTO-W and reiterated a Neutral rating due to ongoing pressure on profit margins.

Industry Forecast: JPMorgan anticipates a rebound in the Chinese automotive industry by 2Q26, projecting a 30% growth in passenger vehicle demand.

Store Openings Strategy: LI AUTO-W plans to focus new store openings in leading malls and quality car cities to enhance brand influence and attract better customer traffic.

City Layout Focus: The company will shift its focus to high-tier cities for sales of BEV models, as lower-tier cities are already well-established.

Store Partner Program: A new 'store partner' program has been launched, allowing stores to operate as independent units with decision-making authority and profit-sharing for outstanding managers.

Market Context: The company is navigating a challenging market environment, with short selling activity noted at $246.10M and a ratio of 35.819%.

Stock Performance: LI AUTO-W opened 1.71% lower and traded at HKD68.2, down 2.78%, with a trading volume of 2.6975 million shares worth HKD184 million.

Financial Results: The company reported a non-GAAP net profit of RMB261 million for Q4 2025, a significant decline of 93.5% compared to the previous year.