LI AUTO(2015.HK)：BRIGHTER PROSPECTS OF UPCOMING I-SERIES BEV TO DRIVE STOCK RERATING

Core Viewpoint - Li Auto's revenue showed a slight increase of 1.1% YoY in 1Q25, while non-GAAP net income decreased to RMB1.0 billion, indicating a mixed performance amidst a challenging market environment [1][3] Financial Performance - In 1Q25, vehicle sales increased by 2% YoY to RMB24.7 billion, but the average selling price (ASP) fell to RMB266,000 due to a higher mix of lower-priced L6 models and cash promotions [1] - Non-GAAP earnings per unit decreased to RMB11,000, reflecting a decline from RMB1.3 billion in 1Q24, attributed to a high base from last year's investment income [3] - Vehicle margin improved to 19.8% in 1Q25, slightly above the previous quarter, but is expected to stabilize around 19% in 2Q25 due to various factors affecting sales mix and pricing [2] Sales Guidance and Market Outlook - The company guided for 2Q25 deliveries of 125,000 to 128,000 units, with expectations of monthly sales returning to 50,000 units by June [1][4] - MEGA HOME Family Edition has gained significant traction, accounting for approximately 90% of MEGA's order backlog, leading to an anticipated monthly sales increase to 2,500-3,000 units by July [4] - The management indicated that the full range of new models could support annual revenue scaling up to RMB300 billion, implying a potential sales volume of 1.2 million units [4] Strategic Initiatives - Li Auto plans to expand into international markets, focusing on pan-Asia and Europe, with a long-term goal of achieving 30% of annual sales from overseas [5][6] - The company is set to launch new pure electric SUVs, Li i8 and Li i6, in July and September, respectively, as part of its strategy to diversify its product offerings beyond SUVs [4] Valuation and Market Position - Current valuations for Li Auto's ADRs are at 18.6x 2025E P/S and 13.6x 2026E P/E, which are below the industry average, indicating potential upside as market expectations for the i-series models are low [8] - The ongoing new product cycle is expected to drive sales growth and stock re-rating, with a revised target price of US$41.00/HK$160.00 based on a 20x 2026E P/E [9]