LI AUTO INC.(LI.US)：CONTINUES TO PURSUE BLOCKBUSTER PRODUCT STRATEGY WITH L9 MODEL;BOOSTS UPSIDE FOR IN-VEHICLE INTELLIGENCE

What's new
On June 21, Li Auto launched its second SUV model L9. L9 Max is priced at Rmb459,800 and delivery is scheduled to start from end-August. We believe that the firm is continuing to pursue its blockbuster product strategy with the L9 model. It enjoys strong competitiveness, intelligent designs and industry-leading user experience.
Comments
Continues to pursue blockbuster product strategy with L9; building strong product competitiveness. On June 21, Li Auto launched L9, its second SUV model, which is priced at Rmb459,800 and starts delivery by end-August. Overall, we believe that the firm is continuing to pursue its blockbuster product strategy with L9, featuring flagship space and comfort, upgraded range extension system and chassis system as well as innovative breakthroughs in intelligent driving and smart cockpit based on enhanced hardware. All L9 models will have those features. We think the L9 enjoys advantages in retail price, performance, interior space and intelligent experience compared to other fuel models in the same class on the market. We expect Li L9 to replicate the success of Li ONE to beat the monthly sales ceilings of fuel vehicles in the same price range.
Industry-leading insights into intelligent space; in-house-developed smart driving system (Li Auto AD Max) officially equipped. We think Li L9 showcases the firm's insights into intelligent space. The L9 features five connectable screens, and is equipped with an ultra-large head-up display, or HUD and a mini-LED display on top of the steering wheel. Additionally, the L9 has a center control display and two infotainment screens in the passenger seat and backseats, all of which are 15.7-inch 3K OLED displays. We believe these interactive features elevate the driving and entertainment experience to a new level. Moreover, with six microphones and a set of 3D ToF transmitters in the vehicle, coupled with the self-developed, multimodal 3D space interaction technology pioneered by Li Auto, Li L9 offers passengers an interactive experience as the system can be controlled by voice and hand gestures. In terms of intelligent driving, the L9’s AD Max system uses full-stack self-developed decision making, planning and control software. In addition, Li L9 is installed with two NVIDIA Orin-X processors, providing a maximum computing power of 508TOPS. We believe the firm’s R&D capabilities in intelligent driving continued to improve amid its full-stack self-developed transformation. We expect the firm’s user experience to outperform peers.
Profitability solid; improved fundamentals to boost valuation. Looking ahead, we reiterate the following catalyst for company fundamentals: 1) We expect the firm’s June delivery to beat guidance released at its results conference, thanks to the recovery along the supply chain. 2) The firm launched the L9 and user experience exceeded market expectations, and we think this may raise market attention. 3) The impact from rising battery cost in 2Q22 was manageable, and we foresee solid earnings growth. 4) In 3Q22, the firm’s earnings may beat expectations, driven by price increases of the Li ONE, the ramp-up of L9 delivery and falling price of lithium carbonate. Since the firm’s listing in the Hong Kong SAR stock market, the valuation gap between Li Auto, NIO and XPeng continued to narrow, as the firm's profitability has been improving since 1Q20, and it took the lead in translating revenue expansion to profit growth. We believe the firm’s valuation is attractive, given its promising growth prospects.
Financials and valuation
The stock is trading at 3.7x 2022e and 1.6x 2023e EV/revenue. We maintain earnings forecast and OUTPERFORM. We maintain the TPs for H- and US-shares at HK$157 and US$40, implying 4.4x 2022e and 2.2x 2023e EV/revenue and offering 14.3% and 11.9% upsides.
Risks
COVID-19 resurgence affecting output and sales; disappointing progress of new projects.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。