Citigroup: LI AUTO-W (02015) first quarter guidance in line with expectations, target price of HK$72.7

Citi's research report stated that during the fourth quarter earnings conference and follow-up activities, LI AUTO-W (02015) management disclosed that their sales target for 2026 is to increase by over 20%, with an annual vehicle gross profit margin of 15%. The bank has lowered its forecast for net profit in 2026 and 2027 to reflect the lower gross profit margin forecast and increased operating expense assumptions. They maintain a neutral rating and a target price of HK$72.7. Li Xiang Automobile announced a fourth-quarter net profit of 20 million yuan in 2025, which was lower than the market consensus of 140 million yuan. The sales guidance for the first quarter of 2026 is between 85,000 and 90,000 vehicles, in line with expectations. Total revenue is expected to be between 20.4 billion and 21.6 billion yuan, which means that the average selling price per vehicle in the first quarter of 2026 is expected to decrease by 9% to 227,000 yuan, at the top end of the guidance. The bank maintains its forecast for Li Xiang Automobile's sales in 2026 and 2027 at 430,000 and 468,000 vehicles respectively, and revenue forecasts remain unchanged at 112.7 billion and 114.5 billion yuan. However, the bank has lowered the forecast for Li Xiang Automobile's vehicle gross profit margin in 2026 and 2027 by 0.3 to 1.7 percentage points to 15.1% and 16.4%, respectively, to reflect the updated guidance. The bank also increased the commitment to operating expenses to include increased investment in the field of artificial intelligence for the 2026-2028 period, with forecast sales, general and administrative expenses and research and development expenses as a percentage of revenue at 19.5%, 17.4%, and 16.3%, respectively. Therefore, the bank revised Li Xiang Automobile's net profit forecast for 2026 and 2027 from the original 1.85 billion yuan and 2.58 billion yuan to a loss of 2.02 billion yuan and a net profit of 1.22 billion yuan.