Li Auto (LI) reported mixed results in the second quarter. On the positive side, the Chinese EV major saw its revenues increase by 10.6% year-over-year to RMB31.7 billion ($4.4 billion) in the second quarter. Fortunately, this was slightly above Street estimates of $4.31 billion.
LI Reports Better-than-Expected Q2 Earnings
When it came to earnings, Li Auto managed to surpass analyst forecasts. The company reported adjusted diluted net earnings of RMB1.42 ($0.20) per American Depository Share (ADS), a decline from RMB2.58 in the same period last year. Nevertheless, this was above analysts’ expectations of $0.19 per ADS.
The company also reported strong vehicle deliveries, with 108,581 units delivered during the second quarter, marking a 25.5% year-over-year increase.
LI Management Comments on Lower Q2 Gross Margin
However, Li Auto faced challenges with its gross margin, which slipped to 19.5% from 21.8% a year ago. The company’s CFO, Tie Li, acknowledged the impact of ramping up a new model but noted that the margin remained healthy. He remained optimistic that as the production of the L6 model stabilizes and the company’s cost-cutting and efficiency measures take effect, margins and cash flow are expected to improve in the second half of the year. The L6, a compact crossover SUV, was introduced earlier this year.
Li Auto Issues an Upbeat Forecast
Looking forward, Li Auto is optimistic about the third quarter. For this period, LI has projected its vehicle deliveries to be between 145,000 and 155,000 vehicles, representing a substantial increase of 38% to 47.5% year-over-year. Additionally, the company expects to generate total revenues in the range of RMB 39.4 billion ($5.4 billion) to RMB 42.2 billion ($5.8 billion), indicating growth between 13.7% and 21.6%. For reference, analysts are projecting the company to post revenues of $5.51 billion.
Is Li Auto a Good Stock to Buy Now?
Analysts remain bullish about LI stock, with a Strong Buy consensus rating based on three Buys and one Hold. Over the past year, LI has declined by more than 40%, and the average LI price target of $28.35 implies an upside potential of 33.6% from current levels. These analyst ratings are likely to change following LI’s results today.
