To The Moon

$Li Auto(LI)$ (LI, BUY) - Mixed 4Q; Cautious 1Q/2025 Outlook Amid Pricing Pressure; Maintain BUY and $30 PT

We maintain our BUY rating and $30 price target following Li Auto's mixed 4Q24 results, which beat Tiger and consensus on profitability, but cautious 1Q25 outlook reflects ongoing ASP pressure and shifting product mix.

4Q revenue 2%/1% below Tiger/Street. Li Auto delivered 158,696 vehicles (+20% y/y, +4% q/q), 3% below Tiger, 2% below consensus, but still within guidance range (160,000-170,000 units). ASP of RMB 269K was 1% above Tiger and consensus, showing resilience despite competitive pressure. Total revenue of RMB 44.3B, 2% below Tiger and 1% below consensus, driven by slight delivery shortfall. Vehicle sales of RMB 42.6B, 2% below Tiger, 1% below consensus. Services and others revenue of RMB 1.63B, 2% below both Tiger and consensus.

Non-GAAP net income of RMB 4,030M was 23%/22% above Tiger/Street. Gross profit of RMB 8.97B, 7%/6% below Tiger/consensus, with gross margin at 20.3%, 95bps below Tiger and 100bps below consensus. 4Q gross margin headwinds include product mix shift to lower-ASP models (L7, L8), continued interest subsidies, and one-off purchase commitment losses related to component procurement. However, GAAP operating income of RMB 3.70B, RMB 704M above Tiger and RMB 372M above consensus. Operating margin 8.4%, up 175bps vs. Tiger, 91bps vs. consensus, primarily due to lower Opex. R&D 24%/19% below Tiger/consensus, and SG&A 11%/7%.

1Q guidance and 2025 outlook. The company guided 1Q deliveries to 88,000–93,000 (+9.5% to +15.7% y/y, -41% q/q), implying monthly deliveries of 34.3K at the midpoint for March. Revenue of RMB 23.4B–24.7B (-8.7% to -3.5% y/y, -44% q/q) — reflects continued ASP compression as L7/L6 gain share and subsidies persist. Vehicle margin expected to hold ~19%, down q/q, as gross margin headwinds persist.  The disconnect between delivery growth and revenue decline was acknowledged by management as driven by mix shift to more L7/L6, along with interest subsidies — reflecting Li Auto's strategy to sustain sales momentum in a competitive NEV market.

Li Auto reiterated its plan to launch two BEVs in 2025 (Li L8 BEV in July and L6 BEV in 2H25), aiming to grow 2x market rate in the RMB 200K+ BEV segment. However, early BEV ramp likely dilutive to margin, especially as initial scale builds. In addition, competitive intensity from BYD, Tesla, and newcomers like Xiaomi remains a headwind — price discipline and AI-driven product value will be key to defending share, in our view.

Summary.

$Li Auto(LI)$ delivered mixed 4Q24 results with strong cost control and better-than-expected profitability, though gross margin faced pressure from product mix shift, interest subsidies, and one-off procurement losses. While 1Q25 guidance reflects ongoing margin and ASP pressure amid fierce competition, much of the weak outlook was already priced into the stock ahead of the print. Looking ahead, investor focus will shift to the successful launch and reception of Li's first BEV models in 2H25 and the company’s ability to defend market share for existing EREV models. We believe the stock’s future performance will largely hinge on execution of BEV ramp and stabilizing its competitive position in the premium NEV segment.

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