Li Auto Guides for Stronger Sales After Quarterly Profit Halves — Update

By Jiahui Huang

Chinese electric-vehicle maker Li Auto guided for higher deliveries in the third quarter after its second-quarter net profit slumped, dragged by slower sales growth and narrower margins.

The hybrid-vehicle specialist said Wednesday that its second-quarter net profit halved to 1.10 billion yuan, equivalent to $154.4 million. That topped the 854.5 million yuan consensus estimate of analysts in a FactSet poll.

Its revenue rose 11% from a year earlier to 31.68 billion yuan, beating analysts' estimate of 30.27 billion yuan.

Gross margin declined to 19.5% from 21.8% a year ago and 20.6% in the first quarter, the company said, citing a different product mix and pricing-strategy changes, which were partially offset by cost cuts. Its vehicle margin dropped to 18.7% from 21.0%.

Li Auto's margins were pressured by price cuts to flagship models and weak April sales due to lower-than-expected orders for the MEGA, its first fully electric vehicle. The company's sales growth slowed in the second quarter, with deliveries rising 25% from a year earlier to 108,581 units, compared with the 53% vehicle sales growth in the first quarter.

For the third quarter, the company said it expects to deliver between 145,000 and 155,000 vehicles and post revenue of 39.4 billion yuan to 42.2 billion yuan.

"As Li L6 production stabilizes and our cost reduction and efficiency enhancement measures take full effect, we expect an increase in both our margins and cash flow in the second half of the year," Chief Financial Officer Tie Li said.

Bocom International analyst Angus Chan said Li Auto still managed double-digit margins, and investors will be looking to see if it can improve its profitability in the third quarter.

By comparison, EV leader Tesla reported an automotive gross margin of 14.6% for the second quarter. Local rival BYD boasted a gross profit margin of 20.0%.

The automaker's sales have begun recovering, thanks to strong orders for its L6, a premium five-seat SUV, which bodes well for third-quarter earnings.

Li Auto remains among a handful of profitable Chinese EV makers, but it faces intense price competition from rivals including Huawei-backed Seres and XPeng.

The Beijing-based company's American depositary receipts, down 43% this year, were 1.6% higher in premarket trading.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

August 28, 2024 07:01 ET (11:01 GMT)

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