Chinese luxury electric vehicle maker Li Auto Stock delivered 34,914 vehicles in the month of August, an increase of more than 7 times from last year. This is well ahead of rivals like Nio and Li Auto is benefiting from strong sales of its high-end EVs, which feature electric drivetrains as well as gasoline-powered range extender generators that help ease range anxiety. While the company only had one vehicle model until 2022, it has since launched three vehicles including the Li L9, a luxury full-size crossover SUV, the Li L8, a luxury mid-size crossover, and the L7. These new vehicles are helping Li cater to a larger customer base, with each of its Li L7, Li L8 and Li L9 models selling more than 10,000 units in August.
Interestingly, Lee’s Sharpe ratio has been 0.5 Since the beginning of 2017, less than 0.6 for the S&P 500 index over the same period. this also falls short Sharp of 1.3 For Trefis Reinforced Value Portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
The outlook for the near future also looks strong. Li previously guided that total monthly sales could top 40,000 units in Q4. Li appears to have enough bandwidth to expand, with a monthly production capacity of 50,000 per month. The company is expected to launch its first pure-battery EV model, the MEGA, by the end of this year, which will have a range of about 500 miles. The company expects this vehicle to be a top seller in the over-$70,000 segment of the Chinese EV market.
So does the stock still look like a buy? While demand for Lee’s new models remains strong, the company’s fundamentals are also improving. The increase in volumes is helping Li Auto increase its margins. Gross margin increased to 21.8% for the quarter ending in June, which is now actually ahead of Tesla, which only reported a gross margin of 18.2% in its most recent quarterly report. That’s well ahead of rivals Nio and Xpeng, whose margins have fallen to single digits or negative levels, partly due to price cuts. Lee trades at about $39 per share, just shy of the all-time highs recently seen. In relative terms, the stock currently trades at about 3x estimated 2023 revenues. Although it is ahead of Chinese rival Nio, it is below Tesla and Xpeng. Given LI’s superior growth and profitability, this is a reasonable multiple. See our analysis Nio, Xpeng and Li Auto: How do Chinese EV stocks compare? For a detailed look at how Nio stock compares to its rivals Li Auto and Xpeng.
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