XPEV - Li Auto Charges Ahead In Fourth Quarter As Slowdown Looms | Benzinga
Key Takeaways:
- Li Auto posted triple-digit revenue growth in the fourth quarter and improving margins, but forecast a sharp slowdown in the growth rate in the current quarter
- The Chinese NEV sector’s rapidly slowing growth could accelerate on growing consumer worries following a recent string of negative headlines about the technology
By Doug Young
Li Auto Inc. (NASDAQ: LI) is increasingly looking like a survivor in the race to see who remains standing when an ongoing consolidation wraps up in China’s overheated new energy vehicle (NEV) sector. At the same time, the company’s strong fourth-quarter results released on Monday contained numerous signs of the stiff competition that is plaguing the sector, as well as of a sharp sector slowdown that many have predicted for this year.
That slowdown could be harder-than-expected, following a growing number of negative media reports that are rapidly making Chinese consumers question the wisdom of buying NEVs. In the latest of those, a fire possibly started by an electric bike battery left 15 people dead and 44 injured at a residential compound in Nanjing last Friday.
Investors were clearly focused on Li Auto’s sector-beating results after their publication, lifting the shares by nearly 20% in Monday trade in New York. Not only did the report include strong sales growth, but the company continued to report strong profits – something only a handful of China’s large field of homegrown NEV makers have been able to do.
Li Auto currently trades at a price-to-sales (P/S) ratio of 3.4, well ahead of other similar-profile companies like Xpeng (NYSE: XPEV) at 2.5, Nio (NYSE: NIO) at 1.3 and Leapmotor(9863.HK) at 1.9, reflecting growing investor belief in its longer-term viability. But it still trails the 6.9 ratio for Tesla (NASDAQ: TSLA), seen by many as having the best prospects. Surprisingly, global NEV leader BYD (1211.HK; 002594.SZ) currently trades at a P/S of just 0.9, which seems to be the result of its surging sales and recent lack of investor enthusiasm for its ...