Deutsche Bank lowers Li Auto's target price to 128 yuan, October delivery volume disappoints expectations

Deutsche Bank published a research report indicating that Li Auto (02015.HK)(LI.US) saw a monthly decrease of 6% and a yearly decrease of 38% in October deliveries, totaling 31,700 vehicles, which fell short of market expectations. This weak performance is attributed to intense competition faced by its "L series" extended-range electric vehicle products from a new wave of competitors, including Aito M9, M8, M7, ZEEKR 9X, Lynk & Co 900, Denza N9, and Denza N8L.

Deutsche Bank stated that in response, Li Auto expanded its promotional program for extended-range electric vehicles in October. The company replaced the car insurance subsidy program from September (subsidy of RMB 11,000 per vehicle for L6/L9 and RMB 8,000 for L7 and L8) with a vehicle replacement subsidy of RMB 15,000 per vehicle. Additionally, Li Auto maintained a local government subsidy of RMB 10,000 per vehicle for its extended-range electric vehicle products, with funding sources reallocated from the Changzhou municipal government to the Shunyi district government.

Considering the disappointing sales volume and the expanded promotional activities, Deutsche Bank lowered its full-year net profit estimate for Li Auto in 2025 by 26.4% to RMB 3.5 billion. Therefore, Deutsche Bank adjusted its target price from HKD 132 to HKD 128 based on the discounted cash flow method, maintaining a "Buy" rating.

Deutsche Bank noted that as Li Auto's sales volume in the third quarter of 2025 decreased by 39% year-on-year and 16% quarter-on-quarter to 93,211 vehicles, it expects the quarterly net profit to decline by 86% year-on-year and 63% quarter-on-quarter to RMB 400 million.

Due to the underwhelming sales performance in October, Deutsche Bank now estimates that Li Auto's full-year sales in 2025 will decrease by 13% year-on-year to 435,000 vehicles. This forecast implies that sales in the fourth quarter of 2025 will decrease by 13% year-on-year to 138,000 vehicles, but will represent a 48% increase quarter-on-quarter. Based on this estimated 48% quarter-on-quarter sales growth, Deutsche Bank predicts that Li Auto will report a net profit of RMB 1.35 billion in the fourth quarter of 2025, indicating a strong quarter-on-quarter growth of 239%