Li Auto (LI.O) released its first quarter 2023 earnings report after the market and before the US stock market on the evening of May 10, Beijing time. Ideal once again defines what is a rock-solid new force of automobiles:
1. The sales guidance is "stable happiness": After the sales explosion in April, the guidance for vehicle deliveries in the second quarter was 7.6-81,000 units, exceeding market expectations of about 73,000 units.
However, due to the better ideal sales after the delivery of L7 and L8 Air in April, the latest actual market expectation should be higher than 73,000, and from the monthly new trend of guidance implied sales, it is estimated that the probability of hitting 30,000 in June is not large.
2. The downward trend of unit price suppresses the imagination of gross profit margin: the company's revenue guidance is between 242.2 billion and 25.68 billion, which is still significantly exceeding market expectations; However, the unit price of the car in the second quarter implied behind this sales volume may not exceed 315,000 yuan, and the current starting price of the main model L7 Air is 319,800, which means that the subsequent possible explosive models are mainly concentrated on this relatively low-priced car, and the sales of the high-priced car L9 seem to be under pressure.
3. The gross profit margin of bicycles in the first quarter was stable: the gross profit margin of bicycles in the selling business was 19.8%, which barely touched market expectations; However, considering the general loss of gross margin of peers in the first quarter, the ideal performance has been quite stable.
4. Ultimate interpretation of operating efficiency: the ideal cost control ability is obvious to all, and the first quarter is even more extreme, R&D expenses have also declined for the first time month-on-month, although sales expenses have been launched, but only increased by less than 100 million yuan month-on-month, and finally ideal delivered the first positive operating profit, the market expected an operating loss.
Dolphin Jun's overall view:
The first quarter results and second quarter guidance are completely consistent with the spiritual core conveyed in the previous financial report: ideal when you can fight, efficiently respond to market changes, efficiently execute strategy changes, say and do.
A performance is a test of a company's comprehensive strength, and the ideal comprehensive strength is commendable.
From the perspective of stability, the ideal is naturally very reliable. However, if you invest in the ideal from the perspective of marginal change, the company has previously put the monthly sales guidance after the 25,000-30,000 vehicles, and from the second quarter sales guidance, the annual monthly sales of 30,000 may still be a relatively pressured target, and sales have been locked in a general range.
In this case, the earnings elasticity this year should come from the improvement in gross margin. The gross profit margin of the company's guidance is to achieve more than 20%, and the L series should be at 25% under steady state.
However, neither the actual performance of gross margin in the first quarter nor the gross margin expectation implied in the sharp decline in bicycle prices in the second quarter is particularly optimistic.
At present, the ideal brand of this year on the new model has basically been released, if there is no obvious improvement in gross margin, from the perspective of incremental benefits, it seems that there is no good alpha income to be seen at this time to intervene in the ideal.
Here is a detailed analysis:
First, less talk and more doing, sales is the best interpretation
From supply as king to demand as king, enterprises have entered the stage of "execution ability verification". And the degree of reliability of the implementation, the three new forces have walked out of very different fates, and the ideal is obviously the best of them.
1) Resolute trend: In the face of market changes, the ideal new car release rhythm is rapidly adjusted, and the difference between the release and the release rhythm is very small, L9, L8, L7 released at the beginning of the year, most of the models have been delivered in the first quarter, and the second quarter has entered full-scale delivery.
2) Say and do: The ideal gave a first-quarter sales guidance of 5.2-55,000 vehicles, implying that the monthly sales in March were 20,000, which surprised the market, and also emphasized in the phone that the subsequent monthly sales should be between 25,000-30,000 vehicles.
Ideals do what they say: March sales really stood at 20,000, and after the official delivery of the entry-level car in April and the L7 Air with a starting price of 320,000, sales in April have begun to rush to more than 25,000 units. In addition, April surprisingly, the oldest car, the ideal one, has also climbed in monthly sales.
The overall delivery of 52,600 vehicles in the first quarter is the lower edge of the company's guidance, but it has basically completed the guidance and can be regarded as a very good performance among peers.
3) Second-quarter sales guidance is tough
By the beginning of April this year, Ideal had begun to deliver all four models of the L7, L8, L9 and One. Especially since April, there are two L7 and L8 Air models, the price has fallen by 20,000 yuan, which will significantly boost the volume, and it also corresponds to the Air out, L7 monthly sales directly tens of thousands.
For the delivery expectation in the second quarter, the company's forecast is 7.6-81,000 vehicles, which means that the average monthly delivery should be more than 26,000 vehicles, because 25,700 units were delivered in April, the probability of May will only be slightly more than April, implying that it is difficult to rush 30,000 sales in June.
In the second and second quarters, the unit price declined, and there is little hope for the improvement of gross margin?
The company's expected revenue in the second quarter is between RMB24.22 billion and RMB25.68 billion, with sales guidance significantly exceeding market expectations of 73,000 units.
However, the unit price implied by the guidance, Dolphin Jun estimates that it should be within 315,000, which is significantly closer to the ideal L7 Air among the current main models, which is 319,800. The ideal first-quarter bicycle price was 349,000, indicating that most of the main sales expected in the guidance were L7 Air, and the sales of the ideal most expensive model L9 were under pressure.
The company has previously said that the long-term gross profit margin of the L series should reach more than 25%, and hopes that this year's gross profit margin can reach more than 20%, and then with the sales volume of the L series model platform, the market was originally expected to increase the gross profit margin.
But at present, the price of bicycles fell too much in the second quarter, and it is still unknown how much the gross profit margin can be improved, waiting for the company to give a more detailed explanation in the call.
At present, the gross margin of automobile sales in the first quarter is 19.8%, which is barely in line with market expectations of 19.9%. From the bicycle economy in the first quarter, it can still be clearly seen that after the decline in bicycle prices, it has affected the profitability of bicycles:
1. The average price of a bicycle in the first quarter was as high as 348,500, and a car sold nearly 25,000 less than in the previous quarter;
2. The cost of a single vehicle is close to 280,000, and the cost of a car is 18,700 less
3. A car earned nearly 69,000 yuan, which was 6,000 yuan less than the previous quarter;
On the whole, due to the excessive decline in the average price, even if the cost of lithium carbonate and other high levels falls, the gross profit margin is still downward.
(Note: The third quarter of last year is the gross margin data of automobile sales after excluding 800 million + the impact of contract losses)
Third, if the sales volume is stable, the revenue is stable
With volume in the lead, the revenue driver – is known to be the ideal total revenue for the quarter of $18.8 billion, which is broadly in line with market expectations. Among them, automobile sales revenue in the unit price (a year-on-year increase of 19%) and sales growth (66%) driven by automobile sales revenue of 18.3 billion yuan, a year-on-year increase of 97%, although the same period last year is the ideal model replacement period, the base is low, such a year-on-year at least shows that the ideal successful replacement.
Fourth, sell cars frantically externally, and "provinces" at home
Up to now, the ideal investment discipline and investment efficiency are obvious to all, and the ideal in the first quarter has further brought this "glorious point" to the extreme:
In the first quarter, the absolute value of ideal R&D expenses fell back to 1.85 billion, and perhaps there were factors such as year-end bonuses in the fourth quarter, resulting in a decline in the first quarter, but in the short history of the ideal listing, there has never been a single-quarter decline in R&D expenses, and the control of head and human expenses can be seen.
Moreover, the ideal selling and administrative expenses were consistently outstanding: selling/administrative expenses were $1.65 billion, significantly below market expectations of $1.9 billion+.
A major expense in sales expenses is the development of sales networks. However, the number of stores opened at the end of the first quarter was not large, and 11 new retail stores and two new cities were opened during the ideal period, while the after-sales service center remained largely unchanged.
The company's previous guidance for the incremental number of stores in 2023 is 130, the expansion of ideal stores in the first quarter is still relatively slow, the growth of sales mainly depends on the significant increase in sales of a single store, you can observe whether the ideal sales network will increase rapidly in the second half of the year.
Fifth, self-sufficient in food and grass, more confident in fighting wars
While maintaining sales, ideal to use the ultimate operating execution efficiency, in the first quarter of this year, the operating profit turned positive even when covering non-cash expenses such as equity incentives: the market expected an operating loss of 270 million yuan, but the actual operating profit was 410 million yuan. From the non-GAAP caliber of equity incentive expenses, the ideal net profit reached 1.4 billion yuan, a new high.
In addition, operating cash flow was strong in the first quarter at $7.8 billion, and free cash flow was $6.7 billion due to reduced capital expenditures.
It seems that accurate product positioning and efficient execution have made the ideal hold on to even all key indicators in this wave of battle, and go further:
1. Record sales volume
2. The gross profit margin is basically maintained;
3. With extreme fee control, ideal operating and free cash flow all hitting new highs, this wave of war seems to be fighting with ease.