Li Auto's recent earnings report reveals a complex financial landscape in which the Chinese automaker has seen year-over-year declines in adjusted earnings while simultaneously experiencing a rise in revenue driven by higher vehicle deliveries. This juxtaposition highlights the challenges and opportunities present in the current automotive market, particularly for electric vehicle manufacturers.
In the second quarter, the company reported adjusted earnings of 1.42 renminbi ($0.20) per American depositary share, a significant decrease from 2.58 renminbi in the same quarter of the previous year. This decline falls short of the expectations set by four analysts polled by Capital IQ, who anticipated a normalized EPS of 1.36 renminbi. Meanwhile, operating expenses rose sharply to 5.71 billion renminbi, up from 4.61 billion renminbi during the analogous period last year, underscoring the increasing financial pressures on the company.
Despite this uptick in expenses, revenue surged to 31.68 billion renminbi, a marked increase from 28.65 billion renminbi the year prior, and slightly beating the analysts' collective estimate of 31.59 billion renminbi. Vehicle sales played a pivotal role in this revenue increase, climbing by 8.4% year-over-year to reach 30.32 billion renminbi.
This growth has been largely attributed to elevated delivery figures, although this upward trend was somewhat counterbalanced by a reduction in average selling prices, which the company attributes to a 'different product mix' and changes in pricing strategies. In terms of delivery numbers, Li Auto managed to deliver an impressive total of 108,581 vehicles during the second quarter, reflecting a remarkable annual growth rate of approximately 26%.
This performance was recognized in the premarket trading where the firm's Nasdaq-listed shares witnessed a 1.7% increase, suggesting a positive reception from investors. Chief Financial Officer Tie Li articulated the company’s focus amidst the fierce competitive landscape: "Amid intense market competition during the second quarter, we focused on creating user value and improving operating efficiency.
Our solid second-quarter deliveries drove revenues." These sentiments underscore the strategic initiatives that the company is deploying to maintain its competitive edge. The gross margin for the quarter recorded at 19.5%, which shows a decline from 21.8% experienced in the previous year. This decrease was primarily due to a drop in vehicle margins, suggesting that even successful sales volumes might not be translating into profitability.
However, Tie Li has expressed optimism regarding the future: "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." Looking to the future, Li Auto has provided forecasts for the third quarter, with revenue expectations set between 39.4 billion renminbi and 42.2 billion renminbi—an anticipated year-over-year growth ranging from about 14% to 22%.
Five analysts have similarly predicted revenue closer to 39.41 billion renminbi. Additionally, the company expects to deliver between 145,000 and 155,000 vehicles in the upcoming quarter, following the distribution of 51,000 units in July. "Looking ahead, we are committed to investing in technological and product advancements to drive steady business growth, while simultaneously optimizing our cost structure," Tie Li affirmed, reinforcing the company’s forward-looking vision committed to innovation and efficiency. Current stock price stands at 21.51 with a change of +0.29, marking a percent change of +1.37..