XPeng Earnings: Vehicle Margin Remains Depressed but Guided to Improve

We maintain our profitability forecast for the outer years on a higher volume expectation and raise fair value estimates. 

Morningstar 17 November, 2023 | 0:42
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XPeng Stock at a Glance

XPeng Earnings Update

XPeng reported third-quarter revenue at the low end of its guidance. Excluding inventory write-off, vehicle margin of negative 3% indicates continued pressure from price promotions amid industry competition. But management guided a margin turnaround in the fourth quarter and meaningful improvement next year on larger volume, lower battery cost, and cost reduction initiatives that have been taken.

With enlarged losses on soft vehicle margin in the quarter, we increase our 2023-25 net loss forecasts. However, as we maintain our profitability forecast for the outer years on a higher volume expectation, we raise our fair value estimates to US$ 15.90 per ADS (HK$ 61.70 per share) from US$ 14.50 (HK$ 56.00), which implies a forward 2024 price/sales ratio of 1.8 times. Shares are in Morningstar 3-star territory and fairly valued, in our view. We suggest investors wait for a better entry point to accumulate the stocks.

For the fourth quarter, management guided vehicle delivery to recover 168%-186% year over year to 59,500- 63,500 units and total revenue to grow 147%-165% year over year to CNY 12.7 billion-CNY 13.6 billion. The midpoint of the delivery guidance implies a monthly sales volume of around 21,000 units for November and December, which we believe is in line with market expectation. For new models, the company is to launch the X9 soon and two new models built on the SEPA platform in second-half 2024. In addition, the first sedan model under the Mona brand is also to be delivered in the third quarter of next year.


Vincent Sun, equity analyst at Morningstar

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
XPeng Inc Class A34.45 HKD4.24Rating

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