Edison Yu's team lowered their price target on Li Auto by $6 to $28, based on 3.0x 2023E EV/Sales, down from 3.5x previously.

Deutsche Bank cut its price target on Li Auto (NASDAQ: LI, HKG: 2015) ahead of the company's first-quarter earnings report due next Tuesday.

Analyst Edison Yu's team lowered their price target on Li Auto by $6 to $28 based on 3.0x 2023E EV/Sales, down from 3.5x previously, in a research note sent to investors today. The team maintains a Hold rating on the company.

Shares of Li Auto traded in the US closed up 4.01 percent to $23.33 on Monday, and the price target implies a 20 percent upside.

(Li Auto L9. Image credit: Li Auto)

Overall, the team lowered their full-year delivery forecast for Li Auto from 175,000 to 150,000 units to account for the negative impact of Covid lockdowns and incremental supply chain constraints.

However, the team increased gross margin by 50 basis points to 22.3 percent, reflecting the price increase for the Li ONE and the higher price point for the upcoming L9.

Tactically, Yu's team does not see compelling reasons to be incrementally bullish as questions may arise about how resilient Li Auto's operational execution will be going forward.

The team believes Li Auto's new pure-play electric vehicle next year will be a headwind for gross margins, especially if raw material prices continue to be high and it must accelerate operating expenses as well as capital expenditures to build out its new production line, charging infrastructure network and higher levels of ADAS capability.

In addition, the L9 SUV targets a market that includes the Toyota Land Cruiser and Range Rover, which is a relatively small segment, the team noted.

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