XPeng delivered weak 4Q results, accompanied by a muted 1Q outlook that shows March demand still under pressure, Deutsche Bank said. | XPeng US | XPeng HK
XPeng (NYSE: XPEV) reported weaker-than-expected fourth-quarter earnings today, and as usual, Deutsche Bank analyst Edison Yu's team provided their first impressions.
Here's the full text of the note the team sent to investors today.
XPeng delivered weak 4Q results (even softer than our preview), accompanied by a muted 1Q outlook that shows March demand still under pressure.
Deliveries for 4Q were already reported at 22,204 units, leading to revenue of 5.1bn RMB, below our 5.4bn and consensus 5.7bn on lower vehicle pricing and "other sales."
Total gross margin declined 480bps QoQ to 8.7%, missing our 11.5% estimate (consensus 12.1%), driven by much lower vehicle margin (5.7% vs. our 8.5% due to increased promotional activity; lowest since 2H20).
Opex of 2,986m RMB essentially matched our model as lower R&D offset higher SG&A.
All together, EPS of (2.57) came in worse than our (2.33) forecast. Management provided a slightly worse 1Q23 volume guidance than expected, calling for 18,000-19,000 deliveries, vs. our 19,500 forecast (translating into 4.0-4.2bn RMB in revenue).
This would imply March improving MoM to low 7,000 units at the mid-point.
ASP will continue to worsen following price cuts and unfavorable mix (G9 volume struggling).
XPeng Q4 revenue misses estimates, gross margin falls to single digit
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The team calls NIO management's long-term strategy the Blue Sky Blueprint, saying it will be a moat for the EV maker, though it's very costly to build.
"Even if we exclude these one-time headwinds, vehicle of margin of 13.5% would have been a miss and lowest since 2Q20," Deutsche Bank said.
Fitch expects sales of passenger NEVs in China to grow by more than 30 percent in 2023, while ICE vehicles will decline by the low teens.
Deutsche Bank expects the latest round of price cuts to spur a big rebound in EV orders, with at least eight automakers already offering some type of price discount or promotion so far.
CICC expects the first quarter to contribute 15.7 percent of China's 2023 NEV sales, with 20.7 percent, 27.6 percent and 35.9 percent from the second to fourth quarters, respectively.
China EV stocks are up an average of 20 percent year-to-date but have underperformed China tech ADRs since December, likely due to investor concerns about weak first-quarter sales and increased competition, according to Edison Yu's team.
By fighting for volume, XPeng's gross margins will take a hit as costs are not materially lower, Edison Yu's team said.
On a full-year basis, the reopening of China will have a positive impact on consumer sentiment and should boost vehicle production and sales in the second quarter, said Edison Yu's team.
After a disappointing 2022, some tailwinds will drive a recovery in retail sales and production in the Chinese auto sector in 2023, Goldman Sachs said.