On Wednesday, US Tiger Securities kept its Buy rating for XPeng Inc. (NYSE: NYSE:XPEV) but lowered the electric vehicle maker's stock price target from $20.00 to $15.00. The decision follows XPeng's fourth-quarter earnings, which showed margins beating expectations despite guidance for the first quarter suggesting a challenging period ahead due to seasonal effects and heightened competition in the industry.
XPeng reported fourth-quarter vehicle margins of 4.1%, a decrease from the previous year but a significant improvement over the previous quarter. The result was slightly higher than consensus estimates, credited to cost reductions and an improved product mix.
Still, the company's forecast for first-quarter deliveries indicates a sequential drop, attributed mainly to the Chinese New Year and competitive pressures.
The company expects vehicle gross margins to continue improving quarter-over-quarter in the first quarter, driven by a favorable product mix, particularly with the introduction of the X9 model. XPeng also anticipates gross margins will keep advancing throughout 2024 as production volumes grow.
The firm has an ambitious plan to launch 30 new or updated models over the next three years, including 12 new models.
XPeng is set to reveal its new sub-brand MONA at the Beijing Auto Show next month, with the first model expected to be delivered in the third quarter. The MONA brand will target the RMB 100K to 150K price segment and will initially focus on the consumer market, followed by a business version several months later.
Moreover, XPeng will introduce another new model under its own brand this year, competitively priced like the G6, and it will also release the international version of the G6 in the second quarter.
The partnership with Volkswagen (ETR:VOWG_p) is anticipated to start yielding platform and software revenue for XPeng this year, with the company highlighting the recurring and high-margin nature of this income. Collaborative efforts with Volkswagen in joint development and procurement are also expected to help reduce XPeng's costs.
For 2024, XPeng predicts a return to year-over-year and quarter-over-quarter delivery growth starting in the second quarter, with a further boost in the second half following the MONA launch and facelift versions.
Research and development expenses for the full year are projected to range from RMB 7 billion to 7.5 billion, with a significant reduction in the sales, general, and administrative (SG&A) expense ratio compared to 2023. The company also forecasts an improvement in operating cash flow year-over-year.
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