China EV maker XPeng set to turn profitable, says CGSI, lifting target price for the stock
CGSI analysts on Thursday (May 22) raised the firm's target price to HK123.80 from HK121.40, and reiterated their 'add' call. XPeng shares last closed at HK81.30 on Thursday. Its shares are also traded in the US.
The analysts cited higher delivery forecasts, robust EV shipping growth and 'significantly improved' Q1 results, which beat consensus from CGSI and Bloomberg.
CGSI analysts Ray Kwok and Sera Chen, highlighting the firm's surpassing of estimates with its improved performance, said: 'We expect XPeng to become profitable in the fourth quarter of FY2025, thanks to ongoing production cost reductions and economies of scale from more EV deliveries,' they said.
Q1 results beat consensus
XPeng's narrower net loss was around 60 per cent better than CGSI analysts' estimates, they added.
'(It) reported significantly improved Q1 2025 results, with non-GAAP (Generally Accepted Accounting Principles) net loss narrowing to 426 million yuan – (compared to) net losses of 1.4 billion in Q1 2024 and 1.4 billion in Q4 2024 – beating our and Bloomberg consensus forecasts of 825 million yuan net loss,' they said.
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This was due to improved vehicle profit margin (VPM) and stable technological services income (TSI) from Volkswagen, for which XPeng provides technical research and development and electrical/ electronic architecture services.
Additionally, XPeng's Q1 vehicle sales rose 159 per cent year on year to 14.4 billion yuan, driven by record numbers of EV deliveries, which spiked 331 per cent year on year to 94,000 units.
Revenue from services rose to 1.4 billion yuan, 44 per cent higher on year, as gross profit margin climbed to 15.6 per cent, up 2.7 per cent year on year, thanks to robust TSI and better VPM, they said.
Forecasts raised, fresh launches in pipeline
XPeng expects to deliver between 102,000 and 108,000 EV units in Q2 FY2025, fuelled by five upgraded models and rising overseas sales, said Kwok and Chen.
The upgraded models include the X9 MPV, Mona M03 Max sedan and G7 SUV models, slated for April, May and June, respectively.
The group also plans to unveil two models in the second half of 2025. The next-generation P7, which features right-hand drive for international markets, will be released in Q3 of 2025; an extended-range electric vehicle model will debut in Q4 of 2025.
Kwok and Chen said that the launches aim to diversify XPeng's product portfolio to serve a broader customer base.
'We lift our forecasts on XPeng's EV delivery in FY2025/ FY2026/ FY2027 to 430,000/ 570,000/ 700,000, reflecting robust market response and higher overseas shipments.'
New models launches to spur China growth
Beyond higher overseas sales, Kwok and Chen think that XPeng could make greater inroads into China's EV market.
'We believe XPeng is the favoured EV manufacturer among middle-class Chinese consumers because of its advanced driver assistance system (Adas) software and in-car intelligent operating system capability,' they said.
They add that XPeng is currently a leader in the Chinese Adas market.
The company plans to release around 20 models between 2025 and 2026, ranging from low-end sedans to high-end MPVs, to target diverse price ranges and consumer niches, they said.
'We expect XPeng's new models for FY2025 and FY2026 to drive its longer-term market share gains in China's EV sector.'
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