XPeng (H-Shares) (9868:HK) (XPEV) PT Raised to HK$34.78 at Citi, 5 Reasons to Stay 'Sell'

(Updated - December 1, 2022 9:16 AM EST)

Citi analyst Jeff Chung raised the price target on XPeng (H-Shares) (9868:HK) (NYSE: XPEV) to HK$34.78 (from HK$12.42) while maintaining a Sell rating.

The analyst comments "Why do we maintain Sell/H rating?: 1) 4Q22E volume guidance is just in-line with our forecasts per our D/G note; 2) The increase in dealership rebate, incentive and poor order in-takes would start to reflect in 4Q22E, while the one-off improvement in 3Q22 margin (after temporary price-hike) doesn’t reflect the true picture on LT margin trend; 3) Both our checks (industry, expert) suggest new order bookings of Xpeng were poor in Nov-22, as well as the order-sales conversion rate. If Xpeng decides to massively deliver G9 and depicts major order back-logs on hand in Dec-22, this would trigger a potential risk of weak delivery in 1Q23E (during low season in car sales); 4) Limited price-hike potential: Intensifying competition in 2023E for BEV: According to our analysis (Seeking NT Alpha: Pent-Up Demand & ASP-Hike (PHEV > BEV), BEVs with Rmb200k-300k/Above Rmb300k ASP segments would suffer a sector level -24.2% and -14.9% YoY at car sales-per-model basis, when supply growth > demand growth; 5) At the sector level we expect 1Q23E PV retail sales to drop by -34% YoY due to low season and subsidy expiry concerns."

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