Li Auto (LI) has submitted a listing application to the Hong Kong Stock Exchange again and plans to be dual-listed on the Hong Kong Stock Exchange on August 12, 2021.  It is planned to be dual-listed on the Hong Kong Stock Exchange on August 12, 2021. A total of 100 million shares will be issued, including about 10 million shares for public offering and about 90 million shares for international offering. The highest issue price per share is HK$150, It’s only one year before Li Auto was listed on Nasdaq on July 7, 2020.

Li Auto was established in 2015. It is a domestic smart new energy vehicle company focusing on providing intelligent transportation services. The first product Li Auto began to be delivered to users in December 2019. What are the reasons for Ideal Motors to return to Hong Kong for listing? Is it worth being optimistic? Is this move worth being optimistic about?

Revenue is dependent on a single model, and Revenue fell in the first quarter. Let’s look at the car delivery situation of the Li Auto first. The Li Auto only started delivery at the end of 2019, and 1,530 cars were produced in December 2019, the delivery volume was about 1,000 cars. Since 2020, the delivery volume has grown rapidly. The annual delivery volume reached 32,624 vehicles, of which the deliveries in the four quarters were 2896 vehicles, 6604 vehicles, 86660 vehicles, and 14,464 vehicles respectively. The quarter-on-quarter growth rate was rapid.

The cumulative deliveries of Li Auto exceeded 40,000 On February 18, 2021, and the first 40,000 deliveries was completed in 14.5 months, setting a record for the fastest deliveries of new vehicles. However, judging from the delivery volume in the first quarter of 2021, it has begun to decline compared with the previous quarter.

Compared with the other two new vehicles manufacturers, NIO delivered 20,600 vehicles in 2019, and XPEV delivered 12,800 vehicles; in 2020, the amount delivery of The Li Auto exceeds XPEV, but there is still some gaps with NIO.

(Data source: wind, company announcement)

Looking at the revenue of Li Auto again, the delivery volume of Ideal Car in 2019 is small, so its revenue is only＄43.81 million, with the substantial increase in car delivery, the ideal revenue in 2020 also rapidly climb to＄1.46 billion, up 3,225.49% year on year, but in the first quarter of 2021, the Li Auto revenue is ＄55.15 million, a decrease of 13.8% from the previous quarter. Regarding the decline in performance, LI said that it was mainly due to the seasonal factors related to the Chinese New Year holiday and the impact of the Covid-19 in northern China in February 2021. However, this reason is obviously untenable. In the first quarter of 2021, the car delivery volume of NIO and XPEV both of which increased by 15.6% and 2.9% respectively from the previous quarter.

It is worth noting that although the total revenue of Li Auto in 2020 is as high as ＄1.46 billion, the company currently only sells one model of Li Auto, which means that the company alone has generated more than nine billion dollars in revenue for the whole year. In the same industry, Tesla, NIO, and XPEV have 4 models, 4 models, and 2 models on sale. Li Auto also pointed out the company’s current risk of relying on a single model to generate revenue in its prospectus.

 (Data source: Company Announcement)

The annual performance is still at a loss, and the quarterly profit is not sustainable. The early-stage research and development cost of new energy vehicles is very high, and the profit cycle is relatively long. From 2018 to 2020 and the first quarter of 2021, the total expenses of Li Auto including sales expenses, administrative expenses, and R&D expenses were ＄164 million, ＄266 million, ＄341 million, and 158 million dollars respectively, of which R&D expenses accounted for. The ratios were 70.18%, 62.91%, 49.57%, and 50.22%, respectively. High expenses are the main reason why Li Auto has not yet made a profit.

 (Data source: Company Announcement)

In the fourth quarter of 2020, Li Auto's net profit was ＄16.61 million. Since its listing, it has taken the lead in achieving quarterly profit among companies in the same industry, but this has not changed the fact that it lost money for the entire year. For the full year of 2020, Ideal Auto’s loss was ＄129 million, and its profitability was not sustainable. In the first quarter of 2021, Ideal Car's loss was -＄ 55.38 million. In the same period, the net profit of NIO and XPEX has not yet achieved profitability and NIO lost the most.

(Data source: Wind, company announcement)

Although the advent of the Li Auto took advantage of the explosion of the new energy automobile industry, in the face of increasingly fierce competition in the market, it is obvious that only one model cannot support future development. It is reported that Li Auto will launch new electric SUV models in 2022, and plans to launch at least two new HPCBEV models every year starting from 2023. The research and development costs in the early stage of the car manufacturing and other costs such as sales during the launch period are very high. The launch of several new models of Li Auto in the future will inevitably require sufficient financial support. This may be one of the reasons why Li Auto returns to Hong Kong for listing. On the other hand, the US's increasingly strict supervision of Chinese concept stocks will inevitably affect the company's normal business activities, which to a certain extent has prompted many Chinese concept stock companies to choose to return to Hong Kong for listing.