Stock Analysis & Valuation Li Auto Inc. (2015.HK)

• Previous Close: HK$65.95
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	97.60	48
Intrinsic value (DCF)	1718.90	2506
Graham-Dodd Method	60.70	-8
Graham Formula	105.40	60

Strategic Investment Analysis

Company Overview

Li Auto Inc. is a prominent Chinese new energy vehicle (NEV) manufacturer headquartered in Beijing, specializing in smart electric SUVs for the family market. Founded in 2015 and publicly listed on the Hong Kong Stock Exchange, Li Auto has distinguished itself through its unique Extended-Range Electric Vehicle (EREV) technology, which combines electric propulsion with an onboard gasoline generator to eliminate range anxiety—a key consumer concern in China's vast geography. The company's flagship model, the Li ONE, is a six-seater premium SUV integrated with advanced smart vehicle solutions, including navigation-assisted ADAS and automatic emergency braking. Operating in the Consumer Cyclical sector, Li Auto capitalizes on China's aggressive push toward electrification and domestic technological innovation. Its business model encompasses end-to-end operations from design and development to manufacturing, sales, and after-sales services, positioning it as a vertically integrated player in the world's largest automotive market. With strong government support for NEVs and growing consumer demand for premium, family-oriented electric vehicles, Li Auto is strategically relevant in the transition toward sustainable transportation.

Investment Summary

Li Auto presents a compelling investment case bolstered by its strong revenue growth (HKD 144.5 billion in FY2024), solid profitability (net income of HKD 8.03 billion), and robust operating cash flow (HKD 15.9 billion). The company's capital structure is healthy, with a strong cash position (HKD 65.9 billion) outweighing total debt (HKD 16.3 billion), providing ample liquidity for expansion and R&D. Its unique EREV technology addresses a critical barrier to EV adoption in China, differentiating it from pure battery electric vehicle (BEV) competitors. However, risks include intense competition in the Chinese NEV market, potential regulatory changes, and reliance on a limited model lineup. The beta of 0.955 suggests moderate volatility relative to the market. The lack of a dividend may deter income-focused investors, but the company's growth trajectory and execution in a high-demand sector support its attractiveness for growth-oriented portfolios.

Competitive Analysis

Li Auto's competitive advantage is anchored in its pioneering Extended-Range Electric Vehicle (EREV) technology, which offers the benefits of electric driving—smooth acceleration, lower operating costs, and reduced emissions—without the range limitations of pure BEVs. This technology specifically targets family users who frequently undertake long journeys, a common use case in China. The company's focus on the premium six-seater SUV segment, exemplified by the Li ONE, allows it to capture a high-value niche with less direct competition than the mass-market sedan category. Its vertically integrated approach, controlling design, manufacturing, and software development, enables faster innovation and better margin control. However, Li Auto operates in an intensely competitive landscape dominated by Tesla and BYD, alongside numerous well-funded domestic startups. While its EREV technology is a differentiator, the industry's long-term trend is toward pure BEVs, potentially limiting its technological relevance as charging infrastructure improves. Its current model concentration is a weakness compared to rivals with broader portfolios. The company's strong brand recognition among Chinese families and its efficient direct sales and service network provide a solid market position, but it must continue to innovate and expand its model lineup to maintain its advantage against competitors with greater scale and resources.

Major Competitors

• BYD Company Limited (1211.HK): BYD is the world's largest NEV manufacturer by sales volume, with a vertically integrated supply chain including its own battery production (Blade Battery). Its strengths include unparalleled scale, a diverse product portfolio spanning budget to premium segments, and strong export growth. However, its focus on mass-market vehicles creates less direct competition with Li Auto's premium family SUV focus. BYD's weakness includes lower average selling prices and margins compared to premium-focused brands.
• Tesla, Inc. (TSLA): Tesla is a global leader in BEVs and autonomous driving technology, with a strong brand and superior software capabilities. Its Gigafactory Shanghai gives it a significant cost and localization advantage in China. However, its models (Model Y, Model X) compete directly in the premium SUV space. Tesla's strengths include its Supercharger network and industry-leading technology, but its weaknesses in the Chinese market include less tailoring to local family preferences compared to Li Auto's six-seater configurations.
• NIO Inc. (9866.HK): NIO competes in the premium EV segment with a focus on battery-swapping technology and a strong community-centric brand. Its strengths include a innovative Battery-as-a-Service (BaaS) model and high-quality user experience. However, its pure BEV focus and higher burn rate for infrastructure investment are weaknesses. NIO's SUV models like the ES8 are direct competitors to Li Auto, but its lack of an EREV option limits its appeal to range-anxious consumers.
• XPeng Inc. (9868.HK): XPeng focuses on technology and autonomous driving, targeting younger, tech-savvy consumers. Its strengths include advanced R&D in ADAS and competitive pricing. However, its sedan-focused lineup (P7) has less direct overlap with Li Auto's SUVs, though its G9 SUV model competes. XPeng's weakness is its narrower market appeal and lower brand recognition for family vehicles compared to Li Auto.
• Chongqing Changan Automobile Company Limited (000625.SZ): Changan is a major state-owned automaker with a strong presence in both traditional and new energy vehicles, often through joint ventures (e.g., with Ford). Its strengths include massive manufacturing scale, extensive dealership networks, and government support. However, its NEV offerings are less differentiated and technology-forward compared to dedicated startups like Li Auto. Its deep market penetration in lower-tier cities is a strength, but its innovation speed is a relative weakness.