Macquarie has upgraded Chinese EV maker Li Auto to “Neutral” from “Underperform,” arguing that the company’s key challenges are beginning to ease despite continued pressure on margins and demand.
In a research note dated May 29, Macquarie said Li Auto’s first-quarter 2026 results likely marked the company’s weakest period of the year, with signs that profitability and product mix could improve in coming quarters.
The brokerage highlighted that Li Auto posted a net loss of RMB2.1 billion in the first quarter, though the result was still better than market expectations. Vehicle margins fell sharply to single digits due to a higher sales mix of lower-margin i6 battery electric vehicles and raw material cost volatility.
Revenue for the quarter came in at RMB22.98 billion, down 20.1% sequentially and 11.4% year-on-year, while gross profit margin dropped to 7.9% from 17.8% in the previous quarter.
Macquarie nevertheless pointed to stabilising demand and upcoming model launches as reasons for cautious optimism. Li Auto plans to introduce a new L8 model in late June, followed by new L7 launches in the second half of 2026, with management targeting a 20% increase in annual vehicle volumes.
The bank also noted that Li Auto’s substantial cash reserves — approximately RMB94 billion — now approach its market capitalisation of around RMB113 billion, providing downside protection alongside a recently announced US$1 billion share buyback programme.
Despite the upgrade, Macquarie lowered its 2026 vehicle delivery forecast by 12% and now expects Li Auto to post a net loss of RMB0.32 per share this year, compared with an earlier forecast for a profit.
The brokerage cut its Hong Kong-listed share target price slightly to HK$57 from HK$59, while maintaining its US-listed target at US$15. Both targets imply limited downside from current trading levels.
Macquarie said competition remains intense as Li Auto faces a growing number of extended-range EV rivals and continues struggling to gain traction in the pure battery EV market. However, analysts believe the company’s fundamentals are beginning to bottom out after a difficult start to 2026.
source https://www.investing.com/news/stock-market-news/macquarie-upgrades-li-auto-as-signs-of-recovery-begin-to-emerge-4717089
