Li Auto: Solid Q2 Margin Recovery Indicates Turnaround Potential

Li Auto delivered a modestly robust Q2, beating top line estimates, but seeing revenue pressure due to falling volumes. LI improved its vehicle margin to 9.4% in Q2, and is therefore still trailing the EV competition. Nonetheless, Li Auto's financial and operating performance could be improving if new product launches, such as refreshed L-Series models and the new Li MEGA, become a success. Shares now trade at less than half their historical P/S ratio of 1.14x, reflecting a substantial safety margin amid strong EV market competition and margin pressures. The firm's Q3 delivery guidance suggests improving growth, with new product launches positioning the EV maker to regain ground against competitors.