Morgan Stanley Comments on XPeng’s Q1 Results
Morgan Stanley analyst Tim Hsiao reiterated on May 21, 2025, XPeng’s ‘Overweight’ rating and $26 price target.
“1Q earnings call – Building up ahead of AI steam
Key Takeaways
Positive stock response reflects catch-up rally along with short covering.
Despite prudent 2Q guidance, reiteration of 2H surge in sales and margin, as well as a profitable 4Q, should lift market sentiment.
Vehicle margin to edge up in 2Q and advance further in 2H25 – underpinned by ASP expansion, favorable product mix, cost reduction, and scale benefits.
Management highlights that vehicle margin for new models remains healthy, in double digits. The aforementioned factors underpin a profit-making 4Q25; group GPM could reach high-teens.
Management highlighted that the ~Rmb0.5bn of government subsidies and FX gains in 1Q25 shall be non-recurring: Hence. overall GAAP net loss could widen in 2Q25. That said, management expects recurring operating loss to narrow QoQ.
New models: XPeng will launch the Mona Max on May 28, which shall stand out, given the lack of similar products with L2+ AD features in the sub-Rmb150k segment. XPeng will also unveil G7 in June and kick off delivery for G7/new P7 in 3Q, followed by more hybrid models in 4Q.
AI initiatives in full swing: Along with the launch of the AI Turing chip and world foundation model with 72bn parameters, XPeng aims to substantially upgrade its L2+ ADAS capability and launch humanoids in 2026.
Derived from our ADR price target using 7.8 HKD/USD. We assign 25%/50%/25% weightings to our bull/base/bear case scenarios – the bull/bear weighting reflects the potential for the macro outlook to improve/weaken and for sector competition to lessen/worsen.
Key base case assumptions: 3% terminal growth rate, reflecting Xpeng’s potential for a sustainable long-term revenue source from software services, 1.6x beta, 13.7% WACC.
Risks to Upside
— More competitive model introductions that drive volume growth
— Greater-than-expected margin expansion
— Better-than-expected branding with superior in-car user experience
Risks to Downside
— Intensified competition in the mid-/high-end segments
— Cash flow pressure with lower profitability
— Moderating auto sales growth pressuring overall industry valuation”
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