Goldman Sachs Downgrades Li Auto (2015:HK) to Neutral, HK$74 PT

Goldman Sachs analyst Tina Hou downgraded Li Auto Inc (2015:HK) (NASDAQ: LI) from Buy to Neutral with a price target of HK$74.00 (from HK$93.00).

“Post an in-line 4Q25 result with below-expectation guidance in terms of volume and gross margin for 1Q26E/2026E, we cut our 12-month DCF-based ADR/H share target price for Li Auto by 21%/20% to US$19/HK$74 (from US$24/HK$93), implying 4%/6% upside from current share prices (vs.

5% for our coverage).

We expect Li Auto to enter into two quarters of widening net profit loss (1Q26-2Q26, lowest since 3Q22), with lackluster volume growth (-6%/+2% yoy) and depressed vehicle gross margins (5%/10%, lowest since 1Q20), driven by lack of new model launches/delivery, raw material & memory cost inflation, as well as higher mix of low-margin model (i6).

That being said, we see Li Auto has maintained a healthy balance sheet with Rmb92bn net cash (highest among China auto OEMs) and a low total leverage ratio at 53% (vs. industry average at 64%) as of end-2025.

At the same time, we recognize the company’s strength in autopilot capability among technology providers in China, and expect management’s renewed focus on embodied AI to position the company well in the long run; that being said, the company is still in the investment phase in the near term (vs. harvest phase), and we expect the growing R&D investment to put pressure on profitability as well.

With limited upside to our refreshed target price, we downgrade Li Auto ADS/H share to Neutral.

Estimate changes: Post 4Q25 result, we lower our 2026E-28E: (1) volume estimates by 5%-22%, on lower-than-expected management guidance for 2026E volume, and slower pace of facelift model launches (we expect 1 now vs.

3 before); (2) gross margin estimates by 0.4-1.0ppt on lower-than-expected 1Q26/2026 guidance, as well as lower volume/revenue generation; (3) as a result, lower net profit estimates by 21%-34%.

We believe current valuation is fair as Li Auto is trading at 1.1x/0.9x 2026E/2027E P/S, vs. our covered pure NEV peers average at 1.0x/0.9x.

We would turn more positive if there is an accelerated model cycle leading to higher sales volume, or if there is faster progress on the company’s embodied AI efforts.”

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