By Yifan Wang

Li Auto Inc.'s shares jumped on Wednesday morning, as investors welcomed the Chinese electric-car maker's first-quarter earnings beat and stronger-than-expected second-quarter guidance.

The company's Hong Kong-listed stock soared as much as 13% by the midday trading break. The sharp gains followed a 4.1% overnight rise in Li Auto's shares on Wall Street.

The sharp rise came after Li Auto on late Tuesday said its first-quarter revenue more than doubled and loss narrowed significantly. Analysts particularly pointed to the solid improvement in the company's profitability, as gross profit margin rose 0.2 percentage point sequentially to 22.6%, despite China's pandemic resurgence. The level was well ahead of market expectations.

"Overall, despite the near-term supply chain issues, we are encouraged by Li Auto's gross margin improvement," US Tiger Securities analyst Bo Pei said in a research note. "With supply chain restoration and new models, growth should reaccelerate" in the second half of the year, he added.

Li Auto also guided for a 19.5%-36.6% growth in car deliveries, a level exceeding many analysts' expectations. Citi called it a "rather positive and encouraging guidance."

Both US Tiger Securities and Citi analysts keep their buy call on Li Auto. US Tiger Securities has an unchanged target price of US$40 for the company's U.S.-traded shares, while Citi cut its target price to US$26.80 from US$51.50 as it believes Li's valuation multiple could weaken due to uncertainties in China's auto supply chain, as the country's strict pandemic curbs drag on. Li Auto's U.S. shares ended at USD19.67 overnight.

"We reckon the valuation multiple has further re-rating potential into June and July, but it very much depends on Covid policy in China and production recovery," Citi said.


Write to Yifan Wang at yifan.wang@wsj.com


(END) Dow Jones Newswires

05-11-22 0042ET