THE CONTEXT

 
Tesla stock has surged 60+% in just the past 4 weeks, catalysed by Donald Trump winning the US presidential election.

Tesla is widely seen as being well-positioned to benefit as Tesla's Elon Musk has been a staunch supporter of Trump.

• At its core, Tesla has several emerging business segments that are on track to be hugely profitable. These include robotaxis and humanoid robots.

• 
Over in China, EV rivals are furiously keeping up with Tesla. While BYD and Xiaomi are developing autonomous driving, they have not explicitly talked about robotaxis as a product offering.

In that respect, HK-listed XPeng (market cap: HK$86 billion) stands out as it is applying its autonomous driving capability to robotaxis that it will roll out as soon as 2026.

Unlike Tesla, XPeng has yet to turn profitable, so it's still a somewhat speculative stock. But with the vast market potential of robotaxis -- and EVs --XPeng stock could provide a good return.

Well, DBS Research has a target price with nearly 40% upside. 
Read excerpts of its report below ....


XPengP7 11.24

Excerpts from DBS Research report
Analysts: Rachel Miu & Raphael Tse


 AI propelling sales growth and margin expansion

 

Investment Thesis
Strength in intelligent driving capability and EREV venture solidify medium term growth.

XPeng Inc., a leading player in the autonomous driving (AD) industry, is capitalising on a strong sales backlog for its P7+ and MONA M03 models, along with four new models set for launch in 2025 (including an extended range electric vehicle [EREV] model).

This leads us to raise our sales volume growth estimates to 65%/25% y/y to about 308k/385k units for FY25F/26F.

The expansion into the EREV market with its Kunpeng Super Electric System (enabling seamless switching between pure electric and range-extended driving) is set to accelerate future growth.



Additional growth potential driven by self-developed AI chip and potential launch of robotaxi by 2026.

XPeng

Share price: 
HK$47.35

Target: 
HK$67

XPeng has developed an AI chip (Turing) with performance equivalent to three Nvidia Orin X chips, according to reports.

The breakthrough will enable the company to deploy L3+ AD capabilities by end-2025 and enter the robotaxi industry by 2026 with its new “Ultra” models.

This underscores XPeng’s strong edge in automotive AI, building on the success of its first AI-enabled model P7+, which utilised visual-based solutions to support autonomous driving.

Margin outlook becoming more favourable.

Enhancing profit margins is crucial to lifting the company’s valuation.

Vehicle margins have been recovering from a negative 8.6% in 2Q23 to positive 8.6% in 3Q24 (+2.2ppt q/q), and is likely to reach c.10% in 4Q24, due to an improving sales, cost reductions, and higher overseas contributions (15% in 3Q24).

All in, we expect blended margin to hit c.17.3% in FY26, driven by scale benefits, new models, and a steady increase in contributions from its collaboration with Volkswagen.

Maintain BUY; lift TPs to HKD67.0/USD17.0 (prev. HKD60/USD15).

We lift our FY25/FY26F revenue estimates by 4%/3% to factor in the upward volume sales revisions.

TPs were raised to HKD67.0/USD17.0, pegged to 1.7x FY25F P/S on strong model cycle (previously 1.6x).

Reiterate BUY on improving sales and margins, which could help the company achieve operating breakeven in 4Q25.

Key Risks
Lacklustre user experience in vision-based solutions, and weak economic activity lowering EV sales.



Full report here


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