Preface
Deliveries by Chinese electric car makers, including (NIO), Xiaopeng (XPEV) and ideal (LI), fell sharply in February. However, the month-on-month decline in trading volume in February may be due to China's holidays and fewer trading days. Investors should expect a substantial rebound in delivery in March. Macro factors further reduced Weilai's valuation. But the fall in the share price of Xilai has been widely exaggerated, and the time is ripe for the electric vehicle industry and Xilai to rebound.
A total of 6131 models were delivered in February, up 9.9 per cent from a year earlier. The Chinese electric car startup delivered 3309 es6, 1738 ec6 and 1084 es8. The popular ES6--, an all-electric advanced sports utility vehicle that can accommodate 6-7 passengers, once again accounted for more than half of its February shipments. Xilai's delivery growth slowed significantly in the first two months of fiscal 2022, mainly because it coincided with Chinese holidays and a decline in the number of trading days in February. These two reasons also explain why other electric car startups' deliveries also fell in February, so the continuous decline in production and delivery is likely to be temporary.
Xiaopeng experienced the biggest month-on-month decline in February, with total delivery falling 52 per cent from the previous month. Weilai ranked second, down 36% from the previous month. Compared with February, the ideal car has a delivery contraction of 31%, ranking third. In addition, Xiaopeng has recently grown at an astonishing 180% rate, but ideal car has performed even better. in February, a total of 8414 ideal ONE-- sports utility vehicles were sold, an increase of 265.8% over the same period last year. As a result, Xiaopeng successfully took over the leadership position of the fastest-growing electric vehicle company in the industry from Xiaopeng.
According to the above analysis, Xiaopeng and ideal easily beat Weilai in terms of delivery growth, but that is likely to change in fiscal year 2022, as the company benefits from last year's revamping of its production line and the launch of new models ET5 and ET 7 this year.
The coming catalyst
Weilai is facing two catalysts that could push up its share price.
The first catalyst is the fourth-quarter earnings report, which is scheduled to be released later this month. Strong car sales, growing profit margins and stronger-than-expected cash flow may remind investors that Xilai is still a growth stock. Lulai is expected to report adjusted earnings per share ($0.12), but the start-up is likely to exceed expectations based on the recovery of car delivery in the last month of the year.
Second, NIO's ET5 and ET7 cars can also be used as catalysts. ET5 is expected to begin delivery to Chinese customers in September 2022, while ET7 flagship sedan delivery will begin at the end of the first quarter. The details of the release and pre-sale of the two products are likely to have a positive impact on the share price of Xilai. It can be estimated that the current delivery level of Weilai can be increased by 2-3, 000 vehicles per month due to the delivery of the new ET5 and ET7.
Xilai Motor will continue to grow rapidly, and revenue growth is currently underestimated.
In recent weeks or even months, investors have been skeptical of stocks with high valuations. Although the growth of Xilai is not small in terms of expected sales, the electric car start-up attracted a higher sales multiplier in 2021. The growth prospects for China's electric car industry remain attractive because China accounts for more than half of global electric vehicle sales.
Revenue from Xilai is expected to grow from $5.7 billion in fiscal 2021 to $30 billion in fiscal 2026, meaning an average annual growth of 40 per cent. It is expected that Xiaopeng and ideal will also achieve significant revenue growth in the next five years. Revenue for all three electric car startups is expected to rise.
As the price of the electric car industry has fallen over the past six months or so, the valuation factors of Xilai and its competitors have also fallen sharply. Just six months ago, the Pmurs ratio (market-to-sales ratio) of Xilai was much higher. Today, the outlook for Xilai in the electric car market is valued at just twice its revenue.
Risks of NIO
There are many risks that must be mentioned. Current political events, such as Russia's invasion of Ukraine, have put pressure on the market, leading to a sharp drop in valuations, especially in industries that experienced strong growth during the epidemic. The shortage of semiconductors is also a problem for the auto industry, although that is not the reason for the drop in delivery last month. If competitors deliver significantly faster than Weilai in fiscal year 2022, the perception of Weilai will change if the supply chain crisis seriously affects Weilai's delivery prospects in the foreseeable future.
The last thought
Weilai's valuation is now out of touch with reality. The mismatch between price and value may be related to a series of negative factors that affect the pricing of growth stocks in the near future. Russia's invasion of Ukraine, soaring inflation and expectations of higher interest rates have recently put pressure on the market as a whole, especially growth stocks. We believe that sooner or later the market will begin to catch up with the reality of Wei's business. The current valuation of Weilai has any significance. Weilai is one of the best investments for growth investors at present!
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