China Merchants Securities International has reaffirmed its target price of HK$74 for Li Auto-W (02015) and $19 for Li Auto (LI.US), while keeping a "Neutral" rating. The assessment reflects the company's declining competitiveness and significant investments in the AI sector. The brokerage has lowered its non-GAAP net profit forecasts by 82% and 20%, citing two main factors: First, the first quarter represents a product transition and earnings recovery phase, while the new L9 model's competitive edge remains under observation in the second quarter, with limited incremental contribution expected. This creates substantial performance pressure in the first half of the year. Second, increased spending on AI and embodied intelligence, though strategically sound, has yet to yield a mature product lineup. The firm noted that Li Auto's fourth-quarter results fell short of expectations, with product mix adjustments and industry competition weighing on average selling price and profit margins. While performance challenges are expected to persist in the first half due to a weaker product lineup, improvements may emerge in the second half as the company actively expands its presence in AI.