CMB International has adjusted its price target for Li Auto-W (02015) on the Hong Kong stock exchange downward by 11.4%, from HK$70 to HK$62, while also lowering its target for the US-listed shares (LI.US). The firm maintains a "Hold" rating on both listings. The bank has reduced its net profit forecasts for 2026 and 2027 by 85% and 21%, respectively, to RMB 511 million and RMB 6.1 billion.

While the institution continues to view Li Auto as a strong company, it believes the company's competitive edge is narrowing relative to its peers until the development path for its "Physical AI" becomes clearer. The report noted that Li Auto's first-quarter revenue and gross margin met expectations, with expense control exceeding forecasts.

The first-quarter net loss of RMB 2.3 billion was slightly better than the bank's prediction but still represents the largest quarterly net loss since the company's listing. CMB International maintains its 2026 sales forecast of 490,000 vehicles but has adjusted its product mix expectations: it has raised sales assumptions for the lower-margin i6 model and lowered the sales forecast for the premium L9 model.

Management guidance indicates that, amid intensifying competition, the refreshed L9 model is expected to achieve a steady monthly sales rate of 6,000 to 8,000 units after production ramps up. More importantly, given that Li Auto's current vehicle portfolio is already relatively mature and comprehensive, the bank sees limited room for sales volume growth in 2027-2028.

Management has guided for a second-quarter vehicle gross margin of approximately 10%, with the i6's gross margin still at a low single-digit level. The bank has lowered its 2026 gross margin forecast from 17.6% to 15%, which still implies a rebound to 18-19% in the fourth quarter.

The institution believes Li Auto is facing a structural challenge: despite the company's efforts to push for premiumization, the differentiation of its products from competitors is shrinking. Consequently, even if raw material costs normalize, the bank forecasts that gross margins in 2027-2028 will remain around 17%, making a recovery to 20% difficult.