XPeng – also known as Guangzhou Xiaopeng Motors Technology Co Ltd (广州小鹏汽车科技有限公司) in its motherland of China – had attracted an eclectic group of investors ranging from Xiaomi and Alibaba to Qatar Investment Authority and Abu Dhabi’s sovereign wealth fund Mubadala before raising $1.5 billion via an IPO at the New York Stock Exchange near the end of August 2020. The company currently has three cars in production:
The G3, compact SUV, which was also the company’s pilot mass-produced model.
The P7, a mid-sized sedan with XPILOT 3.0, an indigenously-designed autonomous driving assistance system.
The P5, a subcompact executive sedan which is marketed as the cheaper and smaller alternative to the P7, and the first mass-produced car with laser-based sensors for driver assistance.
Today, the company is at a crossroads: the company’s agreement with state-owned Haima Automobile, which manufactured its G3 SUV, ended as of the 31st of December 2021. In the meantime, XPeng’s Zhaoqing facility rolled out its 100,000th P7 sedan in March this year. The P7 is frequently compared to the Tesla Model 3 (and for good reason, going by its specs):
Construction of XPeng’s second factory in Guangzhou was announced in September 2020 with production expected to start by the end of this year. Meanwhile, its third factory in the now-familiar city of Wuhan is expected to go online sometime around 2023 – to bring up around 400,000 vehicles in annual production capacity.
Now, the details of this expansion are rather interesting: the vast bulk of the financing for setting up facilities comes directly from the Government. In the case of its Guangzhou plant, the company has to repay the the State-owned investment agency after seven years and then take ownership. A similar agreement can be assumed in its other facilities, given the nature of its backers for its Zhaoqing facility as well as its upcoming Wuhan facility.
This is rather pertinent when it comes to existing trends in the company’s fiscals over the past two full years’ audited results vis-à-vis its most recent quarter’s unaudited results:
Note: The 2021 FY report didn’t report its yearly numbers in US$. Hence, all figures are laid out in RMB to maintain consistency.
The trends that are apparent indicate:
The current year’s fiscals seem to be more in line with the past year’s rather than 2020.
In the current year, revenue is trending to close out the year much higher than in the previous year. However, so are cost of sales as well as operating losses.
Net Loss Per Ordinary Share is trending to be nearly 25% higher than in the previous year.
So, simply on the face of fiscal trends, the company’s bottom line doesn’t make its ticker very attractive. Added to this is the fact that the company’s impending expenses during asset transfer to the State would be rather substantial – thus making net earnings potentially even more frayed. However, the company’s trends in market share add further depth to the matter.
Market Share TrendsIn terms of total vehicles, 2021 was a stalwart year for the company: it registered a 263% increase in sales over the past year:
In sales over the first five months of the year alone, the company’s sales are nearly half this number. Furthermore, in June, the company sold 51% more vehicles than in the previous month. Sales trends indicate that current year will be the company’s brand-new stalwart year.
Long-time watchers of China’s Electric Vehicle market will recognize the fact that the EV share in total car sales has seen a consistent uptrend. Consolidated EV sales in China for the month of June aren’t available yet. However, total « Plugin Car » sales in the first five months of the year are already 45% of that sold over the entirety of 2021.
The company’s share of sales in this segment continues to trend seemingly-ever upward:
Ratios and Recent Price Trajectory
An analysis of the 3 ratios similar to that executed in recent articles indicates that, as would be deducible for a company that is still in its growth phase, aren’t particularly encouraging:
Seemingly spurred by its June sales data, the company’s ratios do seem to have arrested their fall as of July 4th. Now, the ticker’s Price to Earnings (PE) Ratio trajectory since its listing is particularly interesting:
Historically, the ticker has been highly highly prized leading to the PE Ratio being south of negative 60 for quite some time. As « ratio cool-offs » began to manifest themselves in the U.S. market (home to the most overvalued equities in the world), the ticker had a precipitous fall until the June delivery data came in to push this ratio southward again (remember: earnings are negative; therefore the ratio goes down and not up if the stock price increases).
It bears noting that, till date, the company’s earnings per share has shown no particularly strong cyclicality on a quarterly basis. On an annual basis, however, the earnings per share has shown very little improvement after adjusting for additional share issuances.
Since the company’s products do find frequent comparison with Tesla (TSLA), lets consider the Year Till Date (YTD) performance of the company’s ticker as well as Tesla’s versus the benchmark « tech-heavy » Nasdaq-100 (NDX):
What’s apparent in trends for both EV stocks are:
Both stocks are particularly sensitive to broader « tech » market trends in both the upside as well as the downside. The company’s ticker has been a little more sensitive to the downside until recently.
While neither stock nor the benchmark have drawn par to levels at the dawn of the new year, the company’s ticker has been gaining steadily higher bullish sentiment since mid-June that has edged it past Tesla’s performance.
Given its growth status, this is a very interesting company to watch. In terms of product range (and even financials), XPeng shares a lot of characteristics with NIO (which was covered recently). Another interesting point of similarity between the two companies is the country of Norway. XPeng has been selling its products there since late 2020, with NIO following suit the following year.
Both these companies along with local rival Li Auto offer attractive products aimed at the mid- to high-end spectrum of the Chinese BEV market, which is increasingly being spoilt for choice.
Now, the company’s Q2 results are expected sometime in the latter half of August. Two items of particular interest to watch for would be:
Whether the company announces a mass-market marque, just like NIO, in a bid to take its high-quality engineering expertise to the « budget » end of the BEV market in China. The company’s increased production capacity certainly has room for a foray in that.
Whether there is an improvement in earnings attributable per ordinary share to bring the trend for the year below that of the past two years’ recorded metrics.
The company’s President Mr. Brian Gu had already stated that he hopes the company will break even by the end of 2023. While plans were announced by the company that it would go deeper into Europe (i.e. beyond its modest market share in Norway) by entering the German, Swedish and Dutch markets later this year, no timetable has been announced yet. This could be another facet of information to consider, if further light is shed on it in the upcoming earnings call.
Long-term investors intending with the wherewithal to hold the stock over a long period of time might see their investment bear decent gains after a period of 2-3 years. In the immediate term, however, the stock’s relation to the broader « tech » market’s weakness is a hurdle. However, another interesting facet to keep in mind is the recent boom in Emerging Markets stocks – which the likes of XPeng and NIO could be considered to gain from, since most of their business is in China.
The interplay between these two sources of momentum in opposite directions will be fascinating to watch over the next couple of quarters. Given that a massive turnaround in stock performance to surpass the price levels at the dawn of the year cannot be reliably expected, disciplined tactical investors in Europe can utilized leveraged and leverage inverse products based on the stock’s daily trajectory to make some quick gains with short-term strategies on the upside and downside respectively.
Violeta a rejoint Leverage Shares en septembre 2022. Elle est chargée de mener des analyses techniques et des recherches sur les actions et macroéconomiques, fournissant des informations importantes pour aider à façonner les stratégies d’investissement des clients.
Avant de rejoindre LS, Violeta a travaillé dans plusieurs sociétés d’investissement de premier plan en Australie, telles que Tollhurst et Morgans Financial, où elle a passé les 12 dernières années de sa carrière.
Violeta est une technicienne de marché certifiée de l’Australian Technical Analysts Association et est titulaire d’un diplôme d’études supérieures en finance appliquée et investissement de Kaplan Professional (FINSIA), Australie, où elle a été conférencière pendant plusieurs années.
Julian a étudié l’économie, la psychologie, la sociologie, la politique européenne et la linguistique. Il possède de l’expérience en matière de développement commercial et de marketing grâce à des entreprises qu’il a lui-même créées.
Pour Julian, Leverage Shares est une entreprise innovante dans le domaine de la finance et de la fintech, et il se réjouit toujours de partager les prochaines grandes avancées avec les investisseurs du Royaume-Uni et d’Europe.
Oktay a rejoint Leverage Shares fin 2019. Il est responsable de la croissance de l’activité à travers des relations clés et le développement de l’activité commerciale sur les marchés anglophones.
Il a rejoint LS après UniCredit, où il était responsable des relations avec les entreprises pour les multinationales. Il a également travaillé au sein de sociétés telles qu’IBM Bulgarie et DeGiro / FundShare dans le domaine de la finance d’entreprise et de l’administration de fonds.
Oktay est titulaire d’une licence en finance et comptabilité et d’un certificat d’études supérieures en entrepreneuriat du Babson College. Il est également détenteur de la certification CFA.
Sandeep a une longue expérience des marchés financiers. Il a débuté sa carrière en tant qu’ingénieur financier au sein d’un hedge fund basé à Chicago. Pendant huit ans, il a travaillé dans différents domaines et organisations, de la division Prime Services de Barclays Capital à l’équipe de recherche sur les indices du Nasdaq (plus récemment).
Sandeep est titulaire d’un master spécialisé en finance et d’un master en administration des affaires de I’Institut de technologie de Chicago.