Li Auto Inc.

LI Details

Li Auto Inc. (NASDAQ: LI) designs, develops, manufactures, and sells premium smart electric vehicles in China. It concentrates its in-house development efforts on its proprietary range extension system, next-generation EV technology, and smart vehicle solutions. Its sole production model is Li ONE, a six-seat, premium electric SUV. LI was listed on the NASDAQ on November 18, 2020. As of July 29, 2021, the company has 904.64 million American Depository Shares (ADS) listed and outstanding (each ADS representing two Class A ordinary shares).

Expansion Plans: The company entered into a memorandum of understanding (MoU) for a strategic collaboration with an undisclosed company in China in July 2021, the focus of which will be the redevelopment and expansion of an automobile manufacturing plant located in the Shunyi District of Beijing.

Robust Deliveries: On July 02, 2021, the company announced that the total Li ONE deliveries for Q2FY21 increased 166.1% YoY to 17,575. It delivered 7,713 Li ONEs in June 2021, the highest in a month yet. This represents a 320.6% increase from the deliveries reported in June 2020.

Launching a New & Improved Model: On May 25, 2021, LI launched a new 2021 Li ONE, which comes with a standard configuration of ADAS (NOA) navigation and various other upgrades. The NEDC (New European Driving Cycle) range has now been increased to 1,080 km, with greater mobility comfort and a smarter cockpit. The new Li One, which commenced deliveries on June 01, 2021, is priced at RMB 338,000 (~USD 52,000).

Q1FY21 Results: The company reported a sharp uptick of 319.78% in total revenue to RMB 3.58 billion in Q1FY21 (ended March 31, 2021) compared to RMB 851.68 million in Q1FY20. However, net loss for the quarter was RMB 359.97 million vs. RMB 77.11 million in Q1FY20. LI’s ongoing efforts to enhance investment in R&D and direct sales and servicing network resulted in higher operating and R&D expenses.

Key Risks: The company uses over 1,900 parts for Li ONE, some of which are sourced from a single supplier. Hence, any defects/quality issues with these components could cause delays in product deliveries, compromising LI’s brand image and business. Further, the Chinese authorities' recent crackdown on its US-listed businesses and the consequential possibility of tougher rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country’s exchanges (in case the US authorities are unable to satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook: In its Q1FY21 Earnings Release, LI stated that it expects its total revenue in Q2FY21 to range between RMB 3.99 billion and RMB 4.27 billion.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LI stock has increased 58.26% in the past 3 months, and is currently trading close to the mid-point of the 52-week range of USD 14.31 to USD 47.70. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 51.31. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 26.20. Considering the heightened frictions between the US and China, the uptick in the stock price, and current trading levels, we recommend exiting the position and give a “Sell” rating on the stock at the current price of USD 30.94, up 0.98% as of July 29, 2021, 11:57 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

CyberOptics Corporation

CYBE Details

CyberOptics Corporation (NASDAQ: CYBE) is a global leader in developing and distributing high-precision 3D and 2D sensors and system products for inspection and metrological services using its unique Multi-Reflection Suppression (MRS) technology. The firm also makes WaferSense sensors, which are wafer-shaped sensors that facilitate the production of semiconductors. CYBE generates revenue through several product lines, comprising 1) High Precision 3D and 2D sensors, 2) Semiconductor sensors (consists largely of WaferSense line of products), and 3) Inspection and metrology systems.

Receipt of Follow-On Orders: On July 20, 2021, the company stated that it picked up a repeat order for its SQ3000 Multi-Function systems, which are employed to manufacture printer cartridge components. The order is valued at USD 2.4 million. These orders are projected to generate revenue in late FY21 or early FY22.

6MFY21 Results: The company reported a 29.33% rise in revenues to USD 42.94 million during 6MFY21 (ended June 30, 2021) as compared to USD 32.43 million during 6MFY20. In addition, the company reported a 71.42% increase in net income to USD 4.55 million during 6MFY21 compared to USD 2.48 million during 6MFY20. As of June 30, 2021, the company’s balance sheet stood with cash and cash equivalents (including marketable securities) of USD 16.82 million with no outstanding debt. CYBE reported a record backlog of USD 45.3 million as of June 30, 2021, vs. USD 32.4 million as of March 31, 2021.

Key Risks: In FY20, FY19, and FY18, export revenues accounted for 80%, 76%, and 72% of total revenue. Global trade tensions and trade wars might harm the company's sales. The introduction of additional tariffs might raise the company's cost structure and as a result, may have a detrimental effect on its profitability. Furthermore, the company's largest customer contributed 14% of total sales in FY20, while the second-largest customer accounted for 13%. Excessive reliance on a few key clients might harm the company's financial viability in the long run.

Outlook: For Q3FY21, the company expects its total revenues to be in the range of USD 25.0 to USD 28.0 million. Due to the usual quarterly fluctuation in sales of memory module systems, it is expected that there would be no income from them in Q4FY21, resulting in the decline in sales in Q4FY21 compared to QoQ basis. However, CYBE’s record backlog and solid capital spending environment are expected to deliver significant YoY sales growth in Q4FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CYBE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CYBE's stock price has surged by 92.12% in the past nine months and is currently trading at a higher end of its 52-week range of USD 20.81 to USD 46.20. The stock made a new 52-week high today and is currently trading much higher than its 50 and 200 DMA levels. Its RSI Index is 75.38. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 35.38. We believe the sharp uptick in the stock price adequately reflects the company’s robust fundamentals and recommend a "Sell" rating on the stock at the current price of USD 46.05, up by 13.93% as of July 29, 2021, at 12:10 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.