Volkswagen’s plan to invest about $700 million in Xpeng Motors and a technical partnership framework agreement between the two companies drove the share price of Xpeng to surge more than 30% last week.
JPMorgan said that the long-term story of Xpeng has undergone a fundamental change and will outweigh investors’ concerns on its near-term margin shortfall and financial stress.
However, the bank highlighted that it remains premature to upgrade the rating on the stock to Overweight, after considering the business execution ability and broader industry headwinds.
The H-share rating for Xpeng was upgraded from Underweight to Neutral, with its target price lifted from HK$40 to HK$71. BYD Company, meanwhile, remained JPMorgan’s top pick among Chinese auto OEM firms.
Xpeng’s H-shares closed 1.9% higher at HK$86.75 on Monday.