20221111-招银国际-Five_new_models_in_1H23_to_regain_market_share_4页_847kb

NIO Inc. (NIO US) Summary

Core Content

NIO Inc. (NIO US) is a Chinese electric vehicle (EV) manufacturer that has faced challenges in its third quarter of 2022, including a lower gross profit margin (GPM) and increased R&D and selling, general, and administrative (SG&A) expenses. The company plans to launch five new models in the first half of 2023, which are expected to boost its sales volume and help it regain market share in the next fiscal year. These models include the new-generation ES8, ES6, and EC6, as well as an SUV version of the ET5, which is anticipated to be well received due to strong consumer demand.

Despite the financial challenges, NIO's current cash reserves are deemed sufficient to support operations at least through FY24E without additional financing. The company's financial outlook shows a continued loss in FY23E and FY24E, primarily due to high R&D investments, but it is projected to achieve positive operating cash flow in FY24E.

Main Points

• Earnings Performance in 3Q22:

  • Revenue was $2%$ lower than expected, mainly due to higher incentives for old models.
  • GPM was $1%$ lower than forecasted at $16.4%$.
  • Income from NEV credits was lower than expected.
  • R&D expenses rose $37%$ QoQ, driven by investments in chips, batteries, and smartphones.
  • SG&A expenses increased $19%$ QoQ, and forex losses contributed to a wider-than-expected net loss.

• New Models Launch in 1H23:

  • Five new models, including the new ES8, ES6, EC6, and an SUV version of the ET5, are set to launch.
  • These models are expected to significantly increase NIO's sales volume, projected at 230,000 units in FY23E, an $80%$ YoY increase.
  • The upcoming NIO Day event is anticipated to serve as a positive catalyst for the stock.

• Financial Outlook:

  • NIO is expected to continue making losses in FY23E and FY24E, with operating cash flow turning positive in FY24E.
  • Current cash reserves are sufficient to cover operations through FY24E.
  • Revenue is forecasted to grow from $51,433$ million in FY22E to $109,373$ million in FY24E, with a $25.5%$ YoY growth in FY24E.
  • Net profit is expected to improve, moving from $-12,149$ million in FY22E to $-7,498$ million in FY24E.

Key Financial Metrics

Ratings and Target Price

• Rating: BUY (Maintain)
• Target Price: US$25.00 (down from US$28.00)
• Current Price: US$9.25
• Upside Potential: +70.35%

Shareholding and Stock Data

• Market Cap (US$ mn): 15,450
• Avg 3 mths t/o (US$ mn): 799
• 52w High/Low (US$): 43.55/8.38
• Total Issued Shares (mn): 1,692
• Top Shareholders:
  • Li Bin: 10.5%
  • Tencent entities: 9.8%
  • Others: 79.7%

Share Performance

Key Risks

• Lower-than-expected sales volume and margins due to intensified competition.
• Sector de-rating could impact the stock's valuation.
• Potential for continued losses in the short term.

Analyst Note

• The analyst is not subject to U.S. rules regarding research report preparation and analyst independence.
• The report is intended for distribution to "major US institutional investors" only.
• Investors should consult a professional financial advisor before making investment decisions.

Disclosures

• This report is not an offer or solicitation to buy or sell any securities.
• CMBIGM does not provide individually tailored investment advice.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.

Summary of Key Insights

• NIO is launching five new models in 1H23 to improve sales and market share.
• Despite 3Q22 earnings missing, the company has sufficient cash reserves for the next two years.
• The analyst maintains a BUY rating but lowers the target price due to revised expectations and increased competition.
• The stock has experienced significant declines in the past 12 months, with a 12-month price performance of -31.7% absolute and -13.8% relative.
• The company's financial performance shows continued losses, but improved gross margins and operating cash flow are expected in the future.