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Summary of NIO Inc. (NIO US) Report from CMB International Global Markets

CMB International Global Markets maintains a HOLD rating for NIO Inc. (NIO US), reflecting concerns about profitability and financial performance despite some positive aspects. The analysis highlights the following key points:

• Financial Performance: NIO continues to lack profitability, with an in-line net loss of RMB5.3 billion in Q1 2024. Average selling price (ASP) declined by RMB12,000 quarter-over-quarter, missing forecasts, and vehicle gross profit margin (GPM) fell by 1 percentage point compared to expectations. R&D expenses were lower than estimates, but overall net loss remained substantial. Net cash decreased by RMB10 billion year-over-year, worse than prior projections, indicating increased burn rate.

• Profitability Outlook: NIO's breakeven assumptions for its brands and battery swap strategy are viewed as overly optimistic due to the ongoing price war. Even if battery swap could be break-even in FY2025, gross margins are insufficient to cover R&D and SG&A expenses. Projections show continued net losses through FY2026, with losses exceeding RMB10 billion in both FY2025 and FY2026.

• Revenue and Sales Projections: Sales volume is expected to grow by 25% year-over-year to 0.2 million units for FY2024, but revenue forecast is cut by 5% due to accelerating ASP declines. SG&A and R&D expenses are projected to decline despite sales volume growth under disciplined investments.

• Valuation Changes: The target price is reduced from US$6.20 to US$5.60 (representing a 6.3% downside), based on a 1.3x revised FY2024 revenue estimate. Key risks include variations in sales volume and margins, sector-wide re-rating, and competitive pressures.

Overall, the report advises caution, emphasizing NIO's unprofitable position and challenges in the market.