Morningstar analyst Vincent Sun has reduced his fair value estimate on Nio to HKD52.50 ($9.09, from HKD58.50 previously, but maintains a “four star” rating following the company’s 3QFY2024 ended September update.
Nio, a global smart electric vehicle company, was listed on the Singapore Exchange S68 in May 2022. It is the first Chinese company to be listed in the US, Hong Kong and Singapore.
In its 3QFY2024 results, Nio announced a 12% gain in vehicle delivery but a 14% decline in vehicle price and 2% drop in revenue to RMB18.7 billion ($3.48 billion).
Nio’s vehicle margin grew 2 percentage points (ppts) y-o-y to 13%, in line with the company’s guidance.
However, higher-than-expected marketing expenses and research spending offset gross margin improvement. As such, net loss remained at around RMB5 billion, similar to the past two quarters, despite a decent delivery volume pick up.
To this end, Sun has pushed back his breakeven estimate for Nio by one year to 2027, while noting that shares are undervalued for “patient investors”.
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Sun has also raised the 2024 to 2028 delivery forecast to factor in new models and the third brand Firefly.
Given lower price assumptions due to discounts and growing contributions from the Onvo brand, Sun’s 2024 to 2028 revenue estimates are largely unchanged.
Sun lifts his 2024 to 2025 net loss forecasts by 4% and 22% respectively, given higher operating expense ratios.
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“We now expect Nio to make a small loss of RMB315 million in 2026, versus our previous forecast of RMB1 billion profit, and to turn profitable in 2027,” Sun adds.
For 4QFY2024, Nio has guided for vehicle delivery to grow 44%-50% y-o-y to 72,000-75,000 units, in line with market expectations.
Nio aims to double its vehicle delivery next year. This compares to Sun’s forecast of 33% growth, given the potential cannibalisation between Nio brand and Onvo and Firefly’s niche focus.
As at 2.32pm, shares in Nio are trading 1 cent higher or 0.21% up at US$4.69 ($6.32).
