NIO Inc. - Net Loss Widens In 3Q; Competition Will Be The Key Challenge
- NIO (SGX:NIO)’s 3Q22 revenue rose 26% q-o-q (+33% y-o-y) to RMB13bn, driven by a 26% q-o-q (+29% y-o-y) increase in EV deliveries (31.6k units). Net loss (non-GAAP) widened to RMB3.46bn (vs. net loss of RMB2.19bn in 2Q22) due to a large jump in R&D expenses and marketing expenses. R&D expenses rose 37% q-o-q (+145% y-o-y) to RMB2.9bn ahead of three new model launches, based on the new platform 2.0, in China and EU. Vehicle margins narrowed 0.3% pt q-o-q (-1.6% points y-o-y) on rising battery costs due to surging lithium price.
- NIO's 9M22 net loss was RMB8.51bn, higher than our previous FY22F forecast due to weaker-than-expected EV deliveries and vehicle margins, no thanks to production suspension in the Hefei factory in 3Q amid COVID-19 lockdowns, and increased battery costs.
- NIO guides EV shipments of 43k-48k units in 4Q22F, representing increases of 36-52% q-o-q, on the back of three new model launches (the ET5, ET7 and ES7) but sees challenges from continued COVID-19 production disruptions in the Hefei factory.
- Our channel checks found that demand for the ET5 remains strong. We estimate that NIO’s 4Q EV shipments will reach 45k units (+42% q-o-q), led by sedan ET5, although demand could be impacted by rising competition in the premium segment. We cut our FY22F/23F/24F EV shipments by 18%/14%/12% as we cut 5k units in Nov 2022 due to
- the production halt in the Hefei factory,
- weak consumer demand for its legacy models, and
- rising competition in the premium segment (Tesla’s price cut recently and XPeng’s and Li Auto’s new premium model launches).
- We now estimate NIO delivering 128k/247k/323k units in FY22F/23F/ 24F, with annual growth rates of +40%/+93%/+31%, which still significantly outpaces China’s NEV shipments growth of +29%/+36%/+47%, respectively. We increase our FY22F/23F LPS forecasts by 74%/207% and cut our FY24F EPS forecast by 67% due to lower EV shipment and vehicle margin assumptions.
- Nevertheless, we expect sustained vehicle margin improvements in FY23F and FY24F due to the new platform (NIO Technology 2.0) launches, which should boost EV shipments and enhance manufacturing efficiency.
- We lower our DCF-based target price for NIO to HK$130.3 as we cut our EPS forecasts and terminal growth rate from 5% to 3% on keener competition and raise risk-free rate from 3.5% to 5.0% to reflect global inflation and uncertainty over China’s economic outlook.
- We maintain ADD as NIO should capture a greater share of China’s premium EV market due to its strong new models in the pipeline.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Ray KWOK CGS-CIMB Research | https://www.cgs-cimb.com 2022-11-10 2022-11-10
Previous report by CGS-CIMB:
2022-09-08 NIO Inc. - Strong Electric Vehicle Delivery In 3Q/4Q On New Models
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