Nio released data yesterday that it delivered 2,528 units in November (down 18% year-on-year and flat month-on-month), and deliveries in the first 11 months of 2019 reached 17,395 units (up 117% year-on-year).
In a more conservative scenario, if Nio delivered 2,700 vehicles in December (down 18% year-on-year as in November), it would mean that full-year net profit would be at risk of falling 18%, according to Citi calculations. If the delivery volume of Nio in December is the same as that of the same period last year, the risk of decline in its net profit will be 17%. If its December delivery volume increases by 30... year-on-year, the downside risk of net profit narrows to 16%.
Considering the headwinds the company and the NEV industry will face in the near term, the bank believes that delivering 40-45k vehicles (up 2-2.5x year-over-year) seems like a more realistic target compared to the 2020 target previously given by Nio. Based on the analysis, this delivery assumption implies that the current forecast for NIO's 2020 net profit will be revised down by 158%-173%.
Citi believes that if the government does not introduce stimulus measures in the first half of 2020, Class B pure electric vehicles (such as ES6) may continue to outperform the entire new energy vehicle industry in the short term, because the market demand for medium-sized pure electric vehicles is relatively stable and the base itself is low. In October 2019, sales of B-class pure electric vehicles in China increased 16 times year-on-year, while sales of all other vehicles declined year-on-year.
It is worth noting that ifTeslaSet its domestic Model 3 at such a competitive price below 280,000 yuan, then Tesla's relatively new market layout in China may give Nio and others from the second half of 2020luxurySales of pure electric vehicles are causing pressure.
Last but not least, Citi stressed that if Nio can find new investors to fill the cash flow gap in the next quarter, this will be a catalyst for its valuation recovery.
In addition, major risk factors that could prevent Nio from reaching Citi's price target include: failure to design and build vehicles that meet quality requirements on a large scale; Increased competition; Demand is lower than expected; Failure to provide customers with compliant services for profit; And product quality issues.
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