To The Moon

Don't be frightened by losses, $NIO Inc.(NIO)$, $NIO Inc.(NIO.SI)$ is approaching a "good day".

NIO disclosed positive revenue and gross profit margin in Q2 2022 report:

• Revenue reached 10.29 billion yuan, a year-on-year increase of 21.8%. This is the first time that NIO has exceeded 10 billion yuan, setting a new high in a single quarter;
• In addition, the gross profit margin of vehicle sales was 16.7%, which was better than market expectations; cash reserves 54.4 billion yuan.

In details: 

1. The price of NIO bicycles has soared, and the income is acceptable: as a high-end electric vehicle brand, the price of NIO bicycles increased by more than 20,000 year-on-year and month-on-month in the second quarter, driving the overall revenue to 10.3 billion, 500 million more than the market expected.

2. The gross profit of automobiles reversed: the gross profit margin of automobiles in Q2 was 16.7%, still lower than the level of 20%+ before the pressure of price increases in the battery industry chain, BUT it encountered cost transmission and orders for price increases have not yet been encountered in Q2. In fact, NIO's auto gross profit margin has actually been maintained, which is much better than the market expected;

3.  Don't be too serious at the bad profits. Under the acceptable revenue and gross profit margin, the company's operating loss is 2.8 billion, which is 200 million more than the market expected. This is the result when the new car being launched in the early stage and not yet in heavy volume, and naturally accompanied by strong sales cost and continuous high R&D cost. As long as the new car can be increased in volume, these are not problems, and the gross profit rate can continue to improve. Profit is profit The real core of the end.

4. The Q3 guidance was flawless: NIO's sales guidance for Q2 was 31,000-33,000 units, Lower than the 38,000 units guidance by Bloomberg. I am more inclined to think that Bloomberg data was untimely updated, which leads to the unanimous expectations on the income side that are not very informative.

And Nio estimates that the sales volume in September will be between more than 10,000 and more than 12,000. Considering that the ET 5 was only delivered at the end of September, it is reseanable, the corresponding revenue guidance is between 12.8 billion and 13.6 billion, and the implied unit price is expected to be slightly conservative.

Overall:

Even Q2 profit seems to be lower than market expectations, but it is more due to the "precipitation" cost in the early stage of new vehicles and new platforms, and sales have not yet been ramped up. As long as the follow-up new car sales are strong, the impact of cost will decrease, and the core also depends on the volume of new cars.

In terms of new car sales expectations, although the revenue guidance for the third quarter is flat, it can be seen that after several quarters of downturn, NIO's car sales should be officially out of the "replacement" curve from the Q3. In the future, there is a high probability of ET 5, which is unlikely to erode the car sales of the existing model user pool. NIO cars' model matrix and brand potential are significantly stronger than $Li Auto(LI)$ and $XPeng Inc.(XPEV)$

Finally, the core concern - the auto gross profit rate indicator: NIO's actual answer sheet actually exceeded market expectations. The reason behind this is that the new platform has a better cost advantage, or is it because the price increase has been reflected in the performance of the second quarter, and the Have to wait for a more detailed explanation from management.