NIO Inc. (NIO US) Company Update Summary
Core Content and Main Points
NIO Inc. reported its 4Q22 earnings, which missed prior forecasts primarily due to higher inventory provision, R&D, and SG&A expenses. The company's revenue for 4Q22 was 1% higher than expected, but the gross margin fell by 9.8 percentage points to 3.9%, mainly due to inventory write-downs for old models. Without these provisions, the gross margin would have been 10%. The net loss for the quarter was RMB 5.8 billion, RMB 2 billion more than the previous estimate, highlighting the ongoing heavy investment in various areas.
The report anticipates a potential strong sequential sales growth in 2H23E, driven by the launch of five new or redesigned models over the next five months. These models are expected to contribute significantly to NIO's sales, with 2H23E accounting for 65% of the FY23E total sales forecast of 200,000 units. The company's current sales mix is dominated by vehicle sales (around 93%), with a small portion from other revenue streams.
Despite the current losses, the analysts maintain a BUY rating, with a revised target price of US$21.00 (down from US$23.00). This adjustment reflects a revised valuation based on a 3x FY23E revenue multiple, considering the possibility of wider net losses than previously estimated. The current stock price is US$9.39, and the target price implies a potential upside of +123.6%.
Key Financial Highlights
Earnings Summary (YE 31 Dec)
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
16,258 |
36,136 |
49,269 |
76,245 |
92,222 |
| YoY growth (%) |
107.8 |
122.3 |
36.3 |
54.8 |
21.0 |
| Net income (RMB mn) |
-5,611 |
-10,572 |
-14,559 |
-12,215 |
-10,562 |
| EPS (RMB) |
-4.74 |
-6.72 |
-8.89 |
-7.22 |
-6.19 |
| P/S (x) |
5.7 |
3.3 |
2.8 |
1.8 |
1.5 |
| P/B (x) |
3.4 |
3.5 |
5.7 |
10.0 |
24.0 |
| ROE (%) |
-53.8 |
-34.2 |
-49.7 |
-64.9 |
-107.8 |
Financial Forecast (YE 31 Dec)
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Net cash from operating |
1,951 |
1,966 |
-6,926 |
-4,124 |
-1,640 |
| Net cash from investing |
-5,071 |
-39,765 |
6,557 |
-501 |
499 |
| Net cash from financing |
41,357 |
18,129 |
-964 |
1,184 |
1,191 |
| Net change in cash |
38,237 |
-19,670 |
-1,334 |
-3,441 |
50 |
Key Ratios
| Ratio |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Gross margin (%) |
11.5 |
18.9 |
10.4 |
15.7 |
17.7 |
| Net profit margin (%) |
-34.5 |
-29.3 |
-29.6 |
-16.0 |
-11.5 |
| ROE (%) |
-53.8 |
-34.2 |
-49.7 |
-64.9 |
-107.8 |
| Current ratio (x) |
3.3 |
2.2 |
1.7 |
1.1 |
0.8 |
Key Risks and Outlook
- Sales Volume and Margin Risks: The analysts caution that actual sales and margins may fall short of expectations.
- Sector De-Rating: A potential de-rating in the broader auto sector could impact the valuation.
- Profitability Timeline: NIO may need to launch a mass-market brand to achieve profitability, as its current earnings suggest a longer breakeven timeline than management projects.
Stock Data
| Metric |
Value (US$) |
| Market Cap |
15,888 |
| Avg 3 mths t/o |
558 |
| 52w High/Low |
24.08/9.25 |
| Total Issued Shares |
1,692 |
Shareholding Structure
| Holder |
Percentage |
| Li Bin |
10.3% |
| Tencent entities |
9.7% |
| Others |
80.0% |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
-22.8 |
-9.5 |
| 3-mth |
-6.3 |
-22.4 |
| 6-mth |
-50.7 |
-48.9 |
Analysts and Ratings
- Analysts: SHI Ji, CFA and DOU Wenjing, CFA
- Ratings:
- BUY: Potential return of over 15% over next 12 months
- Target Price: US$21.00 (down from US$23.00)
- Current Price: US$9.39
- Upside: +123.6%
Conclusion
NIO Inc. continues to invest heavily in R&D and expansion, which is expected to support long-term growth but may delay profitability. The company's 4Q22 earnings were below expectations, but the analysts remain confident in its future performance, especially with the upcoming model launches. Despite the current losses, the BUY rating is maintained, suggesting strong potential for a 12-month return.
