NIO losses expected to widen on low profitability - China Renaissance

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By Sam Boughedda

Nio Inc (NYSE:NIO) was cut to Hold from Buy, with its price target lowered to $12.30 per share by China Renaissance analysts in a note Monday.

They told investors that NIO's net loss widened on lower GPM and higher expense ratios in the third quarter.

"NIO's 3Q22 revenue rose 32.6% YoY/ 26.3% QoQ to RMB13.0bn, while GPM fell 7.0ppts YoY to 13.3% (+0.3ppt QoQ). In particular, vehicle sales grew 38.2% YoY/ 24.7% QoQ to RMB11.9bn, while segment GPM dropped 1.7ppts YoY/ 0.3ppt QoQ to 16.4% due to higher raw material costs and a change in product mix. Vehicle delivery came in at 31,607 units in 3Q22," wrote the analysts. "We note both delivery and revenue were at the mid-point of management guidance."

The analysts added that despite NIO's five new models in its pipeline for 2023, they see its loss continuing to widen due to the low profitability and high expense ratio.

"In the earnings call, management noted the current capacity crunch is likely to ease in 2023, as it expands the vehicle production capacity of its two plants to 150,000 units per shift. Management guided 4Q22 deliveries at 43,000-48,000 units (+71.8%-91.7% YoY), suggesting full-year 2022 deliveries of 125,000-130,000 units; it expects 4Q22 revenue of RMB17.4bn-19.2bn (+75.4%-94.2% YoY). Meanwhile, management targets to launch five new models in 1H23 (including the upgraded "866" and two brand-new models) to offer a total of eight models. However, we expect NIO's losses to widen given its low profitability and high expense ratio," commented the analysts.

NIO shares are down 1% Monday.