Written by Cláudio Afonso | info@claudio-afonso.com
Deustche Bank analyst Edison Yu released on Sunday a note lowering NIO’s price target from $70 to $50, maintaining the Buy rating. Based on the last closing price at $20.86, the price target represents an upside of 139.7% for the next 12 months. The analyst added that “the main risks for NIO are supply chain constraints and regulatory scrutiny.” Yu also warned on “supplier shortages for chips and battery cells” that can limit NIO’s sales growth.
Deutsche Bank statement
“Looking ahead, we can envision the stock being choppy until late 2Q when ET7 deliveries start picking up, paving the way for the stock to outperform for the rest of the year on a relative basis. We think the narrative of going from 10k/month in deliveries to 25k/month exiting the year can alleviate many investor concerns about demand and supply chain management.
We lower our price target by $20 to $50, based on 5.0x 2023E EV/Sales or 40-50% discount to US comps such as TSLA/LCID (vs. prior 8.0x), to account for the derating in Chinese ADRs following concerns about delisting/geopolitical risks, but reiterate our Buy rating, seeing significant long-term upside once the shareholder base stabilizes and NIO gets credit for its upcoming product cycle inflection. The main risks for NIO are supply chain constraints and regulatory scrutiny.
Demand for EV components are very high as adoption increases causing supplier shortages for chips and battery cells. This could limit NIO’s sales growth and force customers to wait longer for delivery. Separately, US regulators have stepped up scrutiny of Chinese companies listed on US exchanges, with potential actions to de-list them if certain agreements are not settled upon with the Chinese government.”
On March 1st, the analyst reiterated the $70 price target after the company confirmed the secondary listing on the Hong Kong Stock Exchange. At the time, Yu said that he believes that the secondary listing “should put away the delisting fear” for the Chinese Ev manufacturer.
“As outlined in our 2022 roadmap, we expected NIO to complete a HK listing in the first half of the year and the company confirmed approval of this during Asian morning hours. In our view, the delisting overhang on the stock should largely be gone now and focus will shift toward the anticipated volume famo-us of 3 new models this year, starting in late March with the E17 flagship sedan. The HK listing was indeed supposed to happen earlier but as reported by the media, regulators wanted to fully understand the charity user trust structure created by CEO/founder William Li before signing off.”
“The listing will not raise additional capital (i.e., no dilution) and instead will utilize a listing by way of introduction method where NIO along with lencent will lend out 41.4m shares to a designated dealer (Morgan Stanley) to facilitate initial trading of the k stock (ticker: 9866) beginning on March 10th. Over time. NO exoccts a meaningful number of exisung holders to naturally convert their US ADR shares to H-shares. We think management wanted to avoid raising capital given the stocks recent large decline (-34% YTD vs. NASDAQ-13%). In relation, NIO also applied for a similar type of listing in Singapore and is awaiting approval from regulators. We suspect this was done as a supplementary option in case the HK listing process dragged on even longer.”
According to a video posted on TikTok, NIO has thousands of models parked at NIO’s Hefei Factory, in China. The company has been keeping the secrets indoors without unveiling pre-orders numbers, test-drives scheduled, or other relevant numbers and JAC x NIO Factory is not an exception. The EV manufacturer will launch its new five-seater SUV in mid-April and will show it to the public at the 2022 Beijing Auto Show. The international automotive exhibition will take place at the China International Exhibition Center of Beijing from April 21st to April 30th.
The company said that it will report its fourth quarter and full year 2021 unaudited financial results on Thursday, March 24, 2022, after the close of the U.S. markets.The Company’s management will host an earnings conference call at 9:00 PM U.S. Eastern Time on March 24, 2022 (9:00 AM Beijing/Hong Kong Time on March 25, 2022). A live and archived webcast of the conference call will be available on the Company’s investor relations website at https://ir.nio.com/news-events/events.
NIO announced on March 1st that delivered 6,131 vehicles during last month.February deliveries are often affected by the Chinese Spring Festival Hollidays where the factories usually close from January 31st to February 6th.
Written by Cláudio Afonso | info@claudio-afonso.com