Written by Cláudio Afonso | LinkedIn | X
Citi analyst Jeff Chung reaffirmed on Thursday the firm’s Buy rating on Nio shares , maintaining a price target of $10.40. Earlier in the day, the electric vehicle maker reported the first quarter financial results with revenue declining both year over year and quarter over quarter.
As of the time of writing, Nio shares are trading 6.36 percent lower at $4.935 per share, and based on the current stock price, Citi’s price target implies an upside potential of 110.7 percent.
Chung expects a notable improvement in Nio‘s second-quarter vehicle gross profit margin to 11.2 percent, driven by a significant 20 percent quarter-over-quarter increase in gross profit per vehicle, which is projected to reach RMB 30.7 thousand, equivalent to $4,237.
This increase is anticipated to contribute to an overall gross profit margin of approximately 8 percent for the quarter, Citi analyst stated.
At the earnings conference call, Nio’s chief executive said the upcoming vehicle platform, NT3, will allow the company to achieve an average of 20 percent of margin.
“Starting from next year, we will gradually upgrade our product to the third generation, and the first product on NT3 will be ET9. And for the third-generation product, we will also take different approaches to improve the vehicle margin. For example, we will start to put more in-house technologies into our vehicles, like chips for better vehicle margin performance,” Nio CEO said.
“We also see some opportunities with the battery cost reductions. So overall speaking, our target for the NT3 product margin will be around 20% on average. And we do have a confidence of realizing that average margin of 20% from NT3,” Li added.
Despite the positive outlook for vehicle GPM, the analyst noted that Nio‘s GAAP net loss of RMB 5.29 billion ($0.73 billion) fell short of expectations. While the result represented a 6 percent improvement from the previous quarter, it marks a 9 percent increase compared to the same period last year.
The firm’s analysis also highlighted that Nio‘s vehicle gross profit margin in the first quarter was in line with the Bloomberg consensus, standing at 9.2 percent.
Nio reported a 7.2 percent year-over-year decline in revenue for the first quarter of this year, as announced in its financial results released on Thursday.
In the subsequent conference call, founder and CEO William Li revealed that the company is gearing up to enter the UAE market later this year.
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The company expects second-quarter vehicle deliveries to range between 54,000 and 56,000 units, anticipating 17,836 to 19,836 vehicles to be delivered in June.
Nio achieved its best monthly result ever in May, delivering 20,544 vehicles. This followed the delivery of 15,620 units in April, bringing the total to 36,154 units for the first two months of the second quarter.
The figures from the month of May represent a year on year increase of 233.8 percent as the EV maker delivered 6,155 a year ago. The last time the company delivered more than 20 thousand units was in July last year when it registered 20,462 vehicles sold.
Last week, Nio appointed Thijs Meijling as the new Head of European Business as part of a restructuring effort in its European organization, aiming to prepare for the next phase of expansion and the introduction of sub-brands.
In China, Nio registered 6,700 insurance registrations in China last week setting a new record. From May 27 to June 2, the Shanghai-headquartered manufacturer increased its weekly registrations by 24 percent from the 5,400 units registered in the previous week.
Written by Cláudio Afonso | LinkedIn | X
