Nio released data yesterday showing that it delivered 2,528 vehicles in November (down 18% year-on-year and flat month-on-month), while deliveries in the first 11 months of 2019 reached 17,395 vehicles (up 117% year-on-year).
According to Citigroup's calculations, under a more conservative scenario, if Nio delivers 2,700 vehicles in December (an 18% year-on-year decline like in November), it would mean that full-year net profit would face the risk of declining by 18%. If Nio' December deliveries remain the same as the same period last year, the risk of a decline in its net profit will be 17%. If its December deliveries increase by 30% year-on-year..., the risk of a decline in net profit will narrow to 16%.
Considering the headwinds the company and the new energy vehicle industry will face in the short term, the bank believes that delivering 40,000-45,000 vehicles (a year-on-year increase of 2-2.5 times) seems like a more realistic target compared to the 2020 target previously given by Nio. Based on the analysis, this delivery assumption means that the current forecast for NIO's net profit in 2020 will be lowered by 158%-173%.
Citigroup believes that if the government does not introduce stimulus measures in the first half of 2020, B-segment pure electric vehicles (such as the ES6) may continue to outperform the entire new energy vehicle industry in the short term, as market demand for mid-size pure electric vehicles is relatively stable and the base is relatively low. In October 2019, sales of B-segment pure electric vehicles in China increased 16 times year-on-year, while sales of all other vehicles declined year-on-year.
It is worth noting that ifTeslaGiven the competitive price of its domestically produced Model 3 below 280,000 yuan, Tesla's relatively new market layout in China, starting in the second half of 2020, may give Nio and others...luxurySales of pure electric vehicles are putting pressure on them.
Last but not least, Citigroup emphasized that if Nio can find new investors to fill the cash flow gap in the next quarter, it will be a catalyst for its valuation recovery.
In addition, the main risk factors that may prevent Nio' stock price from reaching Citigroup's target price include: the failure to design and manufacture cars that meet quality requirements on a large scale; Increased competition; Demand was lower than expected; Inability to provide customers with services that meet standards for profit; and product quality issues.
