NIO Inc

NIO Inc (NYSE: NIO) is the leading manufacturer of smart electric vehicles in China. The leading products are ES8, ES6, EC6 and EP9 supercar.

Investment Highlights – SELL at USD 44.19

• On the profitability front, NIO had been consistently reporting loss from the last five years, while the industry median of all profitability metrics fell into positive territory.
• The consensus estimates had indicated that NIO would incur a loss for at least three more years.
• The Return on Equity and Return on Assets were in the negative territory during Q1 FY21.
• The stock price had jumped approximately 300% in the last one year, indicating a good exit point to book profits.
• From a technical standpoint, the stock is trading lower than the 20-day exponential moving average of USD 45.70, indicating that the stock could decline in the near term.

Key Risks

• The global shortage of semiconductors could lead to supply disruptions.
• Any further rise in interest rates could make it difficult for NIO to raise funds for further expansion.
• The Covid-19 pandemic led restrictions continued to cause business and operational delays.

Recent News

Appointment of Independent Director: On 12 July 2021, NIO had appointed Ms. Yu Long as an independent director effective from the same day.

Q2 FY21 & June 2021 Delivery Update: On 1 July 2021, NIO unveiled that it had shown a robust growth of around 116.1% and delivered 8,083 vehicles in June 2021. Moreover, it had delivered 21,896 vehicles during Q2 FY21.

Q1 FY21 Financial Highlights for the three months period ended 31 March 2021 (as of 29 April 2021)

 (Source: Company Result)

• During Q1 FY21, there was a 489.8% increase in vehicle deliveries against Q1 FY20, which led to a 481.8% surge in revenue from Q1 FY20.
• NIO had widened the net loss by around 183% to negative USD 744.10 million during Q1 FY21 as compared to Q1 FY20.
• The Company had cash & cash equivalents of USD 7.30 billion as of 31 March 2021.

One Year Share Price Chart

 (Source: Refinitiv; Analysis done by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (Illustrative) 

Conclusion

Despite showing record sales and robust vehicle deliveries, NIO had still reported a significant net loss during Q1 FY21. Moreover, the consensus estimates had also indicated no signs of profitability. Furthermore, the stock is highly volatile as it generated around 300% return in the last one year but produced negative YTD returns. Thus, it would be advisable to exit and book profit at current levels. The stock made a 52-week High and Low of USD 66.99 and USD 10.46, respectively.

Considering the weak profitability metrics and unfavourable valuations shown above, we have given a "SELL" stance on NIO Inc at the current market price of USD 44.19 (as on 16 July 2021 at 09:04 AM ET), while we look forward to reinvesting after the announcement of Q2 FY21 results.  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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