$NIO - Nio Inc: Investment Update

Hello again, It has been a long time since I posted my original $NIO analysis (found here), and since then there have been several developments that I felt needed to be addressed. As a result of this, I have decided to create this Nio update for all of the people who read my previous analysis, and also for people who just want a quick rundown of current/recent Nio events.  Recent SEC Filings: Q2 2021 Delivery Update: Nio delivered 8,083 vehicles in June, which is a 116% increase YoY Nio delivered 21,896 vehicles in Q2, which is a 112% increase YoY Culminative deliveries (between their ES8, ES6, and EC6 models) totalled 117,597 Appointment of Independent Director: On July 12th, 2021, Nio announced their appointment of Ms. Yu Long as an independent director. Long is the founding/managing partner of BAI Capital and has an outstanding track record of investing into technology and internet companies. Long was also governor of China VC and Private Equity Association Ltd., CEO of Bertelsmann China Corporate Center, and managing partner of Bertelsmann Asia Investments. Furthermore, Ms. Long is a board member of $TPR – Tapestry Inc. and $LX – LexinFintech Holdings Inc. July Delivery Update: Nio delivered 7,931 vehicles in July, which is a 124% increase YoY, however it is a net decrease month-over-month. Culminative sales increased to 125,528 vehicles. Q2 2021 Financials: Vehicle sales totalled $1.225B (USD in Q2 2021, which represents a 127% increase YoY, and a 6.8% increase QoQ Their vehicle margin was 20.3% (compared to 9.7% Q2 2021) and their gross margin was 18.6% (compared to 8.4% in Q2 2020). Gross profit was $1.3B (USD) in Q2 2021, which represents a 402% increase YoY, and a 1.2% increase QoQ. Net loss was $90.9M (USD), which is a decrease of 50% YoY, and a 30% decrease QoQ. This decrease in net losses shows that Nio is trending in the right path and may be able to report a net gain in the next couple of earnings reports. August Delivery Update: Nio delivered 5,880 vehicles in August, which represents a 48% increase YoY, however, once again their deliveries are decreasing month-over-month. However, they noted supply chain issues as a major contributor to this decrease, which makes sense. Culminative deliveries totalled 131,408. Equity Distribution Agreement: On September 7th, Nio announced the terms for their $2B (USD) offering of American depository shares. Share Repurchase: On September 24th, 2021, Nio repurchased 1.418% equity interest from one of their strategic investors for $388M. Q3 2021 Delivery Update: Nio delivered 10,628 vehicles in September, which represents an increase of 125% YoY, and an 80% increase QoQ. This is Nio’s highest monthly delivery figure ever. Nio delivered 24,439 vehicles in Q3 2021, representing an increase of 100% YoY, and an increase of 11% QoQ. This is also a record high number of quarterly deliveries for Nio Culminative deliveries totalled 142,036. Recent News: Lotus Partnership: On September 9th, 2021, Nio announced their partnership with the famous European Luxury Automaker “Lotus”. Lotus was recently bought out by Geely, who is a Chinese Automaker, and they are looking to bring their own “Lotus” branded EV to the market with the help of Nio Inc. Furthermore, Lotus is looking on going public soon, and Nio is expected to receive some of the proceeds of this listing. The news of this partnership led Nio to gain 4%, which could be the result of Nio being trusted with assisting such a trusted and historic automaker. Nio in Norway: Recently, there has been a lot of buzz around Nio expanding their operations into Norway (their first expansion outside of China. On September 30th, 2021, Nio opened their first “NIO house” in Europe. This Nio house is located in Norway’s capital city, Oslo. Nio is expected to roll out their ES8 electric SUV, as it is vehicle that Nio expects to be most widely adopted in Norway, due to customer needs. This expansion into Norway was not random by any means, Nio strategically planned to expand into Norway de to Norway’s heavy investment and acceptance of green technology. Approximately 70% of all new cars sold in Norway have been electric, which makes them the perfect market for Nio to penetrate. If Nio is able to build their infrastructure quickly, it is likely that we see them become one of the biggest EV competitors in the country. Battery Swapping: There has been a lot of competition to arise in the EV space over the past couple of years, but little stand a chance to the market leader, Tesla. However, among all of Tesla’s competitors, Nio seems to be the EV company that is giving Tesla the best “run for their money”. On September 29th, 2021, Nio announced that they have completed 4M battery swaps. This is so significant because Nio has pioneered battery swapping technology, and Tesla has refused t implement this idea. However, the fact that this idea is so widely accepted and practiced in China is great news for their business, as they are able to generate revenue from the “battery as a service” business model associated with these swaps. Nio’s battery swapping technology is far quicker than the likes of Tesla’s “Supercharging”, as a battery swap takes approximately 3 minutes to complete, and “supercharging” takes around 40-50 minutes. Nio in Germany: On September 20th, 2021, Nio presented their ET7 model in Germany, and announced their intentions of expanding their line of cars into Germany sometime in 2022. Germany is another fantastic market for Nio to expand into as 30% of German adults are considered to be “in the market” for a fully electric vehicle. Furthermore, the German government is one of the most forward counties in terms of their transition to green energy, which makes them another obvious candidate for Nio’s expansion into Europe. Furthermore, the German market for EV’s is subsidized with a tax credit between €7,500-9,000. Over time, this subsidy should contribute to sustained growth in Germany’s EV market and helps Nio to capitalize in this market. Evergrande’s Effect on Nio: The biggest story in the stock market in September of 2021, was Evergrande, their large amount of debt, and their missed bond payments. Historically, when economic uncertainty and/or government action (on stocks) occur in China, their equities on the US markets are very susceptible to huge drops in share price. This was the case after China restricted the Ant Group IPO, it was the case when China restricted Chinese companies listing on US markets, and it will continue to be the case in the future. However, this time, the problem stemming from China that affected Chinese equities in the US markets was the “meltdown of Evergrande”. Ever since the worries about Evergrande defaulting began in early September, Nio’s stock has fell nearly 12% (at the same time that $SPY was down 3%, and $DRIV (EV ETF) was down 4%). Just by looking at this you can get an idea of the disproportionate effect of Chinese problems, on their US equities. Considering this event had little to no effect on NIO as a business, this recent dip in their share price has granted a great opportunity for investors to grab some $NIO shares at a discount. Upgrade from Goldman Sachs: On October 7th, 2021, Nio’s stock surged 7% as a result from an upgrade from Goldman Sachs. Goldman analyst Fei Feng increased his Nio rating from “neutral” to “buy” and re-instated his price target of $56/share (implying a 66% increase from Nio’s prices before he changed his rating). This came just after Nio’s delivery figures for September 2021, and Q3 2021, which exhibited a much higher growth rate than their main competitor, “Tesla”. Investment Summary: Overall, I think that my conservative comparable price target of $47/share (achieved in my previous analysis, found here) is very fair for the short term. Overall, I think in the upcoming years we may see my original price target of $60/share being hit. However, due to their current situation, I think that the conservative comparable makes more sense in this case. I think that the new developments in Nio as a company (since my previous analysis) bode well for Nio’s stock and have put the on the right track for future growth. It will be interesting to see how their European expansion turns out in the next few years, and how aggressive they get with it. Right now, I believe that Nio is a well-position EV company, that has recently became a bargain, but is susceptible to lower valuation due to the complexities between China and the USA.

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$NIO - Nio Inc: Investment Update

bullish

Hello again,

It has been a long time since I posted my original $NIO analysis (found here), and since then there have been several developments that I felt needed to be addressed. As a result of this, I have decided to create this Nio update for all of the people who read my previous analysis, and also for people who just want a quick rundown of current/recent Nio events. 

Recent SEC Filings:

Q2 2021 Delivery Update:

  • Nio delivered 8,083 vehicles in June, which is a 116% increase YoY
  • Nio delivered 21,896 vehicles in Q2, which is a 112% increase YoY
  • Culminative deliveries (between their ES8, ES6, and EC6 models) totalled 117,597

Appointment of Independent Director:

  • On July 12th, 2021, Nio announced their appointment of Ms. Yu Long as an independent director.
  • Long is the founding/managing partner of BAI Capital and has an outstanding track record of investing into technology and internet companies.
  • Long was also governor of China VC and Private Equity Association Ltd., CEO of Bertelsmann China Corporate Center, and managing partner of Bertelsmann Asia Investments.
  • Furthermore, Ms. Long is a board member of $TPR – Tapestry Inc. and $LX – LexinFintech Holdings Inc.

July Delivery Update:

  • Nio delivered 7,931 vehicles in July, which is a 124% increase YoY, however it is a net decrease month-over-month.
  • Culminative sales increased to 125,528 vehicles.

Q2 2021 Financials:

  • Vehicle sales totalled $1.225B (USD in Q2 2021, which represents a 127% increase YoY, and a 6.8% increase QoQ
  • Their vehicle margin was 20.3% (compared to 9.7% Q2 2021) and their gross margin was 18.6% (compared to 8.4% in Q2 2020).
  • Gross profit was $1.3B (USD) in Q2 2021, which represents a 402% increase YoY, and a 1.2% increase QoQ.
  • Net loss was $90.9M (USD), which is a decrease of 50% YoY, and a 30% decrease QoQ. This decrease in net losses shows that Nio is trending in the right path and may be able to report a net gain in the next couple of earnings reports.

August Delivery Update:

  • Nio delivered 5,880 vehicles in August, which represents a 48% increase YoY, however, once again their deliveries are decreasing month-over-month. However, they noted supply chain issues as a major contributor to this decrease, which makes sense.
  • Culminative deliveries totalled 131,408.

Equity Distribution Agreement:

  • On September 7th, Nio announced the terms for their $2B (USD) offering of American depository shares.

Share Repurchase:

  • On September 24th, 2021, Nio repurchased 1.418% equity interest from one of their strategic investors for $388M.

Q3 2021 Delivery Update:

  • Nio delivered 10,628 vehicles in September, which represents an increase of 125% YoY, and an 80% increase QoQ. This is Nio’s highest monthly delivery figure ever.
  • Nio delivered 24,439 vehicles in Q3 2021, representing an increase of 100% YoY, and an increase of 11% QoQ. This is also a record high number of quarterly deliveries for Nio
  • Culminative deliveries totalled 142,036.

Recent News:

Lotus Partnership:

On September 9th, 2021, Nio announced their partnership with the famous European Luxury Automaker “Lotus”. Lotus was recently bought out by Geely, who is a Chinese Automaker, and they are looking to bring their own “Lotus” branded EV to the market with the help of Nio Inc.

Furthermore, Lotus is looking on going public soon, and Nio is expected to receive some of the proceeds of this listing. The news of this partnership led Nio to gain 4%, which could be the result of Nio being trusted with assisting such a trusted and historic automaker.

Nio in Norway:

Recently, there has been a lot of buzz around Nio expanding their operations into Norway (their first expansion outside of China.

On September 30th, 2021, Nio opened their first “NIO house” in Europe. This Nio house is located in Norway’s capital city, Oslo. Nio is expected to roll out their ES8 electric SUV, as it is vehicle that Nio expects to be most widely adopted in Norway, due to customer needs.

This expansion into Norway was not random by any means, Nio strategically planned to expand into Norway de to Norway’s heavy investment and acceptance of green technology. Approximately 70% of all new cars sold in Norway have been electric, which makes them the perfect market for Nio to penetrate. If Nio is able to build their infrastructure quickly, it is likely that we see them become one of the biggest EV competitors in the country.

Battery Swapping:

There has been a lot of competition to arise in the EV space over the past couple of years, but little stand a chance to the market leader, Tesla. However, among all of Tesla’s competitors, Nio seems to be the EV company that is giving Tesla the best “run for their money”.

On September 29th, 2021, Nio announced that they have completed 4M battery swaps. This is so significant because Nio has pioneered battery swapping technology, and Tesla has refused t implement this idea. However, the fact that this idea is so widely accepted and practiced in China is great news for their business, as they are able to generate revenue from the “battery as a service” business model associated with these swaps.

Nio’s battery swapping technology is far quicker than the likes of Tesla’s “Supercharging”, as a battery swap takes approximately 3 minutes to complete, and “supercharging” takes around 40-50 minutes.

Nio in Germany:

On September 20th, 2021, Nio presented their ET7 model in Germany, and announced their intentions of expanding their line of cars into Germany sometime in 2022. Germany is another fantastic market for Nio to expand into as 30% of German adults are considered to be “in the market” for a fully electric vehicle. Furthermore, the German government is one of the most forward counties in terms of their transition to green energy, which makes them another obvious candidate for Nio’s expansion into Europe.

Furthermore, the German market for EV’s is subsidized with a tax credit between €7,500-9,000. Over time, this subsidy should contribute to sustained growth in Germany’s EV market and helps Nio to capitalize in this market.

Evergrande’s Effect on Nio:

The biggest story in the stock market in September of 2021, was Evergrande, their large amount of debt, and their missed bond payments.

Historically, when economic uncertainty and/or government action (on stocks) occur in China, their equities on the US markets are very susceptible to huge drops in share price. This was the case after China restricted the Ant Group IPO, it was the case when China restricted Chinese companies listing on US markets, and it will continue to be the case in the future.

However, this time, the problem stemming from China that affected Chinese equities in the US markets was the “meltdown of Evergrande”. Ever since the worries about Evergrande defaulting began in early September, Nio’s stock has fell nearly 12% (at the same time that $SPY was down 3%, and $DRIV (EV ETF) was down 4%). Just by looking at this you can get an idea of the disproportionate effect of Chinese problems, on their US equities.

Considering this event had little to no effect on NIO as a business, this recent dip in their share price has granted a great opportunity for investors to grab some $NIO shares at a discount.

Upgrade from Goldman Sachs:

On October 7th, 2021, Nio’s stock surged 7% as a result from an upgrade from Goldman Sachs. Goldman analyst Fei Feng increased his Nio rating from “neutral” to “buy” and re-instated his price target of $56/share (implying a 66% increase from Nio’s prices before he changed his rating). This came just after Nio’s delivery figures for September 2021, and Q3 2021, which exhibited a much higher growth rate than their main competitor, “Tesla”.

Investment Summary:

Overall, I think that my conservative comparable price target of $47/share (achieved in my previous analysis, found here) is very fair for the short term. Overall, I think in the upcoming years we may see my original price target of $60/share being hit. However, due to their current situation, I think that the conservative comparable makes more sense in this case.

I think that the new developments in Nio as a company (since my previous analysis) bode well for Nio’s stock and have put the on the right track for future growth. It will be interesting to see how their European expansion turns out in the next few years, and how aggressive they get with it.

Right now, I believe that Nio is a well-position EV company, that has recently became a bargain, but is susceptible to lower valuation due to the complexities between China and the USA.

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6 min

47.00

Target Price

9/ 10

Confidence

1-3 Years

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