Written by Cláudio Afonso | LinkedIn | X
A few days after Goldman Sachs analyst Tina Hou downgraded the firm’s rating on the EV maker Nio, Singapore’s leading consumer bank DBS maintained the Buy rating despite the slight price target reduction.
In a new research note, the bank’s analyst Rachel Miu said the form believes Nio’s new models “may broaden its customer base, offering a potential upswing in sales.” At the latest earnings call, the company said it will launch upgrades for several models of its portfolio in 2025 and 2026 besides the ET9 and the models of the sub-brands Onvo and Firefly.
Commenting on the Onvo L60 production ram-up, Miu noted that the company has recently seen some reservation holders canceling their orders and switching to other EV models which can guarantee them access to the incentives in China.
“While management expects Onvo L60’s monthly production to hit 10k by Dec 2024 and 20k by Mar 2025, with it opening more ONVO salespoints to some 300 stores by end-2024 (current 190) to drive sales, ~50%-60% of potential buyers decided not to purchase Onvo L60, as they were unable to receive deliveries before end-2024 to enjoy the NEV subsidy,” the analyst wrote.
Rachel Miu expects Nio’s cash flow to continue improving in 2025 noting it had, as of the end of the third quarter, a “strong cash position”
“Given the company’s strong cash position (total cash of around Rmb42bn at end-Sep 24) and expectation of continued improvement in operating cash flows in FY25 (which already turned positive in 3Q24), the company’s financial position is poised to support growth,” the analyst commented.
DBS has revised its revenue estimates for 2024 and the subsequent two years, resulting in a “slight trim” of the price targets for both U.S.-listed and Hong Kong-listed shares. The new targets are $7.5 (down from $8) for the U.S.-listed shares and HK$58 (down from HK$65) for the Hong Kong-listed shares. Based on the latest closing price of $4.38, the new price target target for the U.S.-listed shares implies an upside potential of approximately 71%.
“We lower our FY24/25/26F revenue estimates by 5%/4%/7% to factor in the 3Q24 results and 4Q24 guidance miss. We slightly trim our TPs to HKD58/USD7.5, pegged to 1.2x FY25F P/S (prev. 1.3x FY25F P/S), 0.8SD below the five-year historical average. We believe NIO’s new models may broaden its customer base, offering a potential upswing in sales,” Rachel Miu concluded.
Earlier this week, Goldman Sachs downgraded Nio from Neutral to Sell, lowering the price target by 19% to $3.90 citing a slow production ramp-up of Onvo’s model, the L60, and increasing sales and marketing (S&M) expenses.
The company delivered 20,976 electric vehicles in October, including 4,319 units of its sub-brand Onvo and 16,657 Nio-brand units. Last month’s figures represent an increase from the 16,074 units recorded in October 2023 and 3,692 fewer EVs than in September.
Written by Cláudio Afonso | LinkedIn | X
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