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Citi maintains Buy rating on NIO, highlights strong 2025E sales and infrastructure expansion

EditorAhmed Abdulazez Abdulkadir
Published 2024-12-03, 12:06 p/m
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NIO
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On Tuesday, Citi reiterated its Buy rating and $8.90 price target for NIO Inc . (NYSE:NIO), expressing confidence in the company's financial targets for the upcoming years. According to InvestingPro data, NIO currently trades at $4.74, with analysts' targets ranging from $3.88 to $12.43, suggesting significant potential upside.

The company, currently valued at $9.25 billion, shows signs of being undervalued based on InvestingPro's Fair Value analysis. NIO management has set a goal for the group to reach breakeven by 2026. This is expected to be supported by the NIO brand achieving monthly sales of 25,000 units at an average selling price (ASP) of Rmb350,000 and a gross profit margin (GPM) of 20%.

Additionally, the Onvo brand is projected to attain monthly sales of 35,000 to 45,000 units with an ASP ranging from Rmb220,000 to Rmb250,000 and a GPM of 15%. To support these targets, NIO plans to limit its research and development (R&D) growth to under 10% year-over-year and control selling, general and administrative (SG&A) expenses in 2026.

For the year 2025, NIO's sales targets include a year-over-year increase of 10-20% for the NIO brand. The Onvo brand's L60 model is anticipated to hit 10,000 units by December 2024 and 20,000 units by March 2025. Following the launch of two new SUVs in the second half of 2025, Onvo's monthly sales are expected to climb to between 30,000 and 50,000 units.

NIO management has indicated that upcoming next-generation NIO models, set to launch in 2025, will offer lower pricing and higher GPMs. This GPM growth is primarily attributed to the adoption of self-developed chips, which could reduce costs by Rmb10,000 per car compared to using four NVIDIA (NASDAQ:NVDA) Orin chips, and the partial adoption of Onvo suppliers to further reduce costs.

The management expects Onvo's GPM to surpass 10% in March 2025 and reach 15% by December 2025. The cost of the ADAS hardware per Onvo car is slightly above Rmb10,000. Onvo previously faced production bottlenecks due to BYD (SZ:002594) battery supply limitations, which restricted output to 5,000-6,000 units per month. However, from December 2024, CATL is slated to begin providing batteries with an initial capacity of 6,000-8,000 units per month, with expectations to increase to 14,000 units per month.

Finally, Onvo is expanding its infrastructure, operating over 100 stores with plans to grow to 500 stores by mid-2025. The network of battery swap stations is also set to expand from the current 600 stations to 1,000 by March 2025 and to 1,500 by June 2025. These developments are part of the company's strategy to strengthen its market presence and enhance customer service capabilities. With a beta of 1.9, NIO's stock exhibits significant volatility, making it crucial for investors to stay informed. InvestingPro subscribers gain access to real-time financial metrics, detailed analysis, and expert insights to navigate such market movements effectively.

In other recent news, NIO Inc. has experienced significant developments in its market outlook. Goldman Sachs (NYSE:GS) downgraded NIO's stock from Neutral to Sell, citing concerns over the company's short-term prospects. The firm also reduced its price target to HK$30.00 from the previous HK$38.00. Furthermore, Bernstein SocGen Group and Macquarie both reduced their price targets for NIO's shares due to slower than expected production ramp-up for the ONVO brand's L60 model and the impact of expiring local purchase subsidies.

NIO's third-quarter results indicated a rise in vehicle sales volume, but a decrease in the average selling price, resulting in a net loss of RMB 5.1 billion. The company's fourth-quarter guidance projects revenues between RMB 19.7 billion and RMB 20.4 billion, with sales volume expected to range from 72k to 75k units.

The company's financial standing has been strengthened by a recent RMB 3.3 billion investment in NIO China. NIO is also preparing to launch its first hybrid car model, the Firefly, targeting overseas markets, and its first SUV under the mass-market brand ONVO.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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