Deutsche Bank Edison Yu's team expects Nio to report revenue of RMB 9.33 billion in the third quarter, representing a 106.1 percent year-on-year increase.
Nio will report unaudited third-quarter earnings on November 9 after the US market closes, so what can investors expect?
Nio has already released data showing that it delivered 24,439 vehicles in the third quarter, up 100 percent year-on-year and 11.6 percent from the second quarter. Of those, 5,418 ES8s, 11,271 ES6s, and 7,750 EC6s were delivered.
(Graphic by CnEVPost)
In a research note sent to investors on November 3, Deutsche Bank analyst Edison Yu's team said the delivery figures were largely in line with their latest forecast.
The team expects Nio's revenue to be RMB 9.33 billion in the third quarter, representing a 106.1 percent year-on-year increase and a 10.4 percent increase from the second quarter.
(Graphic by CnEVPost)
Yu's team expects Nio to report a gross margin of 17.0 percent in the third quarter and a vehicle margin of 18.6 percent. As a comparison, the company had a gross margin of 18.6 percent and a vehicle margin of 20.3 percent in the second quarter.
(Graphic by CnEVPost)
The team attributed their lower gross margin forecast to higher depreciation amortization.
Based on these, the team expects Nio to report a loss of RMB 0.82 per ADS in the third quarter. This compares with a figure of RMB 0.21 in the second quarter.
For the fourth-quarter outlook, Yu's team expects Nio's management to likely give guidance of 24,000-25,000 deliveries, considering that October's downtime resulted in only 3,667 deliveries for the month.
Nio's management has hinted that their order book has exceeded 10,000 units for several months in a row, so Yu's team expects Nio's deliveries in November and December to improve back to more than 10,000 units, and expects the company's guidance for fourth-quarter revenue may be in the RMB 9.5 billion-10 billion range.
Nio has previously said it aims to deliver three models next year, including its flagship sedan ET7, Yu's team noted, adding that they don't think Nio's management will do a complete refresh of its current models next year, as it believes they can remain competitive with the most competing German luxury models with minor updates.
Yu's team raised Nio's delivery forecast for next year from 150k to 160k and for 2023 from 245k to 285k.
Based on the latest delivery forecast, the team raised its price target on Nio by $10 to $70, still based on 8x 2023E EV/sales.
In a separate report sent to investors on November 4, Yu's team noted that Nio's stock has significantly underperformed its local peers over the past three months, but that could change soon.
The team believes that there are 2-3 potential catalysts that could help change the narrative on the stock next. Here's what they say:
1) 3Q21 earnings on 11/9: management will provide 4Q guidance that shows large step-up in volume recovery for Nov/Dec and while official consensus is likely too high, we believe buy-side expectations have already been reset.
2) November monthly deliveries: likely reported on 12/1 and should confirm robust demand for existing models despite greater competition.
3) Nio Day: will be held on 12/18 and we expect new models/technology to be unveiled that should boost both investor and consumer sentiment.
Notably, the team also cautioned that risks including further constraints from the supply chain, a sudden shift in EV investor sentiment and poor initial acceptance of new products could also invalidate these judgments.
Nio shares are up about 10 percent so far this month and up about 20 percent in the past month.
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