"We continue to believe Nio can exit 2022 at around a 25,000 monthly deliveries run-rate," said Edison Yu's team.
Nio (NYSE: NIO, HKG: 9866, SGX: Nio) yesterday reported first-quarter revenue that beat expectations, but higher battery costs led to a significant decline in gross margin.
As usual, Deutsche Bank analyst Edison Yu's team then provided their first impressions of the earnings report.
Here is the full text of their report sent to investors on Thursday.
1Q22 Earnings First Look
Nio reported soft 1Q results on gross margin while providing an in-line 2Q volume outlook.
Deliveries for the first quarter were already reported at 25,768 units, leading to revenue of 9.91bn RMB, in-line with our/consensus forecasts.
However, gross margin of 14.6% was materially below our 15.8% forecast, mainly due to higher than expected battery costs and charging infrastructure related spend.
Opex of 3,766m was consistent with our expectations, both on R&D and SG&A.
All together, adjusted EPS of (0.79) came in better than our (0.99) estimate due to higher SBC (added back to non-GAAP number) and "other income" line items.
Management provided an in-line outlook for 2Q22, calling for 23,000-25,000 deliveries (implies ~12,000 at midpoint for June which would be all-time monthly record).
This matches our 24,000 forecast and suggests to us the Shanghai re-open is very much on track. Assuming no further COVID disruptions, we think the high end range is achievable given very robust order book (set all-time record in May).
Revenue is expected to be 9.34-10.088bn RMB, consistent with our 9.70bn forecast.
For 2H22, management is confident about launching 2 new models on time despite recent COVID lock downs.
The ES7 SUV will be officially unveiled later this month and begin deliveries toward end of August, followed shortly by ET5 sedan in September.
Existing "866" SUV models will also get a mid-cycle facelift for infotainment hardware in short order and then transition to next-gen NT2.0 platform next year.
We continue to believe Nio can exit 2022 at around a 25,000 monthly deliveries run-rate.
In respect to gross margin, management stayed away from providing clear near term targets but directionally indicated 2Q will be lower while 3Q will recover.
Nio's battery cell costs with CATL are now linked to a monthly index which can fluctuate greatly based on changes in commodity prices.
In addition, 2Q's deliveries will be essentially all related to orders placed before the price hikes (+10,000 RMB), creating imbalance between procurement costs and deliveries.
Looking at the rest of the year, Nio did not provide any official updates but made directional comments:
- Deliveries: lost 8-10k units from COVID lock downs, 3Q should be at least 40k units (Shanghai represents 15-20% of volume)
- Vehicle gross margin: original 18-20% target will be more difficult to achieve; we now see some downside unless lithium carbonate prices come down materially in 2H
- Other gross margin: 1Q run-rate will likely carry over for next 2-3 quarters except when there are meaningful regulatory credits recognized, but note value of credits have declined a lot
- R&D: increase by more than double YoY, implying >9bn for full-year (unchanged)
Nio Q1 revenue beats expectations, but higher battery costs lead to lower margins
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